NYLP: Welcome to the New York Launch Pod. A podcast highlighting new start-up businesses and openings in New York City area. I’m Hal Coopersmith and in this episode we’re going to be talking about trucking and stepping on to the Launch Pod, we have Roseanne Stanzione. She is the founder of LaneHoney and LaneHoney, it wants to bring transparency to trucking, is that correct?
Roseanne: That’s right.
NYLP: Welcome to the Launch Pod Roseanne.
Roseanne: Thank you Hal.
NYLP: Tell us about LaneHoney.
Roseanne: LaneHoney is a market for truck capacity. We’re bringing the sharing economy much like Uber does in the taxi world to trucking.
NYLP: Before we start, let’s get some terminology down. We have shippers.
Roseanne: Shippers and carriers.
NYLP: And who are they?
Roseanne: Okay. So shippers are product manufacturers, distributors, warehouses, anyone that needs to buy a truck to move goods from one place to another. Carriers are truckers. They can be large fleet carriers or they can be individual owner/operators who have between one and four trucks and that’s the majority of the business, that’s 97-95% of the business that are little small businesses with just one or two or three trucks.
NYLP: How did you come up with the idea?
Roseanne: I worked in trucking as a trucking analyst on Wall Street for ICAP the inter-dealer broker. My job was to look at new markets that we could bring electronic brokerage to, we did it in ship freight and did very well there and my job was to look at truck freight and air freight.
I got to know a number of the big fleets and they saw a giant opportunity but saw that it was too early. Back then it was about 2006, 2007 and I knew that there needed to be greater penetration of smartphones in the hands of carriers. In 2012 I decided the timing was right.
NYLP: What does LaneHoney actually do?
Roseanne: LaneHoney connects truckers and shippers directly. We’re different than any other Uber or trucking platform out there because we’re actually connecting the two directly as supposed to segregating them and building a spread fee in between much like Uber does. And so we’re really trying to drive market transparency. We share a lot of price information, transparently, demand information transparently and so everyone knows where all the trucks are, all the shipments are and what price everything is trading at essentially.
NYLP: Trucking is not something I know anything about except that I had learned just by talking to you earlier that everything I touch comes off of a truck.
Roseanne: True. If you bought it, a truck brought it. A lot of people don’t realize that everything they’re sitting on, playing with your headset, your microphone, the computer, everything came on a truck at the end of the day. It might come in to the country via a ship but it is transferred via truck to the railroad and/or to a truck and it gets to retail locations from there. Trucking is a very important part of the economy.
NYLP: Trucking is extremely important. Everything comes from a truck. What was this industry like before all these technology entrants?
Roseanne: Well, we haven’t moved the needle that much to be honest. We’re all brand new entrants. Even two years ago, there were no Uber for trucking players. We’re all just getting started, everyone has a slightly different business model. Mine is one of transparency.
Price transparency and demand transparency which is quite different than all the others but even just a year ago, no one was seeing — the venture capitalist were barely registering that this was a new market to go in to. Now they see it as a giant market because it is almost 800 billion right now and based on my analysis, there’s probably two trillion in potential.
NYLP: What is the shipper doing now to ship something on a truck?
Roseanne: Yeah, right now they call around to truck brokers.
NYLP: On the phone?
Roseanne: Yeah, on the phone and they get a number of prices and generally those prices don’t make any sense in them because they’ll be all so different, they’ll get $500 from one and $2,000 from another and $5,000 from another and $10,000 from another, it doesn’t make any sense to them.
That’s because there is no real market right now, there isn’t a place where a shipper can go online and find the going price of moving freight via a truck. That’s really what we’re ‘trying to do at LaneHoney is create the very beginnings, the foundation of creating a real market in this space.
NYLP: Why don’t the prices make any sense?
Roseanne: Because they’re kind of conjured by brokers, because there isn’t a market. That means when you call up a truck broker, he’ll just tell you, he knows you want an instant price and if he thinks he has a truck in the area and he might not even know if he can get a truck, he’s just going to price it for you.
NYLP: Based off of what? I’m sorry.
Roseanne: Well, it’s sort of a feeling. Some of the larger firms actually have a database of information and they have a probability or someone might know of a truck but generally, the way the market works right now is they just price by feel. A lot of brokers actually take a lot of losses, about 30% of the freight they quote they take a loss on, and that which means they gouge on the other side in order to make up those differences.
There’s a real inefficiency in this place and having a real price source can actually create a lot of efficiency for everyone. Think about stock brokers 20 years ago, you will call a stock broker and he would just tell you whatever. Now, you wouldn’t think twice about going on E-Trade or other platforms and you know the price of the stock, you’re not going to pay some outrageous difference, you definitely know more about where the price is.
It’s sort of the Wild West in freight, we don’t know where those prices are right now. There’s a lot of people who say, “Oh I know the price.” When we’re talking to the buyers of transportation at a very large brand, they’ll say, “I know the price.” The analysis we’ve done so far tells us there’s anywhere between 20 and 41% spread. Our job is unveiling that spread and creating real transparency in the marketplace so that when you start having transparency, the spread is thin and that’s where we’re going.
NYLP: 28 to 41% spread. That means what exactly?
Roseanne: Okay, spread. I know, that’s a Wall Street term. So I’ll just give you a quick example. When a shipper say they have ping pong balls and they have boxes of ping pong balls and they need to get them to market. They will call a number of brokers and they’ll get a number of prices and then in the trucking market, truck brokers actually buy freight and they sell it to a trucker.
