Convoy Poised to Win the Startup Trucking Race
Convoy, the digital trucking service that matches shipments with carriers, can win the startup trucking race. But first it must help shippers use fragmented streams of IoT data that will result from truck sharing.
Fragmented Market. Fragmented Data.
Convoy’s truck sharing model will spur innovation from new entrants, but ensuing carrier fragmentation and adoption of Internet of things technology will require Convoy to help shippers produce actionable analytics.
Control Towers
Shippers increasingly setup complex “control towers” that analyze supply chain data from a multitude of sources to forecast supply and demand, diagnose failures and improve product design.[i] Documenting, ingesting and identifying causal relationships across data from many sources is no simple task. For example, driver performance metrics, such as jobs per day or idle time, could reflect driver competence, tendencies of a dispatcher, site specific limitations (e.g. steep hills), product characteristics (e.g. hazardous materials) or numerous unknown factors.[ii] Such complexities limit a control tower’s ability to derive actionable insights from supply chain data.
Internet of Things
The rise of Internet of things technology usage among carriers increases the breadth and depth of available data. This presents exciting opportunities such as the ability to monitor travel circumstances (e.g. temperature or exposure to light).[iii] However, each additional variable increases complexity and therefore cost of analysis.
Sharing Economy
Convoy’s sharing model lowers carrier asset costs, inducing new entrants[iv] that may possess differentiated IoT technologies. This may significantly increase the composition of available carrier data, as sharing is expected to comprise 15% of the trucking market by 2025.[v] However, Convoy will need to deliver fragmented data from a multitude of carriers to shippers in a format that control towers can use. To achieve this, Convoy may need to tightly integrate with complex customer systems.[vi]
Convoy’s Response
Convoy is turning this challenge into an opportunity by forming long term shipper partnerships and advocating for blockchain adoption across the industry.
Long term partnerships
Convoy formed a long-term partnership with Anheuser-Busch centered around sharing real-time shipment data.[vii] Working directly with this large shipper’s control tower will increase Convoy’s competency in delivering actionable data that aligns with the shipper’s overall strategy. For example, Anheuser-Busch has already revealed that it aspires to set facility specific targets and increase trust with drivers via efficiency and transparency.[viii] As the sharing economy continues to fragment carriers and IoT technologies become pervasive, Convoy will be uniquely poised to align new data sources with supplier systems and goals.
Blockchain
As a charter member of the Blockchain in Trucking Alliance (BiTA),[ix] Convoy is priming the industry to adopt technology that can standardize transmission of data in a fragmented marketplace. Blockchain protocol eliminates the need for custom software integrations with each shipper and carrier. Rather each activity performed by any participant in the supply chain is recorded sequentially on a decentralized and distributed ledger.[x] Furthermore, blockchain creates possibilities for smart contracts that leverage IoT data to automatically charge or pay carriers for bad transit conditions or delivery,[xi] thereby reducing disputes.[xii] By removing the need to integrate with many systems and embracing smart contracts, Convoy will enable shipper control towers to act upon fragmented IoT data sets.
Recommended Actions
Stay disciplined
Long term partnerships with large shippers are likely to require significant customization. Wherever possible, Convoy should identify trends in feature requests and prioritize engineering resources around product improvements that can benefit its entire ecosystem over customizations that may only benefit a single customer. Doing so will help Convoy standardize the manner in which it collects and transmits fragmented IoT data to the benefit of all customers.
Build IoT community
Convoy should lead the transition to IoT technology within its carrier network by forming an IoT community. In a leadership role, Convoy can promote technologies that align with shipper priorities and integrate well with the sharing platform. Ingredients of successful community may include a digital forum for carriers, shippers and IoT vendors to share experiences, as well as a knowledge base of best practices. The literature suggests that a sense of community among carriers likely already exists as a result of the sharing platform itself.[xiii]
Target clusters
Increasing Convoy’s presence within logistics clusters, or nodes where many carriers and other logistics service providers congregate, may catalyze the growth of Convoy’s IoT community. Furthermore, it is likely to increase uniformity of IoT technologies adopted (and therefore data collected) within its network, as actors in clusters have been known to share information and collaborate.[xiv]
Potential areas for further research include: 1) a deeper look into Aheuser-Busch’s control tower and logistics operation, 2) limitations of blockchain and barriers to supply chain adoption, 3) insight into Convoy’s product roadmap, 4) playbook for building digital communities, and 5) patterns of technology sharing within logistics clusters.
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[i] Blanchard, Dave. 2014. “Supply Chain & Logistics: Digital Technologies Realign the Traditional Supply Chain.” Industry Week
[ii] Islam, Samsul, and Tava Olsen. 2014. “Truck-Sharing Challenges for Hinterland Trucking Companies.” Business Process Management Journal 20 (2): 290-334.
[iii] Shanley, Agnes. 2017. “Real-Time Logistics.” Biopharm International 30 (9): 47-48.
[iv] Deloitte. 2016. “The rise of the sharing economy. Impact on transportation space.” 1-12.
[v] World Economic Forum. 2016. “White Paper Digital Transformation of Industries: In collaboration with Accenture. Logistics Industry.” 1-31.
[vi] Ocicka, Barbara, and Grażyna Wieteska. 2017. “Sharing Economy in Logistics and Supply Chain Management.” Scientific Journal of Logistics 13 (2): 183-193.
[vii] Konrad, Alex. 2017. “Convoy Scores A Win In The Trucking Startup Race With Anheuser-Busch Alliance.” Forbes. October 17. https://www.forbes.com/sites/alexkonrad/2017/10/17/convoy-allies-with-anheuser-busch/#7524de0d2502.
