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Loadsmart Award Write Up

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2018 United States Automated On-demand Freight Brokerage Company of the Year Award

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Loadsmart Award Write Up

  1. 1. 2018 United States Automated On-demand Freight Brokerage Company of the Year Award 2018
  2. 2. BEST PRACTICES RESEARCH © Frost & Sullivan 2018 2 “We Accelerate Growth” Contents Background and Company Performance ........................................................................3 Industry Challenges..............................................................................................3 Visionary Innovation & Performance and Customer Impact........................................4 Conclusion...........................................................................................................7 Significance of Company of the Year.............................................................................8 Understanding Company of the Year.............................................................................8 Key Benchmarking Criteria ....................................................................................9 Best Practices Award Analysis for Loadsmart .................................................................9 Decision Support Scorecard ...................................................................................9 Visionary Innovation & Performance .....................................................................10 Customer Impact ...............................................................................................10 Decision Support Matrix ......................................................................................11 Best Practices Recognition: 10 Steps to Researching, Identifying, and Recognizing Best Practices .................................................................................................................12 The Intersection between 360-Degree Research and Best Practices Awards.....................13 Research Methodology ........................................................................................13 About Frost & Sullivan ..............................................................................................13
  3. 3. BEST PRACTICES RESEARCH © Frost & Sullivan 2018 3 “We Accelerate Growth” Background and Company Performance Industry Challenges The United States (US) trucking industry faces a host of major challenges, such as upcoming stringent greenhouse gas (GHG) mandates, ultra-low nitrogen oxides (NOx) regulations, varying emission norms from state-to-state, new safety regulations, oil price fluctuations, freight demand fluctuations, low operating margins, operational inefficiencies, and driver shortage. With the North American trucking industry consisting of 8.6 million medium-heavy vehicles in operation, capacity utilization is one of the foremost challenges: up to just 79% full truckload (FTL) operations and 68% capacity in less than truckload (LTL). This means that 21% of the capacity in a truck contracted to carry an FTL remains empty while the situation is even more dismal in the case of LTL operations with 32% of capacity left empty per trip, on average. Lower capacity utilization results in inflated costs for carriers, which in turn is passed on to shippers and end consumers. In addition, empty or dead head miles (trips en route to picking up loads during which trucks carry no load) hover at nearly 25% of all miles clocked by transporters. Reducing empty miles and improving route planning efficiency can mitigate challenges such as driver shortages and seasonal fluctuations in freight rates. Moreover, empty miles have an avoidable environmental impact, wherein more emissions per ton of freight transported are entering the air than necessary. That said, strengthening GHG regulations is going to require incremental technology be added to vehicles, which will result in more expensive trucks for fleet customers. Finding effective solutions to reduce empty miles is thus imperative for the entire trucking ecosystem. Companies that manage private trucks and dedicated transportation fleets are forced to do more with fewer resources. They are tasked with increasing efficiencies and compliance to mandates while meeting customers’ growing expectations for just-in-time delivery and express delivery, all the while working to safeguard profit margins. An ever-increasing need to improve freight efficiencies and thus improve bottom lines has made these segments lucrative for freight brokerage solution providers. In particular, digitization can improve the efficiency and flow of freight operations, from pick-up to drop-off, through better resource management, transportation management, real-time localization, inventory management, and yard management. Truck telematics devices have been gaining steady penetration, resulting in digitalization opportunities. Most recently, trucking apps that solve the problems of freight mobility, freight optimization, and driver utility are being developed. Apart from apps, product/service providers are also offering digital freight aggregation services that leverage telematics and Big Data (through information on driver behavior, routing, and asset management).Competitors are helping for-hire as well as private fleets tap into data from the many electronic devices now available in trucks to reduce empty miles.