They will tell the shipper, I will do that for a thousand dollars and then they will tell the trucker, I have a load for you but I can’t pay you anything. I can maybe give you fuel. They’ll give the trucker, they’ll tell them, I can give you this load for a hundred dollars and then they’ll pocket the 900. That is a very typical scenario. They’re segregating the buyer and the seller, they’re misrepresenting the market conditions and they’re building this middle, this spread which is their fee.
They don’t disclose that. So it’s an undisclosed fee that they’re building between each side. That’s the way the market works now, that’s sort of the Wild West, it’s the way it was about 20 years ago in lots of other markets. In every single market, a competitor came in who was disclosing the spread and creating transparency and they took the market. That’s where we’re going.
NYLP: Just to clarify, why is this market so crazy? Is it because that there are so many truckers that have one to four trucks that it’s a lot of small businesses interacting with a lot of large businesses?
Roseanne: There’s a famous book called The Long Tail and it’s about how the Internet will change every business. Because now you can market to long tail. The Long Tail is, you have a curve and you have the majority of the…It used to be, when say, you would have a hit record and it would sell to the majority of people and then you had a hit on your hands and then that curve would drop off. What you think about trucking and the top 5% of carriers, the majority of large trucking companies only make up 5% of the entire market. You think about the Schneider Nationals and FedEx and UPS and zillions of giant trucking companies, they only make up 5%.
The rest are these little tiny companies. How are you going to market to them? How are you going to reach them? Before, you had to have thousands of agents. Now, you just need the Internet. That’s kind of where the market is right now. Think about buying a plane ticket. 20 years ago, you would call a travel agent, now you go on to Kayak.com and you know the price from eight million different airlines and you can kind of pick and choose.
That’s really where the market is going and we looked at our opportunity in terms of should we take the Uber route and build an undisclosed spread and be a truck broker? Because, the current brokerage market is the Uber model. It is building a spread and having demand pricing. They do it by feel whereas Uber does it with a machine. We thought, “Well there’s something much more, that’s really not disrupting the current business model,” we wanted to just disrupt the current business model and that is creating transparency. It’s very radical.
NYLP: The other folks out there who do have technological based applications, what they’re doing is they’re quoting a price and giving a certain percentage or a certain rate to a trucker and taking what’s in between kind of like what Uber does with the driver. The customer pays something and the driver gets a portion of that and Uber takes what’s in between. What do you want to do?
Roseanne: Well, that is the current truck brokerage model. It’s no change to the current model.
NYLP: Except that there are no losses in that model right?
Roseanne: I believe that the Uber model will have to take losses in order to compete with the big brokers. If you’re not changing the model and then your five guys with the machine as supposed to a big brokerage with 7,000 agents on the ground and you’re competing head to head then yeah, they’re going to be able to use their slush fund to beat you every time on price.
If you’re not changing the model then you’re operating on the same playing field. How can we change that and be competitive? The only way to really do that and the way that it’s successfully been done over and over again is what’s called an all to all market. You let everyone see all the trucks, let everyone see all the shipments, you let everyone see all the prices and the same on Kayak and tons of all the old platforms on Wall Street have taken market share from incumbent brokers by unveiling the spread.
That’s what we’re doing. If that’s jargony, think about it as you just basically make a fairer “buy it now” kind of market and you let the users set the prices, you let the truckers set the prices. In the current marketplace, the Uber for trucking platforms and the truck brokers make the prices and they force it on the truckers and the shippers.
On LaneHoney, the truckers and the shippers, the real market is setting the pricing. If there are not enough trucks then the price goes up, if there are tons and tons of trucks in a location and the price comes down, it makes sense.
NYLP: I still can’t get over how crazy this market is without this transparency. Why is it so crazy?
Roseanne: It’s the way the market was designed and the way that I think because it’s a small business market trying to meet a small business market. It’s a B to B market that both sides have long tail. It’s uniquely an opportunity in time for the Internet and the on demand economy to bring those two groups of buyers and sellers together.
I think the Wild Westness of it that’s existed unchallenged for 20 years or more is really… I think they’ll continue to enjoy, will be little tiny concerns to them until there’s like a real price source that’s published every day that’s for real and that’s a trusted, just like you don’t invest, you only invest in a stock market because you see the prices published every day, you need a trusted source of information.
LaneHoney is about creating that trusted source of information and we believe that more people will join in that and they’ll become — what’s interesting is we think there could be like 20 exchanges that we could have segments, there could be a market for just flatbed trucks, there could be a market for just grain haulers.
Because these all operate really as separate markets and it’s really about aggregating those types of carriers efficiently and we believe that and publishing the prices at the same time. Real time information is very powerful.
NYLP: Who are the big players in the market?
Roseanne: They’re daunting but what’s interesting is, by just making — there’s a couple of interesting success stories. The big gorillas are CH Robinson, they’re a public company, XPO Logistics, they’re a public company, Coyote Logistics was recently bought by UPS and Coyote was very interesting because they simply changed the way that their internal operations worked and were able to gain huge market share by one little change.
Take for example a typical truck broker and a big firm. They will have a shipper that they’ve gone out and gotten theirselves. They’re sales people right? They go out and they find little tiny company and they say, “I’ll get you trucks.” The company will call them and say, “Okay, I need a truck today,” but they actually won’t have a truck but the guy sitting next to them has a truck. They’re reluctant to give it to the guy next to them because they have to pay away part of their fee to the guy next to them.
This sort of operates is like little tiny fiefdoms. Not only do you have the CH Robinson fiefdom but you have the New Jersey office of the CH Robinson fiefdom and then you have the Jessica fiefdom that works at the New Jersey fiefdom of the CH Robinsons fiefdom. You have huge network inefficiencies built into this model.
I think what’s really cool about this Uber for trucking market is we get to use a platform approach to take out all these network inefficiencies and that alone will bring huge price efficiencies to shippers. And truckers will know earn more.
