An App for Truck Drivers Called Convoy
Most Americans take for granted the incredible selection of consumer goods available just about anywhere in the country. A search for “salad dressing” on the Walmart website returns over 1,300 results. Spend some time people-watching in the land of the free, and you’ll quickly conclude that eating salads isn’t something Americans do very often, yet each grocery store dedicates half an aisle to something that gets dribbled on lettuce leaves once a month. Having such a vast selection of products is uniquely American, and it’s made possible by something else that’s uniquely American – the country’s $700 billion trucking industry.
Being a truck driver is the most common job in America, and there are about 3.5 million drivers of which 1.7 million drive the heavy trucks and tractor-trailers that blanket the country’s interstate highways. It’s largely a male-dominated industry, with just 6.2% of truck drivers being female. (This explains why you hear so many people calling for equality in the trucking industry.) The median annual wage for heavy and tractor-trailer truck drivers was $42,480 in May 2017, a number that’s been increasing due to a shortage of Americans who are willing to drive truck for a living. While one way to solve the shortage of truck drivers might be to increase salaries, there’s actually a much cleverer way to handle the problem. As it turns out, of all the miles that truck drivers travel across the country, 40% of those miles are driven with empty trucks. That’s where Convoy steps in.
An App for Truck Drivers
Founded in 2015, Seattle startup Convoy has taken in $265.5 million from an impressive list of investors that includes Amazon’s Jeff Bezos, Salesforce’s Marc Benioff, asset management firm T Rowe Price, Bill Gates, Reid Hoffman of LinkedIn, and Dara Khosrowshahi who happens to be the CEO of Uber. That’s an interesting coincidence, when you consider that Convoy is similar to Uber in that they connect drivers with people who need to move stuff.
Update 11/13/19: Convoy has raised $400 million in Series D funding to scale its business amid an increasingly competitive market. This brings the company’s total funding to $665.5 million to date.
In this case, Convoy connects truck driving companies with companies that need to ship stuff. And they’re doing a lot of connecting:
While 15,000 trucking companies might sound like a lot, it isn’t. Take the below statistics from Convoy:
The top 20 trucking companies have just over 12% of the heavy trucks; the rest belong to the other 1 million trucking companies. 91% of trucking companies have fewer than 6 trucks; the average has 3 trucks.
Then you consider that there are over one million trucking companies out there, and 900,000 of them have fewer than six trucks, you can begin to understand the need for such an app. There is no way that a company with six trucks can afford to invest in any sort of technology that might make things more efficient. Instead, the industry relies on “brokers” who help shippers find trucking capacity using outdated technology and phone calls, often making more than 200 calls a day to arrange, track, and complete shipments. For that privilege, they take a percentage of each job, often 20% or more according to Convoy. That’s about to change.
How the Convoy Trucking App Works
The way the app works is quite simple, and best explained by Convoy as follows:
- Shippers book shipments by visiting the Convoy website or connecting their internal tools directly to Convoy’s system
- Shippers enter load details such as pickup and drop off locations, weight or dimensions of the freight, and time at which the load needs to move.
- Convoy automatically calculates a competitive price, which allows the customer to book the load instantly, without negotiation.
- Convoy’s free mobile app automatically matches preapproved carriers to the load based on equipment type, frequently driven routes, and current or desired location.
- Carriers can view the rate, required equipment, and load details, then accept the job instantly.
- Convoy monitors the progress of each shipment to ensure on-time delivery and processes carrier payments within days of the job.
If you’re more of a visual person, then this graphic does a good job of showing how the process works.
Notice how one perk for shippers is listed as “supply chain optimization based on Convoy’s unique data”. That’s a good segue into the next thing we want to talk about – big data.
Big Trucks and Big Data
For truckers, Convoy’s app is free to use at the moment, a trick often used by companies that want to accelerate adoption as quickly as possible while accumulating massive amounts of delicious big data that they can later feed to hungry machine learning algorithms. Perhaps the most valuable thing about Convoy’s business is all the big data they’re generating. Any driver that uses the app needs to have their phone “location enabled” for the duration of the trip:
Drivers need to have the Convoy Driver app open and their location services turned on for the entire shipment. Turning on location services automatically sends updates about the load to the Convoy team and our shippers, so you don’t have to worry about getting called for ETAs.
That’s also a condition if the driver wants “Quick Pay”, which means they can literally get paid as they complete jobs. One problem point in the trucking industry today is around paying drivers who may be delayed by shippers. It’s called “detention”, and historically it’s been a manual process for truckers to get paid which involves lots of paper shuffling. Well, not anymore. Drivers who use the app now can get automatic detention, something that will no doubt make them very happy so that they tell all their driver buddies about the Convoy app:
“Convoy’s detention guarantee is one of the most brilliant things we have seen in a while,” says trucking magazine FreightWaves, and it’s just one feature in a long list of things that the trucking industry can now do better using a software platform like Convoy.
Expect to see all kinds of products and features being developed around the Convoy app that will also produce even more types of data. No doubt there will be integrations so that drivers can easily log all the fuel they’re purchasing. Soon they’ll be able to start directing drivers where and when to fuel up based on the cheapest places to gas up. The app can also track “hours driven” so that the trucking companies can stay in compliance with the rules set by the Federal Motor Carrier Safety Administration. Convoy might also look to partner up with other companies to direct the flow of money being spent across the industry. They’ve already partnered up with Goodyear Tires for example.
There’s also a green element to the whole business model, something that Convoy describes best with the following statement:
For every 1% improvement in truck routes and utilization, we can save nearly 400 million gallons of fuel from being consumed, 100 million hours from being wasted and 3 billion miles from being driven each year.
To put those fuel savings numbers in perspective, 400 million gallons of fuel is enough to drive from Los Angeles to San Francisco 1,152,737 times. You do the math on how many fewer truck drivers we’ll need once the utilization improvements kick in. While some people are concerned about self-driving trucks threatening the industry, it’s route optimization that might be the biggest threat to jobs at the moment. Speaking of which, it’s easy to see how this business model lends itself to a future of self-driving trucks. Once the software is in place, you could easily automate the entire process.
Just today, Convoy announced a $185 million investment which was led by Alphabet’s CapitalG. (Does anyone else still feel uncomfortable referring to Google as Alphabet, or is it just us?) Money is not a problem for this young startup, and anyone who tries to compete with them in the United States will face an uphill battle. Convoy isn’t the only company trying to disrupt the trucking industry with technology. We’ve talked before about 13 Startups Racing to be the Uber of Trucking, a list that also featured Convoy. With their latest round of funding and traction so far, it’s only a matter of time before Convoy squashes any competing apps. Truckers will have to use the Convoy app because it’s the only game in town, and you can bet that Convoy has already scoped out all the functionality on every other trucking app out there and put it into their product roadmap. As of today, it looks like that roadmap is going to happen a whole lot quicker.
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