Convoy Shutting Down?

From Craig Fuller @ FreightWaves

 

So the business was viable but they couldn't figure out how to cut massive "technology & data spend"? Gotcha...

 

You ignored their new 4,000 trailer lease, a huge new fixed cost.

 

They tried to blitz scale and failed during an unusual macro stable low rate cyclical hurricane? So they were defeated by buzzwords? Lol

They were supposedly making 16-18% which is great. But what is it? 16, 17 or 18? It can only be one number. Do they even know?

They couldn't chop that massive waste of money on technology spend and have enough savings or profit from their imagined 16-18% to pay for the trailer rent?

There's a real reason nobody was interested in buying out Convoy...

 

He’s saying they tried to buy market share (by mass leasing trailers) during a time of instability in an inherently unstable industry.

Craig described the venture capitalists behind Convoy as follows:

“Many of these VCs were tourists, unaware about how the freight business actually operates. Worse, they often thought they were more knowledgable than they really were.”

 

I'm not arguing with you im questioning the claims he and his source are making. Buying market share doesn't mean what you think it means because that's not what he said. "Buying market share" is buzz talk for "severely undercutting other brokers and suffering a loss on every load they book on a carrier". If they were truly profitable on their brokerage chopping massive technology spend seems like a logical thing to do.

 

The technology spending is how they were making their margins. A big part of their profit came from being able to predict load to truck ratios, and adjust offered rates accordingly. When overall truck to load ratios are 'balanced', that is a value add. When truck to load ratio is low (ie 2020, 2021 and early 2022), being able to quote a shipper a price and then be able to find a carrier for under that price is HUGE. Convoy was doing really well in that regard - until almost every market became 'undersold' and finding a truck became easier than finding a bar in Wisconsin. All those analytics become much less useful.

Their failure was two fold. First, they tried to become a quasi-asset carrier by providing trailers to shippers and doing power only stuff. There's money to be made with that business model (a lot of it), but only if you know the industry and have some method of controlling the use of those trailers. It's a problem when you know the risk. If you don't understand the risk, you're going to lose equipment left and right - just like all the 'bike sharing' companies did. If you acquire the equipment at premium pricing, you're doubly screwed. On average, my company has 200 'missing' trailers at any given time. We are not allowed to drop at many Amazon's due to Amazon 'borrowing' the trailer to haul loads. Recently it's gotten so bad they offered a bounty for company drivers reporting any of our trailers being hauled by 3rd party carriers - fill out a quick form and if that trailer turns out to be 'misappropriated', the driver gets $50.

The second reason for the failure is they had no real proprietary capabilities or brand. Their technology is easily replicated and their user's have ZERO brand loyalty. They weren't first, they weren't better, and the cost to cheat their way to 'victory' was more than they'd win.

 

Given GPS, can't the office dweebs in Green Bay ascertain that if a trailer is moving, but not connected to a company driver's or owner/op's power unit, then it's being hauled by an "unauthorized" 3rd party? Is not one of the purposes of GPS tracking to maintain control of one's assets?

 

The trailer tracking software has gotten a lot better, but it's far from perfect. GPS tracking doesn't tell you WHO is moving it, despite an awful lot of effort. It was POSSIBLE for us to program the trailer to talk to the Qualcomm on a P3 Cascadia, so the Qualcomm knew what trailer it was hooked to. It was not possible to get that information to populate through to the dispatch software, or even through a bespoke app up to the Puzzle Palace. Work on it was delayed when Qualcomm pooped their pants with a tablet based ELD and we had to "develop our own", then stopped when we started taking delivery of the P4 Cascadias which wouldn't communicate with the trailer at all.

Even if it were possible, there would be too many false positives. Every time a yard jockey plugged into the trailer, it would send the "I need an adult!" message, not to mention all of our legitimate 3rd party providers (who haul for 'HOW DO YOU STAY IN BUSINESS' rates). And that's when the trailer tracking is working at all. I'd say 15% of the trailers the GPS is non-functional. Some of it is bad installs, some of it is damage, more of it is "danged if I know why it's not working".

It's a lot better than it was, but not as good as it needs to be.

This is one of those "oh, that's easy, just do XXX", until you try to do XXX and end up married to a syphilitic Peruvian Tree Frog with ties to an underground Beanie Baby fighting ring.