NYLP: I’m a shipper, I call up several brokers it seems like in order to ship my goods, what do I do with LaneHoney?
Roseanne: You come onto our site once you hear about us and usually they hear about us by seeing a price survey or something like that in their market and they can immediately see trucks at a price. These are carriers who are saying, “I’m available, I’m in Chicago, I am a refrigerated truck and I have room for four pallets on my truck and I’m heading east.”
They’ll be able to say, “Wow, there’s a guy and it’s this much per pallet approximately,” and they’ll be able to do what’s called a request for a quote. That means giving a little bit more information about their needs so that we can match them and send an offer to the carrier and he can respond with a very accurate quote and that’s really how it works.
Our shippers are requesting quotes and the carriers are responding to them by quoting the shipments directly and then we match them and once they decide to transact together, we handle everything else, it’s a very automated dispatch of paperless process, it saves tons of paperwork and we have a very automated bill of lading, we do the invoicing on behalf of the carrier so we’re taking all the fraud out of the freight transaction.
There’s a big fraud, and there’s a problem in freight and that even a big company that’s moving a lot of freight, they’ll have a lot of padding, a lot of invoices. They’ll see additional fees that they were not aware of and there’s this sort of this whole after market that’s called freight auditing that happens and a typical large company that we do business with will spend like two million dollars a year just auditing carrier invoices.
Because we’re doing the invoice on behalf of the carrier to the shipper and we’re verifying all those charges, we’ve taken all the fraud out of that freight invoice and they’re just done and dusted and they don’t have any question about it going forward and they’re able to pay immediately.
NYLP: Is it hard for truckers and shippers to agree on pricing when they’ve never done it before?
Roseanne: Well the carriers, that’s an interesting question because I’ll talk to someone who has been doing, they’ll say, “I’ve been doing a certain kind of trucking for 17 years,” but they’ll call me and ask for price guidance because they’re so used to having brokers dictate price to them or carriers acting as brokers just telling them what they’re going to earn, that they really don’t know how to quote their own shipments and they need a lot of guidance there.
We try to have the market operate as a guidance to them. Lots and lots of carriers will be quoting loads and the carriers learn from each other and then we do have some guidance for them and they learn very quickly how to be competitive.
One of the things that we do is when a shipper comes on board, they give us their most recent quotes from brokers and if they have contract carriers, meaning they’ve gone out and they’ve negotiated with the big fleet for that lane. A lane is an origin to destination by the way, and hence our name LaneHoney.
They actually tell us this information and that’s sort of crowd sourced and shared with both shippers and carriers. On this lane, this is the average broker quote on this lane and this is the average fleet quote on this lane. We’re revealing pricing at all times and educating both shippers and carriers.
NYLP: What’s been the reaction?
Roseanne: Well the biggest reaction, surprisingly, is not price. They love to go with the least expensive carrier of course but they love having a very high level of service. We optimize our matching engine to provide the highest, best level of service, the best quality carrier in terms of insurance and safety to our customers as opposed to price. They also get to set their own qualification requirements.
If say they want a million dollars worth of general liability and that is their requirement then we only match them with those people. However, the most fascinating thing has been, “Yeah, I only want to meet the match with this kind of carrier,” but we show them all the un-matches too. Because the guys that don’t match are running that lane too, they’re quoting loads, they’re getting matched on that lane and that affects their price as well.
Guys that don’t match with your specification is affecting your price on the lane because it’s affecting how many carriers are in an area. It’s a real market dynamic that happens as supposed to sort of the made up dynamic of the broker with the phone.
NYLP: Do you rate truckers or are shippers are able to rate truckers based off of their performance?
Roseanne: We actually have a very unique rating system. People can say, “Yes, I had good service, whatever.” But actually, we publish real time performance, we’re actually capturing every segment of the trip and so we’re capturing whether they were on time to start the trip, did they arrive at the pickup location, we’re actually time stamping every segment of the trip and we’re creating performance statistics around that and displaying that a the time of tender.
Tendering is meaning I’m choosing this carrier and I’m going to send him an offer for my shipment. They’re seeing the real time, “Okay, in the last two days, this guy has been right on the money. A week ago he was running late for some reason, maybe it was weather but I can see that this is a high quality carrier. He’s done 10 runs for LaneHoney, he’s been on time for everyone. He’s reported in when there’s been wait time at a location.” This is hard data, there’s no fudging that because they have to report in their location, we’re dropping a GPS pin. We know if they’re there or not.
NYLP: Can the shipper see where their trucker is in real time?
Roseanne: Okay, that’s a very good question. Truckers hate to be tracked.
NYLP: Me too.
Roseanne: Truckers do not like to be tracked and so we’ve designed the app to only have them check in at the key points of business verification. I’ve started the trip, I’ve arrived at the pickup location, I’ve successfully picked up the goods and I am now on route, I’ve arrived at the drop off location. These are — there’s six points of interest to the shipper that we capture and let the trucker agrees to reveal his location at those times.
They feel like, “Well I can then take a coffee break, I don’t feel tracked by this, I don’t feel like I’m participating and providing good service feedback to my shipper,” and they feel more engaged there. We’ve managed to kind of strike a balance between privacy and good service.
NYLP: What about factors that are outside the carrier’s control?
Roseanne: Yes.
NYLP: Like weather or traffic, you kind of brought up — there’s big accident, how is a shipper and carrier supposed to interact? Obviously that affects their on time performance but they’re probably factors that are outside their control.
Roseanne: There’s a ton of factors outside of the carrier’s control and the shipper’s control that affects the price of their freight. This is one of the most interesting parts and I’m really glad you asked this question because I see a lot of investment in Uber for trucking players where no one’s mentioning this part of the equation.