[viii] Cassidy, William. 2017. “Even largest shippers struggle with realtime visibility.” JOC.com. November 6. https://www.joc.com/technology/even-largest-shippers-struggle-real-time-visibility_20171106.html.
[ix] Blockchain in Trucking Alliance. 2017. Members. https://bita.studio/members.
[x] Haughwout, Jim. 2017. “Blockchain: A Single, Immutable, Serialized Source of Truth.” Material Handling & Logistics.
[xi] Shanley, Agnes. 2017. “Real-Time Logistics.” Biopharm International 30 (9): 47-48.
[xii] Kilcarr, Sean. 2017. “Blockchain Viewed as a Protective Measure for Trucking.” Fleet Owner.
[xiii] Möhlmann, Mareike. 2015. “Collaborative consumption : determinants of satisfaction and the likelihood of using a sharing economy option again.” Journal of Consumer Behaviour (14): 193-207.
[xiv] Rivera, Liliana, David Gligor, and Yossi Sheffl. 2016. “The Benefits of Logistic Clustering.” International Journal of Physical Distribution & Logistics Management 46 (3): 242-268.
This is a great writeup on how the internet of things and blockchain can have a huge impact on the supply chain of these shipping companies. To tie this into one of the other themes of the TOM challenge, I wonder how efficient supply chain management in this space will have a positive impact on the emissions of shipping (on a % of emissions basis)? Having more truck availability in locations where it is needed, and better optimizing supply chains are sure to reduce emissions.
Matt, I agree that a more efficient logistics operation will reduce emissions. In fact Anheuser-Busch specifically cited environmental impact as one of its reasons for forming a long term partnership with Convoy! [1]
[1] http://www.anheuser-busch.com/newsroom/2017/10/anheuser-busch-and-convoy-sign-multi-year-partnership-to-drive-e.html
This is a very succinct and clear discussion of the role that Convoy and its offering are playing.
While I recognize they are primarily a software company, I’d argue it may be beneficial to develop (or partner) specialized hardware of their own to assist companies with IoT-izing their entire fleets more quickly. On one project where I worked for a trucking company, I learned that a shockingly large percentage of the truck parc is still unconnected and there is resistance from drivers to connect them (due to ‘big brother’ concerns). Convoy may even want to give away the hardware they develop to spur adoption and ensure consistency (and control over) in data generation.
As you alluded to, it is often very difficult for a software company to produce hardware. This is because the two product categories thrive under different organizational architectures (people, culture, tasks, structure).
However, that’s not to say it is impossible. There are many examples of companies, such as Adobe, [1] that have pulled it off. If Convoy were able to produce a simple IoT line of its own, then it would have an easier time standardizing the data it collects across carriers.
[1] https://techcrunch.com/2013/09/17/adobe-gets-serious-about-hardware-will-launch-its-mighty-digital-pen-and-napoleon-ruler-in-1st-half-of-2014/
It is great to see another applicable usage of blockchain technology. Leveraging the rich data set Convoy has on the movement and allocation of trucking resources, they will hopefully be able to boost shipping efficiency. This could curb costs for Busch and reduce carbon emissions. I wonder how Convoy will play with the autonomous wave of trucks coming down the pipeline. There are a number of startups including Otto and Tesla designing the smart trucks of the future. Once these systems come online with Convoy’s algorithms be utilized or replaced?
Regardless of what the future holds, it is clear that Convoy is improving trucking efficiency and fleet utilization through data analytics. It would be great to see this same type of optimization proliferate across all transportation and logistics industries.
You make an important point about self driving trucks. While Convoy certainly needs to consider the long-term implications of autonomous vehicles, I believe the complexity of shipping will require humans to accompany trucks for the foreseeable future. As a simple example, who will ensure that cargo is correctly packed and the back of the truck is secure? [1]
[1] https://www.geekwire.com/2017/convoy-co-founders-cautious-self-driving-trucks-raising-62m-investment-round/
Great analysis! One question I would dig deeper into is the time frame of these changes. If autonomous trucking is able to capture the market in the medium term there is a chance it could beat out the adoption of IoT. Another broad question to think about is barriers to implementation inherent in the industry. Another comment referenced the trust issue and “big brother” concerns. The relatively less technologically advanced nature of trucking (historically) could also be an obstacle. It may be difficult for key players in the industry to understand and accept blockchain as a place to store and transfer information. I appreciate your analysis on how blockchain could revolutionize IoT and this it might also be applicable in other industries.
To ensure that its data continues to improve as autonomous vehicles hit the market, Convoy could aim to equip these self driving trucks with IoT technology — perhaps the two are not mutually exclusive.
There are certainly barriers to the digital transformation of this historically offline industry. Hopefully the timing is right and the economic benefits of digitization will overcome this friction.
Very well written and interesting analysis on Convoy. While I think that Convoy is moving in the right direction, my hypothesis is that the advent of self-driving trucks will give new players with the self-driving technology to create a new marketplace for truckers and shippers. Convoy will need to leverage its head-start in the space to create strong network effects with the IoT data and likely strike partnerships/acquire companies to maintain its market position.
This is a very interesting topic with obvious comparisons to other platforms that exist today (Airbnb, Uber, etc.) and feels like a model that can be implemented with good chances of success in fragmented non-linear networks to create efficiency. Looking at the trucking business, telematics technology exists (and is being used by trucking companies) and can be used to implement what Convoy proposes. So my question is, what is holding back existing telematics companies from integrating themselves and increasing the barriers to entry for companies like Convoy? I believe that Convoy’s competition is not other trucking startups but rather these existing telematics business that already provide network services to trucking businesses and can adapt to new competition and make it harder for Convoy (and others) to enter the market.