  4. 4. BEST PRACTICES RESEARCH © Frost & Sullivan 2018 4 “We Accelerate Growth” Traditional freight brokers match freight loads to carriers through a negotiated freight rate, an extremely time-consuming process. Web-based freight brokerage and load boards, which serve as a digital negotiation platform, are a value-added-service provided by almost all freight brokers presently. But these platforms do not provide drastic improvements to real-time freight visibility, which is crucial to connect trucks already on the road and running with full or partial empty space with real-time shipment requirements and opportunities. Automated on-demand freight brokerage solutions deliver greater efficiency and ease in the freight brokerage process for shippers. As an end-to-end technology, automated on-demand solutions also help carriers with document automation, free fleet management systems, and guaranteed payments within 24 to 72 hours. Visionary Innovation & Performance and Customer Impact Differentiation in a Cluttered Market The US freight brokerage industry is highly fragmented in terms of shippers, carriers, as well as brokerage companies. The largest brokerage house in the industry accounts for less than 6% of the entire freight brokerage market, indicating the high level of fragmentation. Founded in 2014, Loadsmart is a technology company at its core that specializes in FTL freight brokerage in North America. It allows shippers to book loads across the country instantly, and carriers can accept loads with a single click. This automation of the brokerage process helps not only minimize dead miles but also save time and money. While there are several new digital brokerage solutions available, Loadsmart has pioneered truckload instant pricing/booking for all US lanes (around 900,000 lanes), enabling shippers to access live rates via their own system with an easy-to-implement application program interface (API). Loadsmart generates instant pricing/quotes by using a machine learning pricing algorithm. Disrupting the industry by changing the existing business model, Loadsmart presents an all-in price to shippers before hiring the carrier. Remarkably, Loadsmart bears the pricing risk of under-quoting on a shipment; after a shipper books, Loadsmart leverages its sourcing algorithms to find and hire a carrier to perform the service, retaining a small commission. By integrating artificial intelligence (AI) and using hundreds of data sources, the company is able to automate freight booking. Algorithms are driven to keep network carriers full so as to minimize empty miles by matching loads moved over the country’s 900,000 transport lanes. Shippers are provided instant quotes based on metrics including the cargo weight, miles, estimated time of loading, and type of commodity. They can then choose to book trucks directly or through Loadsmart’s APIs. Loadsmart is also among the first digital brokers to launch instant pricing via API for transportation management system (TMS) integrations. The API allows third-party companies to leverage Loadsmart’s unique instant pricing/booking feature inside their own
  5. 5. BEST PRACTICES RESEARCH © Frost & Sullivan 2018 5 “We Accelerate Growth” platforms. This means that companies developing enterprise software could allow their users to check real-time truckload shipping prices with a single click without leaving their platforms. And if they like the Loadsmart quote, they can instantly book a 53’ long truckload. In comparison, a largely popular load-board solution helps owner-operators determine shipping prices over the last 15 days, but only across some 100,000 lanes. Also, shippers and carriers have to call each other to negotiate the final price when using traditional load-board solutions. To lead in next-generation technology and the digital transformation of the freight brokerage industry, Loadsmart has invested heavily in employing top engineers and data scientists. In fact, it has one of the highest ratios of both in the industry. To extend its talent growth, the company regularly organizes hackathons and has expanded its recruiting reach internationally. Customer Usage Experience Loadsmart has attracted several Fortune 500 shippers as well as small-medium-large carriers. Its strategy for customer acquisition has been to lead with cutting-edge technology complemented with strategic partnerships to move more with less. The company invests exclusively in product development and technology. In fact, its recent round of investment will enable Loadsmart to increase business exponentially while maintaining high service levels. The company founders believe it will also enable them to scale the solution without losing its edge on innovation and technology. Since January 2018, the largest truck OEM in the United States, Daimler Trucks North America (DTNA) has deployed Loadsmart’s solution to match its spot loads via a customized app for all its contract carriers in the United States. The following DTNA testimonial attests to the positive customer usage experience: “To manufacture trucks, we need carriers to deliver components and parts to our plants. Offering a customized app to our contracted carriers gives them first access to our spot business and improves critical points in our supply chain.” - Lori Heino-Royer, director of business innovation at Daimler Trucks North America DTNA has vouched that adoption of Loadsmart to run a private exchange for its carriers has helped it cut spot-market brokerage for its inter-plant transfers from 5 hours to just 18 minutes. This is made possible by Loadsmart’s use of AI technology to improve real- time visibility of assets and truck lane prices, as well as its use of machine learning to offer dependable instant quoting. Additionally, carriers using the DTNA private exchange receive payment in just 2 days rather than having to wait more than 30 days, as is the norm in trucking.