In any freight transaction, there’s actually a third party and there’s a fourth party. The third party is the shipment location. It’s not the shipper’s location, it’s say their warehouse where they store their goods or their production facility, has nothing to do with them. Then there is the fourth party called lumpers. You’ve probably never heard this term before.
Those are almost like longshoremen, they load and unload trucks at warehouses and distribution centers and if a lumper is demanding cash from your driver and your driver doesn’t have the cash then they basically send them to the end of the line and make them wait. Some locations, it’s mandatory, it’s an insurance requirement to have someone else unload the truck, in other places it’s kind of highway robbery to be honest, these are…
NYLP: Literally.
Roseanne: Literally highway robbery. There are this unknown factors that affect the cost of the end cost of moving freight that neither shipper nor carrier has any control of. One of the very important aspects of LaneHoney is capturing that third party and fourth party information, standardizing it, publicizing it.
“Oh, there is a four hour wait at preferred freezer at Edison, New Jersey today.” Then, any carrier who is offered a shipment that he has to deliver that day to that location can say, “They’re not guaranteeing detention pay meaning wait time pay for me. I know I have to wait four hours to get served there, I’m not going to take that load.”
We are creating a transparency not only in price and demand between trucker and shippers, we’re creating transparency at shipment locations and at load and unload. They call it warehouse service, lumper charges. Those charges can eat up the margin on any load at any time of day. The way it’s packaged in to the price of freight on the broker side, they call it fuel surcharge.
Fuel surcharge is sort of euphemism for “I’m going to charge you all kinds of extra fees for stuff that I couldn’t quote for but now I’m going to charge extra for”. Last summer for example, shippers were being quoted a thousand dollars for a shipment and then they’d get a bill and it would say a 65% fuel surcharge. Instead of a thousand, they were paying $1,650. That can kill a specialty foods maker, their cost of goods sold just went through the roof and they can go under with enough of that.
So, we’re trying to create transparency in that situation as well. I can tell you the exciting Uber story. Yeah, this guy has empty room for two pallets and yes we are getting him the other two pallets and yes he is making more money. But the more interesting story is creating price demand and service level transparency and that will completely change the price dynamic going forward.
NYLP: Carriers are reporting these incidents?
Roseanne: Carriers love, they’re trolls like Internet trolls, they love to complain. They love to tell you about brokers they hate, shippers they hate, shipment locations they hate. Whatever it is, they’re super vocal and super detailed. They tell stories, they’re very colorful in their stories. So we get a ton of feedback everyday about the real time location situation in any shipment location that we’re dealing with.
NYLP: That’s reported in your app?
Roseanne: It’s reported as both comments and when from hard data perspective, “Okay, it’s looking like we’re moving into another hour of detention.” The shipper’s getting a notification and then we are doing some background and reporting why. The trucker, when he’s got a wait time. We ask him to provide notes, what’s the story there? And the shippers are getting that in their dashboard, real time.
NYLP: I know you said this isn’t the interesting side of this story, the Uber story but when you have a carrier and they are collecting several pallets on the way. Let’s say Chicago to New York for example, I don’t even know if that’s an actual route.
Roseanne: It is, it’s a very busy route, yeah.
NYLP: When they have pallets and they’re collecting them along the way, do they report those? Obviously that would be a factor in terms of the travel time.
Roseanne: It’s called a stop. So say you have a guy and he is emptied half his truck and now he’s got a half of a truck, 15 pallet space in his truck between Chicago and New York and we offer him a load for say 8 or 10 pallets and he loves it and he is going to price it to take, say he has to drive an hour out of his way to pick those up and then he’s got a two hour load and unload zone there.
He’s priced that in. He’s priced in his time, the shipper has accepted the price and so each separate shipment is tracked separately, the pickup time, the drops, we handle multiple drop shipments so say a shipper says like I have a full truck load but I have four stops across the country. Those are all handled in our system.
It’s really simple especially for the trucker, it has to be really simple for him. He gets a mobile app and it just has a button, “I’ve arrived.” We give him one thing to do at a time. It gives us that visibility in to each stop.
NYLP: If I’m a carrier or a trucker, New York to Chicago and someone’s paying me New York to Chicago. Let’s say I want to make a stop along the way, will the person who is paying me New York to Chicago be upset that I’m making this additional stop along the way?
Roseanne: Okay, you’re saying that if they’ve accepted a job on LaneHoney for 10 pallets and then we offer him another 6 pallets, does that affect the timing of the first shipment? And no, our algorithm does not allow them to accept a shipment where they couldn’t make those time checks.
We’re actually making sure that they only are offered and can accept shipments that they can genuinely do within the hours of service. There’s another layer of complexity in that truckers time on the road, you might have read about Tracy Morgan, getting hurt and all that, it was very…
NYLP: Of course.
Roseanne: Public. Yeah. That driver actually spent like 12 hours driving to his job and then he got in the truck and was doing his first job and he had been on the job for 31 hours or some crazy number and I think he was driving 14 hours and he’s only legally allowed to drive 11 and a half or something.
Whatever the hours of service, he was well past that. They did everything wrong. There’s actually a legally regulated amount of time that a driver can be behind the wheel on a job. Our algorithm also captures all of that and each job that is accepted, the carrier acknowledges that he has the hours of service to complete the shipment.
Once all of those things — there’s a lot of tolerance on either side and we’re making sure all of that happens so that we deliver a very high service level and at the same time, we’re facilitating a direct transaction. You asked me, how does the shipper get in touch with the carrier? And we make it very easy for our shippers to request an update and they basically say they hit a button that says, “I’d like an update.”
