t e c h n o l o g y

CARRIERPOINT VS. 'BUSINESS AS USUAL'

Not a broker, CarrierPoint brings shippers andcarriers together in a neutral, service-oriented way

JOHN BENDEL
TECHNOLOGY EDITOR

     In March, CarrierPoint launched an independent Internet marketplace for truck transportation. Shippers’ members can tender freight to selected carriers, ask for bids from specific carriers or put freight out for bid to all carriers on the system. Carriers are rated by a number of parameters but they are not obligated to accept loads; similarly shippers are not obligated to go with the lowest bidder. In fact, according to CarrierPoint president and CEO Brian Kinsey, the low bid is very rarely the winner. Besides bringing the parties together to make deals, CarrierPoint offers an inexpensive alternative to paper transactions, dedicated electronic communications and sometimes EDI (electronic data interchange). The Internet marketplace can put even small carriers on an operational level with their largest shipping customers. Meanwhile, both sides of freight transactions can benefit from accumulated business records, which can be used to analyze traffic lanes and business cycles, among other things. That kind of computer analysis now goes by the trendy name “data mining.” CarrierPoint calls its data-mining module Data Depot.
      CarrierPoint charges a 4% commission on transactions, 2% to shippers and 2% to carriers. The company does not handle freight revenue, which still moves directly between shipper and carrier.
      Of course, CarrierPoint is not the only truck transportation startup on the Internet, but it is one of the higher-profile efforts. Unlike some Internet ventures backed by existing logistics companies, CarrierPoint brought no business with it to the Internet. The company has had to start sales from zero. Nevertheless, investors in CarrierPoint have included CyberLab Ventures, William E. Simon and Sons, the venture capital affiliate of Donaldson, Lufkin & Jenrette and the UPS Strategic Enterprise Fund. At least part of that investment was made because CarrierPoint was headed up by Brian Kinsey.
      Prior to becoming president and CEO of CarrierPoint, Kinsey served as vice president with Landstar Systems and executive vice president with Landstar Inway, where, among other things, he was credited with reducing owner-operator turnover and creating a buying cooperative for owner-operators, agents and drivers.
      Kinsey, 49, holds degrees from the Georgia Institute of Technology and Harvard University. He is a popular speaker on trucking topics. He spoke with HDT early in October.

      Kinsey: The site has been up and running since March 3. The company has been in business for 15 months. So we have been in operation seven months. Business is going along pretty good. Right now I think we have 50 customers on the shipper side and about 260 customers on the carrier side, although that number is going up rapidly right now. We initiated another customer who brought in a large number of carriers so there are probably close to 300 carriers.
      Ideally what we’re looking for is a 7-to-1 ratio, carriers to shippers. I like the seven number. I think it’s going to take that many to make sure we get the coverage, so that there are carriers looking for loads in all the places the shippers are posting.
      Right now our strongest presence is in flatbed. We have a huge number of flatbed carriers, several pages of them here. We do have a lot of van operations. We don’t do a lot of refrigerated at this point. Most of the refrigerated is in the nonfood area, and a lot of it is in a mixed-fleet environment where you have a chemical company that’s doing a combination of bulk liquid, dry van and refrigerated.

     HDT: Did you set out looking for the flatbed market?
     Kinsey: No, it was a customer-based thing. We have good contacts at several flatbed shippers. One of our large flatbed shippers is also a very large dry van shipper. He needed more help on the flatbed side than he needed on the dry van side, so we started with the flatbeds.

     HDT: Does that put you in competition with Eflatbed.com in Pittsburgh?
     Kinsey: Yes.

     HDT: Are you serving the same metals markets that they are?
     Kinsey: That is probably a fair assessment. They’re not the only competition, and I think that one important thing is that they are brokering loads. We don’t broker. We bring the parties together and let them deal directly with one another. CarrierPoint has received a private letter ruling from the Federal Motor Carrier Safety Administration that what we do is not brokerage. We’re not controlling the transaction.

     HDT: So you do not do the actual hiring?
     Kinsey: That’s right. We’re not intermediating the transaction. We are in the process of developing the back end [of our system]. We have all the information in our system to do an electronic invoice. So sometime in the first quarter we’ll have electronic invoicing capability, electronic approval at the shipper level and electronic freight payment.

     HDT: You will still not be a broker?
     Kinsey: No, because it will be the carrier’s freight bill and we will not handle the money. The money will be transferred through a bank. The bank will handle the electronic funds transfer. We won’t touch it.

     HDT: Where do you see CarrierPoint in the current market?
     Kinsey: Companies like CarrierPoint, that are truly independent, have a particular appeal to a large number of shippers concerned that they are not going to get the best deal with supplier-based companies.
      We found with most of our focus groups there was a tremendous aversion to doing business with brokers. It was like a last resort kind of thing. A lot of the business models of those proprietary or captive companies really is more of a pure brokerage model. They are just doing brokerage on line. I don’t think that’s any more attractive to a shipper or a carrier than the old way.

     HDT: But those logistics people have business to begin with. You independent folks have to start from scratch.
     Kinsey: That’s absolutely true. It’s really a question of liquidity and bringing the company, up to a high volume, a break even or better level and in a reasonably short period of time.
      Our company is well-funded and we have a lot of staying power. If you talk to the analysts, they’ll tell you we have a very good business model. It is particularly attractive to shippers and carriers. Our biggest competitor right now is “business as usual.” We’re trying to change habits and change the way business is conducted. It seems like every customer we add gets a bit easier.
      Everybody loves the idea. Nobody really wants to get started with it. It’s one of those things. Our success has been where there is an internal champion in the company who is really interested in pursuing this. Internal process costs in most of these companies is as much as 20% of their total logistics budget. If I can cut that in half, that is a huge improvement.
      We have a more comprehensive solution than most. It’s going to ultimately be a one-stop-shop kind of environment. Shippers or carriers don’t want to have to interface with dozens of these things. On the carrier side, nobody deals with just one broker; nobody is going to deal with just one Internet company. But they’re not going to deal with 12.
      That’s about how many viable competitors there are in the marketplace. The market will handle several. This is not a one-company-wins-everything kind of idea. It’s too big a market.
      The bigger you get in terms of the scope, the more volume you’re going to need to make it. We’re concentrating right now on segments of the truckload industry with LTL as a backup. We’re getting some traction in the larger LTLs shipments as fill-ups and load completions for truckloads.
      They [other web markets] are also trying to buy co-ops, which at this point is a huge diversion from what it’s really going to take to succeed. If you’re going to be in the freight business, you need to focus on freight and not offer tires at a discount.
      One of the not surprising things I found is that in most cases, carriers are better-positioned and more willing to try this than many shippers. They have Internet access on a pretty generic basis across the board. After they get over the fear that they’re going to lose control of their customer base, they’re more than willing to try it. They’re very willing customers.

     HDT: Are you offering service to three third-party Logistics companies)?
     Kinsey: We don’t use brokers. If all they’re going to try to do is broker the freight, we don’t put them in there. We’ve had some discussions with several large 3PLs who have long-term contracts with major shippers. They’re looking for a way to improve their process costs by using us to reach the very carriers that they use. That’s perfectly legitimate. We just don’t do business with brokers.

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