  6. 6. BEST PRACTICES RESEARCH © Frost & Sullivan 2018 6 “We Accelerate Growth” Robust Business Model Loadsmart is a data company at its core. The company’s founders describe it as a technology logistics company that leverages data and technology to allow shippers to book a truck instantly across North America. Algorithmic pricing sends thousands of instantly bookable rates via API to multiple TMS every day, enabling server-to-server truckload bookings with no human interaction. This model results in an extremely low marginal cost of moving additional loads via heavy investment in automation. Loadsmart’s technology integration with several Fortune 500 shippers like DTNA helps it provide a pre-spot market solution for loads by fully automating the quoting and selection process in freight brokering. Shippers that tender loads on the Loadsmart platform either manually or via API integration with TMS are assured of service. Loadsmart has two solutions for shippers as part of its business model. 1. Semi-automated Dynamic Routing Guide: In this process, shippers transfer information about all loads that need to be moved to Loadsmart’s platform via an API that integrates with shipper’s TMS. The platform provides an instant bookable rate for each shipment by running each load via the machine learning-based pricing algorithm. The shipper’s load planner can manually compare Loadsmart’s rates with other carriers’ and brokers’ quotes before booking with Loadsmart pressing a book button inside shipper’s TMS. 2. Fully-automated Dynamic Routing Guide: In this process, Loadsmart’s algorithm replaces the human load planner. First, the algorithm ‘discovers’ the right price for the shipment and then tenders the load to carriers on the shipper’s routing guide. When the lowest price is determined to be on the Loadsmart platform, the load is automatically booked. This system delivers a level of automation that drastically reduces manual work (reducing human capital costs as well as errors) and improves load matching efficiency. Loadsmart’s business model has gained tremendous investor confidence; the company has accrued over $34.7 million from various investors during 3 rounds since its inception. The latest round occurred in October 2018 bringing in $21.6 million in Series A funding led by shipping company A.P. Moller-Maersk’s ‘Maersk Growth’ investment arm, Connor Capital SB, and Chromo Invest. The previous rounds of funding were in August 2016, which raised $10.1 million in convertible notes, and in December 2014, which captured $3 million in seed funding. Below are some of the appraisals from its investors: “We see huge potential with Loadsmart. Forward integrations between ocean shipping and over-the-road services can create incredible synergies and eventually provide a full service to shippers.” - Sune Stilling, Head of Maersk Growth
  7. 7. BEST PRACTICES RESEARCH © Frost & Sullivan 2018 7 “We Accelerate Growth” “Loadsmart has a solid company strategy and exciting distribution plan. They have built an outstanding team with advanced technology that can be deployed alongside our investment portfolio to digitize and accelerate supply chain and transportation logistics execution.” - Emmett McCann, Managing Director and Co-portfolio Manager, Oaktree “Chromo focuses on investing in companies leveraging AI in different industries. We have been very impressed with how Loadsmart leverages huge data sets to predict future outcomes and automate tasks. We’re looking forward to scaling the technology and driving this forward.” - Marcelo Ferreira, Managing Director, Chromo Invest Conclusion Apart from a lack of load and carrier visibility, pricing opacity has been one of the key deterrents to the adoption of digital brokerage solutions. Loadsmart has made possible instant pricing across all lanes in the United States (over 900,000) using machine learning, which is a tremendous step forward in automating the freight brokerage process. Loadsmart’s ability to offer an all-in instant price for shippers before hiring the carrier is a unique value proposition that strikes at the heart of the freight brokerage process. For large private fleets, the integration of Loadsmart with their TMS for semi-automated route guide or fully-automated dynamic route guide provides the ease and agility that translates into better asset utilization, whether human or truck, and, thereby, more cost savings. The efficacy of Loadsmart’s solution is evidenced by its revenue growth in recent years (350% year-on-year in 2018 and 150% in 2017) achieved by on-boarding fortune 500 companies such as Daimler Trucks North America, Anheuser-Busch, and Albertsons/Safeway. For its strong overall performance, Loadsmart has earned Frost & Sullivan’s 2018 Company of the Year Award.