Then the carrier gets an immediate notification that says, they’d ask them to just push a button and it drops a pin and it lets our shipper know exactly where they are.
NYLP: I’m glad you brought up that Tracy Morgan accident because obviously that’s a high profile, something when I was researching your company and the trucking industry came to mind. Why is it that in the trucking industry, someone is driving 12 hours to get to a job? Why is it that there are these seemingly incomprehensible things that in this industry that are a part of it or that are kind of built in and that was for a large shipper which we all know about.
Roseanne: Yeah. Well Walmart has drivers and they probably knew nothing about that guy dead heading down. The driver owned his own truck and this is a very common scenario. Because they can’t find their own loads, because finding a load is so hard, there are bulletin boards that are like Craigslist of truck loads and half of what’s on there is not real and it’s just a big mess so they end up just being driven to broker phones and being dictated price.
It’s just a real mess for this long tail of drivers to find their next shipment. I don’t know if you could imagine waking up every Monday morning and not knowing if you have a job or not. That’s how they live, day in and day out. I don’t think Walmart, he was a leased on driver which means they paid his insurance for general liability and cargo and then he had his own auto insurance.
Then they paid everything else and then that means they dispatched him on certain jobs so he didn’t have to look for jobs. That’s how they call them leased on drivers or attached to these big fleets. He was driving for Walmart and they didn’t know that he was driving the truck for 10 hours or whatever it was from wherever he was in Georgia or whatever to go to his job in New Jersey.
That’s very hard to capture, but the majority of owner operators run their own businesses. They pay for their own insurance, they manage their own hours of service, their regulated hours of service, they don’t want to drive more than 11 or 14 hours in a day. They’re allowed 13 and a half hours a day with a 30 minute break.
14 hours on duty a day, they have to have mandatorily have 10 hours off at night. They don’t like being controlled like that and it puts a lot of inefficiencies in the system but it’s sort of the Wild West out there, it’s sort of like, if you have a system, truckers are only paid for the miles they drive. Of course their only incentive is to drive more hours.
They have no wage protection. They rarely receive any kind of benefits, they’re not paid for detention, the wait time, it’s called free time by the way. Two hours in the beginning of a load and two hours at the end of load. For every shipment they do, they’re giving away four hours of their time. There’s just so much like that that their incented to overdrive, drive too long, take every job they get and it needs to be done.
That’s what all of this new startups, they’re seeing this giant opportunity, all of us are seeing this opportunity to make a better match, to make more efficient time of the carrier’s time, to deliver a highest service level and take some of the pressure off of these guys. A typical owner operator is spending between four and six hours just looking for a load on these horrible Craigslist load board things.
NYLP: Plus the four hours that they’re waiting to start.
Roseanne: Yeah, exactly. They’re picking up the load and then they’re told to go sit in their truck and then somebody taps on the window three hours later. It’s a crazy world and it needs more visibility. One thing that I should mention is, there is this thing called the FMCSA, The Federal Motor Carriers Safety Administration. It’s a division, the safety division of the USDUT and their job is to monitor carriers and make sure they’re safe and everything.
They’re only able to actually inspect about 12% of carriers across the country. Of like the 3.5 million drivers, only 12% of them ever saw an inspection, ever was looked at. That means 88% of carriers, no one knows anything about them. There’s a huge opportunity to step in as private companies and provide more visibility there.
NYLP: The market, again sounds very crazy and it seems as you mentioned a great opportunity for a lot of the startups. How many users do you have right now?
Roseanne: We have 22,000 carriers that have signed on so far. The shipper numbers don’t believe. 54 shippers, they don’t sound very exciting but some of them are like, they ship 40,000 shipments a month. Just the number of shippers doesn’t really matter, depends on the size of the shipper.
We have small businesses, we have medium sized companies and we have very large enterprises that use our product and we’re just getting started here. I think everyone of the startups in this, we’re all facing very interesting challenges to work with usually an uneducated, not terribly educated population.
Most of my initial carriers that signed on are really early adopters, they’re college educated guys, or they have bigger fleets or they’re very interested in innovation but when she start getting into the owner operator population, you just find guys that are, they probably never graduated from high school.
There’s huge turn over in trucking, 120% is that so that means that a good 10% of carriers every month are turning over meaning they either have their truck repossessed because they couldn’t make a go of it and they go and work. They either go work into construction or they go and work as a driver for a big fleet but then a year later, they’re back in and they lease another truck and then they’re back in.
There’s this constant churn. You need a lot of people or you need a machine to manage that churn. All of us are faced with that challenge of managing churn, managing the marketing and connecting carriers and shippers at scale. It’s really a mathematical problem and hence my tech team. Data scientists and mathematicians. They’re geniuses.
NYLP: How are you getting more carriers and more shippers?
Roseanne: What’s interesting about us is that we’re providing data to our users on the demand in any location, the price in any location. Market data is the big draw and we drive signups just through that because even if they can’t find a load, they learn about price, they learn about how many carriers are in a location at any time of day. That gives them some points of negotiation when they talk to a broker and need to negotiate a price outside of LaneHoney.
NYLP: You’re providing information and that’s sort of advertisement?
Roseanne: It’s the pillar of the transparent market, it’s the first thing you need to do to get a market off the ground is provide transparent market data and that’s what we’re dedicated to right now.
NYLP: The carriers as you mentioned, they’re very small, they’re very fragmented, how are you going to get more of them? How are you going to get them on, how are you going to get more shippers on and say, “You know what? You don’t need to call brokers anymore, you need to use this app.”
Roseanne: Yeah, they find out about us when we have shipments, we are actually going out to those horrible craigslist billboard thingies that I told you about and they see us there and we’re using the current channels if you will and we’re acquiring users from the current channels. That’s sort of the AirBnB play, all of us are doing it, all of us are integrated with those old style channels and we are all acquiring users from that base. It’s a challenge.
NYLP: How many carriers and how many shipments is the key metric are you growing every month?
Roseanne: Yeah. We do have a really nice growth rate right now. We’re tracking between 12 and 20% which is kind of crazy but…
NYLP: Per month?
Roseanne: I know, we’re really — at first we were growing like 5% per month and then it sort of spiked. And then as we started adding, at first we were just showing demand information. We were telling people how many open request for trucks there were in any location. Not any price information.
When we started adding price information, we had a real bump in those numbers. They think of us as a load board, these Craigslist things that I’ve told you about but then they realize that if they list their rig, they get matches, they get shippers actually requesting quotes, specifically from them and it all kind of feeds on each other and so they like to announce themselves.
That’s a real first I think. Typically a load board, a craigslist, a truck load will have about a 120,000 loads on it but only about a thousand truckers will list themselves. It’s just the other way around with us. We’ll have 1,500 loads in a day because we’re small and we’ll have a thousand truckers who will announce themselves, it’s like great, the numbers are kind of cooling and don’t make any sense to us.
We’re still learning. What’s the lever, how do we get — it depends if it’s a hot lane or what we found from our research is that truckers throw themselves at long hauls because it takes them so long to find a load and to negotiate one like four to six hours that I told you about and to qualify and to send all their paperwork and I’ll just kind of stuff.
That’s so much time invested, they want to be gone the whole week. What we’re doing is making it, we’re taking all the friction out of the transaction so they get offers for instead of a long haul that’s only paying $1.80 a mile, they’ll get a short haul for 500 miles that is paying $12 a mile. It’s a completely different value proposition and then they’ll see that right after that, we have another short haul.
So we’re unlocking the short haul which is, there’s about 12 to 14 short hauls that never see a truck for every long haul that’s out in the market. It’s just a completely ignored, underserved market and that’s what we’re really unlocking here. It’s just so much more money, such great earnings for the carrier, they’ll do those — what I hear from the carriers is they’ll say, “Oh I’ll do that all day long. You have any more of those? I’ll do those. Just keep sending me those.”
NYLP: Right, because it’s a long trip across the country.
Roseanne: Well, they want the short trips because then they don’t want to go far from home and they make three, four times as much.
NYLP: How does LaneHoney make money?
Roseanne: We just charge a flat fee to our shippers and at first, there was little push back, I’ll be perfectly honest with you. Some of our largest enterprises were saying, “Woah, that seems like a high fee.” But once we unveil the spread and show them the difference between what the direct carrier numbers are versus what their brokers are quoting, they were more than happy to pay our fee.
NYLP: What’s the difference between a LaneHoney price and a broker price?
Roseanne: It can be anywhere between five and 20%.
NYLP: Less?
Roseanne: Yes.
NYLP: Who are your competitors?
Roseanne: Well, our competitors can be a fleet that has trucks that is competing for shipments, it can be a broker like CH Robinson that doesn’t own any assets and therefore can price a lot more competitively and has a huge budget and everything. I want to change the game, I don’t want to play their game.
So that’s the reason for creating price transparency and then of course the other Uber for trucking competitors but so far I keep winning those frequently, I find out that I won the customer away from one of those. Because they turn out to be not very competitive, they’re using an algorithm to build the spread so they find themselves being undercut by brokers.
Sometimes LaneHoney is competitive, the carriers are learning how to price. Sometimes they’re not competitive enough yet. Every once in a while there will be a guy who will do things cheaper for a back haul and the broker can really underprice. That’s not the majority. They can even use their slush fund and say, I actually have shippers who use us to benchmark their broker. They go with their broker anyway, we’re fine with that.
If I have tons of shippers that come on board, they request quotes and then they go, “Look at this quote I got on LaneHoney,” and then the broker has to beat it and he’ll use his slush fund to beat it. My shipper got a great deal and they used us to learn about the market but that means they come back to us every time and that means I have way more price data. Because we always get the price data from them and then we publish it out. So we’re always aggregating the data, we’re always…
NYLP: Even if they use someone else, you’re able to get their data?
Roseanne: Yeah, we always call and get the price.
NYLP: How do you get that data? You call them up and say, “Why didn’t you use us?”
Roseanne: Sometimes they’ve actually put it in their panel, we make it really easy for them to make a comparative window. We have shippers that will upload all their house contracts and then upload their broker prices and as they get them — their broker quotes, as they get them. Then, when they see what we bring them, it’s on the screen, compared in real time.
We are creating a competitive window that doesn’t exist for them right now. They’re actually sharing that data with us. Well they don’t think about it as sharing the data, they’re just using us as a dashboard and it gives us those data points and then we’re actually sharing back with them. If they put in, “Oh this provider is quoting me X on this origin to destination.” We share all the individual quotes from other brokers and fleets on that lane to them.
We crowd source and we share the data lane by lane and provider by provider. So if they have CH Robinson quoting them X on Chicago to New York then they see everyone else, every other shipper’s quotes for Chicago to New York from CH Robinson and XPO, everybody else is right there.
It’s very disruptive because they’ll call back, “LaneHoney is publishing out X. I want a better deal,” and they’re able to negotiate a better deal and that’s what it’s really about. That’s what’s driving the entire machine is really the sharing, constant sharing of price information.
NYLP: You mentioned that you are on Wall Street and that you are analyzing freight. What’s your background, how did you get in to all of this?
Roseanne: My very first job on Wall Street, I actually automated the operations of a complex transaction and that no one thought could be done and it seemed really simple to me.
NYLP: What type of transaction?