  8. 8. BEST PRACTICES RESEARCH © Frost & Sullivan 2018 8 “We Accelerate Growth” Significance of Company of the Year To receive the Company of the Year Award (i.e., to be recognized as a leader not only in your industry, but among your non-industry peers as well) requires a company to demonstrate excellence in growth, innovation, and leadership. This kind of excellence typically translates into superior performance in three key areas: demand generation, brand development, and competitive positioning. These areas serve as the foundation of a company’s future success and prepare it to deliver on the two criteria that define the Company of the Year Award (Visionary Innovation & Performance and Customer Impact). Understanding Company of the Year As discussed above, driving demand, brand strength, and competitive differentiation all play a critical role in delivering unique value to customers. This three-fold focus, however, must ideally be complemented by an equally rigorous focus on Visionary Innovation & Performance to enhance Customer Impact.
  9. 9. BEST PRACTICES RESEARCH © Frost & Sullivan 2018 9 “We Accelerate Growth” Key Benchmarking Criteria For the Company of the Year Award, Frost & Sullivan analysts independently evaluated two key factors—Visionary Innovation & Performance and Customer Impact—according to the criteria identified below. Visionary Innovation & Performance Criterion 1: Addressing Unmet Needs Criterion 2: Visionary Scenarios through Mega Trends Criterion 3: Implementation Best Practices Criterion 4: Blue Ocean Strategy Criterion 5: Financial Performance Customer Impact Criterion 1: Price/Performance Value Criterion 2: Customer Purchase Experience Criterion 3: Customer Ownership Experience Criterion 4: Customer Service Experience Criterion 5: Brand Equity Best Practices Award Analysis for Loadsmart Decision Support Scorecard To support its evaluation of best practices across multiple business performance categories, Frost & Sullivan employs a customized Decision Support Scorecard. This tool allows our research and consulting teams to objectively analyze performance, according to the key benchmarking criteria listed in the previous section, and to assign ratings on that basis. The tool follows a 10-point scale that allows for nuances in performance evaluation. Ratings guidelines are illustrated below. RATINGS GUIDELINES The Decision Support Scorecard is organized by Visionary Innovation & Performance and Customer Impact (i.e., these are the overarching categories for all 10 benchmarking criteria; the definitions for each criterion are provided beneath the scorecard.). The research team confirms the veracity of this weighted scorecard through sensitivity analysis, which confirms that small changes to the ratings for a specific criterion do not lead to a significant change in the overall relative rankings of the companies.
  10. 10. BEST PRACTICES RESEARCH © Frost & Sullivan 2018 10 “We Accelerate Growth” The results of this analysis are shown below. To remain unbiased and to protect the interests of all organizations reviewed, we have chosen to refer to the other key participants as Competitor 2 and Competitor 3. Measurement of 1–10 (1 = poor; 10 = excellent) Company of the Year Visionary Innovation & Performance Customer Impact Average Rating Loadsmart 9 9 9 Competitor 2 8 7 7.5 Competitor 3 8 6 7 Visionary Innovation & Performance Criterion 1: Addressing Unmet Needs Requirement: Implementing a robust process to continuously unearth customers’ unmet or under-served needs, and creating the products or solutions to address them effectively Criterion 2: Visionary Scenarios through Mega Trends Requirement: Incorporating long-range, macro-level scenarios into the innovation strategy, thereby enabling “first-to-market” growth opportunity solutions Criterion 3: Implementation of Best Practices Requirement: Best-in-class strategy implementation characterized by processes, tools, or activities that generate a consistent and repeatable level of success. Criterion 4: Blue Ocean Strategy Requirement: Strategic focus on creating a leadership position in a potentially “uncontested” market space, manifested by stiff barriers to entry for competitors Criterion 5: Financial Performance Requirement: Strong overall business performance in terms of revenues, revenue growth, operating margin, and other key financial metrics Customer Impact Criterion 1: Price/Performance Value Requirement: Products or services offer the best value for the price, compared to similar offerings in the market. Criterion 2: Customer Purchase Experience Requirement: Customers feel they are buying the most optimal solution that addresses both their unique needs and their unique constraints. Criterion 3: Customer Ownership Experience Requirement: Customers are proud to own the company’s product or service and have a positive experience throughout the life of the product or service.