Roseanne: It was a derivatives transaction of a swap and to me it was like, “Yeah, it happens on this state and then there’s a price and then there is a day that you collect the price a year from now,” and these seemed to be fields to me that could be automated. To me I look at a freight transaction and I see all that same possibility. There’s a possibility, it’s sort of like if you dial back 15 years, it’s like there was no standardization of terms, there’s no standardization of pricing, there’s not standardization of anything.
Trucking is really big and juicy and just starting with getting the standardization of terms, right? Then the standardization of pricing and how you’re going to talk about price and I think the way the market does it right now, they’re so used to the way they do things, they’re not aware that there’s this transparency opportunity.
NYLP: When I was researching for this podcast, I came across an article in Landline Magazine which is something that I’d never heard of before but it is the business magazine for professional truckers and they said in this article. Ubers for trucking, “LaneHoney evolved from the Wall Street big data technology,” that’s you. “It’s based in New York City. It promises pretty much the same benefits as the other guys but not for everyone and not right now.” What do you have to say about that?
Roseanne: I don’t think that, first of all, I am a subject matter expert for even the Wall Street journal because I think most of the people covering this space didn’t understand what these new start-ups were offering, they didn’t understand what the sharing economy was about and they didn’t understand, I think that most of the start-ups were just truck brokers with technology front end. And so when I was describing what I was doing, as you can see, I’m not terribly articulate about it. It’s hard to describe the difference between a spread builder and a transparency platform.
“Well she’s not doing it for everything,” because you got to pick your battles and at that point we were just experimenting in the intermodal, that’s the movement of containers from port to company warehouse or distribution center. That was my entry market, that’s where I’ve decided to focus.
It’s a focus point of one of our competitors as well because those are short hauls, there’s a very finite group of carriers, it’s not hard to aggregate those carriers, it’s a set 6,700 carriers only who target that market. Who are licensed to operate in those locations. It just made a lot of sense to just focus on that but we just had huge demand for refrigerated trucks and flat beds and so sometimes you just go eat what you kill, what you get.
We’ve been testing in a number of market segments. We’ve had request for auto carriers. Those big trucks where they have like 10 cars on them. No one’s aggregated and created a market around those. We get lots of request and we have to pick our battles and I think that’s what the guy was referring to.
Yeah, you can’t be all to everyone, you have to be like Convoy for example, they’re operating just in Seattle within 250 miles off Seattle and they’ve focused on a region. Cargomatic is my competitor is focused on the Los Angeles and the port of Long Beach. Again, a geographic location based and small trucks, 10 foot trucks, inner city trucks. They’re called straight trucks in our world.
Transfixed is doing more long haul because he is a long time truck broker and he has long time customers. He’s just using his platform to service those customers. I don’t really see any difference really from a traditional broker in that scenario but there’s a number of other players who one of them has got a load board, taken all the load board data and put it on a phone to acquire carriers.
Carriers are pretty easy to get, it’s the shippers that are hard and I think all of us will be faced with, it’s so easy to call broker and just like get serviced, and we all have to deal with coming face to face with how to compete with that.
NYLP: This trucking world is obviously a very different environment. What’s been the biggest adjustment for you or I guess the biggest thing that you‘ve had to do in terms of acquiring knowledge about the industry?
Roseanne: The biggest challenge has been having enough time with carriers and shippers, you have to have a lot of user feedback to get this right. Cause you’re trying to take friction out of a transaction that has a ton of friction. How do you make it a beautiful experience for people? Where they feel like it’s super easy, it’s as easy as picking up the phone and calling their broker and really, truckers have been my best friend.
They are such sharing, amazing people who want to teach you everything about their world and I just learned so much about every segment. I’ve learned everything about frozen and refrigerated and the long-flatbed market and hopper bottoms which is grain and other commodities and the inner modal container, moving space.
Whether it’s a big enterprise and a logistics guy who has been doing it like who is a quant, who has been doing it for 15 years or an individual owner operator who’s just running around the port of Virginia and wants to learn how to make more money. They are the most generous people and will teach you — they’ve just taught me everything.
So have big fleets. Big fleets are very interested in learning how startups are going to change their world and they’d rather be on the right side of the equation. They’ve been amazing partners to us, teaching us technicalities that we never knew about because there’s a zillion and that’s how we learned about the shipper location mess and that’s really, those third and fourth party location, situations are going to be the largest, I think that’s the biggest friction point that all of us have to solve that’s sort of hiding in the corner.
NYLP: What’s to stop a competitor from coming in?
Roseanne: Well there’s a zillion competitors with tons of money. XPO Logistics is — okay, but here’s an interesting fact. CH Robinson is the big gorilla, they have 8,000 agents, something crazy like that. They only have less than 2% market share. So you think about the very biggest gorillas having centesimal market share, then you think about carriers, turn over, 120% every year, carrier numbers are dropping, shipments only increase, there’s about between 9 and 11% annual growth. Basically the market’s going to double in 10 years while carrier numbers are dropping.
NYLP: Because people don’t want to truck anymore?
Roseanne: Well they make more money in construction or whatever it is. The game is gamed against them. Why would you take a lease on a hundred thousand dollar truck if you knew — like the Millennial’s are not — the average logistics person is 55 years and up. Most carriers are older that there’s an aging work force in logistics that’s not being addressed and new technology and new opportunity can address it.
But what I was saying about there being like these big players with tiny market share which is giant market shares, it’s billion dollar market share but super tiny in the greater universe of things and this huge carrier turnover means that it’s anybody’s game. Anybody’s game who can manage that churn more efficiently than a guy with 8,000 seats of people and overhead and phones and faxes and paper right?
NYLP: We talked about this as the Uber for trucking. Why can’t Uber be the Uber for trucking, not just a shipping broker but a big technology company that has all the resources that can do a big marketing push and has a reputation that says, “You know what shippers? We are great at transporting people, we can do the same thing for trucking.”
Roseanne: Yeah, that’s a very good question. I work a Grind, the co-working space and the company Uber actually took over the large conference room in our space. I got a little insight to how they work. And what I saw was a company raising a lot of money and at the end of the day, when you talk to an Uber driver and you find out that they have a very phone fax, paper relationship on-boarding as a driver.
You have this company with these amazing valuation but they have a very unscalable, very high touch situation to onboard a driver that only needs a driver’s license. Trucking is so regulated, it’s so complex. I think that we’ve managed to automate on-boarding in a way that would make us an attractive acquisition by someone like Uber because they could come into this market right? They’ve got a lot of money and they could throw a lot of people at it. But then they’re just like XPO or CH Robinson. I mean, even at the billion dollar level, they’re 1% market share. It’s still about managing, automating some of these processes and I don’t see Uber — I know they’re not still not doing it with their own taxi drivers. How are they going to be doing it with trucker drivers that are highly regulated?
That’s my own take, I could be wrong, obviously, money solves a lot of problems, I think we’ve been really smart with our money, we really focused on automation of very complex tasks and that’s going to allow us to grow and pass people on the left in the next year.
NYLP: What happens if something goes wrong with the shipment? Like a truck crashes?
Roseanne: Oh yeah, we get that a lot.
NYLP: A lot of truck crashing?
Roseanne: No.
NYLP: Good. What happens when things go wrong?
Roseanne: We get that question a lot. What’s interesting is a lot of people think that in the brokerage world and in the Uber brokerage world that when something goes wrong, the platform or the broker takes care of it. They don’t. Shippers sign these contracts every day and they don’t realize that they sign away their rights and at the end of the day, the broker’s never going to let them make a claim against their bond, they’re going to give them a free shipment or something.
Things go wrong every day because they’re optimizing their own spread, they’re not optimizing the service. So lots goes wrong. I think when you start optimizing the service, less goes wrong. About one to two percent of shipments go very wrong and we think we can reduce that number significantly by approaching the business in the way that we are. We haven’t had…
NYLP: Because someone’s driving 12 hours to get to a shipment?
Roseanne: Yeah, we’re confirming hours of service, we’re watching service levels, we know when things are late, we are aware of where people are, we have notification systems that are alerting us and we know well before something goes really wrong.
Now, if there’s an accident and that kind of thing. That is the one and two percent market. We are a platform like if your plane crashed are you going to sue Kayak? No. We are a booking platform. We are an efficiency and booking platform, we are allowing carriers and shippers to transact directly, we are bringing them together.
Most of our shippers are actually managing the shipment themselves, they can contract with us to manage it for them. That’s just managing it, that’s not owning. The reason that people sue brokers, there’s been some famous cases of the court assigning the liability to say a big broker like CH Robinson. The reason for that is that they are actually buying the freight.
They’re actually taking the freight they’re entering into the transaction. They are pricing it, they’re becoming a party to the transaction, if you’re a part to the transaction, you’re a little eyeball but if you’re not a party to the transaction and LaneHoney is never a party to the transaction, and if something goes wrong, it’s not like we say, “Oh no, not our problem.” We don’t do that, we actually facilitate a claim with the carrier.
It’s always the carrier’s insurance anyway. We do the exact same kind of intervention that a broker does. The first level of liability is always with the carrier and the carrier’s insurance. That’s why we take such lengths to qualify carriers appropriately and know exactly, verify their insurance on behalf of the shipper.
NYLP: How big is your company?
Roseanne: There’s five us right now, we’re really a teeny team and we have two developers, partners that are CTO and COO are brilliant. Harvard Law School grads, developers, they’re amazing guys, they’ve just changed my world and just they’ve helped me grow the business in ways that I never thought I could.
My partner Ali is a natural sales guy. He has successfully scaled enterprise platforms for Bed, Bath and beyond, Sephora and other names. So we have a lot of enterprise experience to bear and then we have a few seats of junior developers and full time Q&A and all kinds of people that make stuff happen and designers and all those other kind of people we’ve had amazing support.
So we have a pretty tight team, we’re constantly turning around new features and we’re responding to shipper’s request for what they need.
NYLP: This has been absolutely fascinating Roseanne, this podcast has probably gone a little bit longer but listening to this podcast on the road is probably a great opportunity. How many truckers do you think will be listening to this podcast?
Roseanne: I don’t think they know….
NYLP: Or carriers I should say.
Roseanne: Yeah, I don’t think they know anything about this world.
NYLP: But we’ll get the message out.
Roseanne: I hope so.
NYLP: How do people find out more about LaneHoney?
Roseanne: They can either come to our website or they can come to my LinkedIn, just look me up, Roseanne LaneHoney and I’ll pop up on LinkedIn and they can read all the articles that I’ve written or my interviews or anything like that and they can call me up too. My contact details are there.
NYLP: It’s an app for iOS and Android?
Roseanne: We actually don’t have an app. We actually have HTML5, responsive. It looks like an app on any phone or mobile device but also works on computer and there was a very specific reason for that and that was to respect the carrier’s privacy.
NYLP: LaneHoney.com for all this?
Roseanne: LaneHoney.com for everything, yeah.
NYLP: Roseanne, again this has been so interesting, this trucking world is incredible. Thank you for stepping onto the New York Launch Pod and sharing your time with us.
Roseanne: Thank you so much.
NYLP: If you want to learn more about the New York Launch Pod, you can visit NYLaunchPod.com or follow us on social media @NYLaunchPod.
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