  11. 11. BEST PRACTICES RESEARCH © Frost & Sullivan 2018 11 “We Accelerate Growth” Criterion 4: Customer Service Experience Requirement: Customer service is accessible, fast, stress-free, and of high quality. Criterion 5: Brand Equity Requirement: Customers have a positive view of the brand and exhibit high brand loyalty. Decision Support Matrix Once all companies have been evaluated according to the Decision Support Scorecard, analysts then position the candidates on the matrix shown below, enabling them to visualize which companies are truly breakthrough and which ones are not yet operating at best-in-class levels. High Low Low High CustomerImpact Visionary Innovation & Performance Loadsmart Competitor 2 Competitor 3
  12. 12. BEST PRACTICES RESEARCH © Frost & Sullivan 2018 12 “We Accelerate Growth” Best Practices Recognition: 10 Steps to Researching, Identifying, and Recognizing Best Practices Frost & Sullivan analysts follow a 10-step process to evaluate Award candidates and assess their fit with select best practice criteria. The reputation and integrity of the Awards are based on close adherence to this process. STEP OBJECTIVE KEY ACTIVITIES OUTPUT 1 Monitor, target, and screen Identify Award recipient candidates from around the globe  Conduct in-depth industry research  Identify emerging sectors  Scan multiple geographies Pipeline of candidates who potentially meet all best- practice criteria 2 Perform 360-degree research Perform comprehensive, 360-degree research on all candidates in the pipeline  Interview thought leaders and industry practitioners  Assess candidates’ fit with best-practice criteria  Rank all candidates Matrix positioning of all candidates’ performance relative to one another 3 Invite thought leadership in best practices Perform in-depth examination of all candidates  Confirm best-practice criteria  Examine eligibility of all candidates  Identify any information gaps Detailed profiles of all ranked candidates 4 Initiate research director review Conduct an unbiased evaluation of all candidate profiles  Brainstorm ranking options  Invite multiple perspectives on candidates’ performance  Update candidate profiles Final prioritization of all eligible candidates and companion best-practice positioning paper 5 Assemble panel of industry experts Present findings to an expert panel of industry thought leaders  Share findings  Strengthen cases for candidate eligibility  Prioritize candidates Refined list of prioritized Award candidates 6 Conduct global industry review Build consensus on Award candidates’ eligibility  Hold global team meeting to review all candidates  Pressure-test fit with criteria  Confirm inclusion of all eligible candidates Final list of eligible Award candidates, representing success stories worldwide 7 Perform quality check Develop official Award consideration materials  Perform final performance benchmarking activities  Write nominations  Perform quality review High-quality, accurate, and creative presentation of nominees’ successes 8 Reconnect with panel of industry experts Finalize the selection of the best-practice Award recipient  Review analysis with panel  Build consensus  Select winner Decision on which company performs best against all best-practice criteria 9 Communicate recognition Inform Award recipient of Award recognition  Present Award to the CEO  Inspire the organization for continued success  Celebrate the recipient’s performance Announcement of Award and plan for how recipient can use the Award to enhance the brand 10 Take strategic action Upon licensing, company able to share Award news with stakeholders and customers  Coordinate media outreach  Design a marketing plan  Assess Award’s role in future strategic planning Widespread awareness of recipient’s Award status among investors, media personnel, and employees
  13. 13. BEST PRACTICES RESEARCH © Frost & Sullivan 2018 13 “We Accelerate Growth” The Intersection between 360-Degree Research and Best Practices Awards Research Methodology Frost & Sullivan’s 360-degree research methodology represents the analytical rigor of our research process. It offers a 360-degree view of industry challenges, trends, and issues by integrating all 7 of Frost & Sullivan's research methodologies. Too often companies make important growth decisions based on a narrow understanding of their environment, leading to errors of both omission and commission. Successful growth strategies are founded on a thorough understanding of market, technical, economic, financial, customer, best practices, and demographic analyses. The integration of these research disciplines into the 360-degree research methodology provides an evaluation platform for benchmarking industry participants and for identifying those performing at best-in-class levels. About Frost & Sullivan Frost & Sullivan, the Growth Partnership Company, enables clients to accelerate growth and achieve best-in-class positions in growth, innovation, and leadership. The company's Growth Partnership Service provides the CEO and the CEO's Growth Team with disciplined research and best practice models to drive the generation, evaluation, and implementation of powerful growth strategies. Frost & Sullivan leverages more than 50 years of experience in partnering with Global 1000 companies, emerging businesses, and the investment community from 45 offices on six continents. To join our Growth Partnership, please visit http://www.frost.com. 360-DEGREE RESEARCH: SEEING ORDER IN THE CHAOS

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