Most supply chain suppliers have solutions that are very similar to each other. Occasionally, a cool vendor emerges – a vendor solving an important problem in a new way. Emerge is that kind of company.
Emerge has an interesting new platform to deal with the problems shippers are having procuring truck capacity. There is a need for a more nimble, continuous bidding process. And there is a need to understand what a fair price for a move is.
The vocabulary used in transportation can be confusing. Newcomers often confuse the terms “shipper” and “carrier.” “Shippers” are companies that have goods that need to be transported. But shippers lack trucks. They, therefore, must hire carriers. “Carriers” are companies that trucks. Carriers move shippers’ freight.
The Emerge Solution
The Emerge solution has attributes of different supply chain software solutions. It has spot procurement functionality that you would see in a transportation management system (TMS), and the request for proposal (RFP) functionality you would see in contract planning or procurement solutions.
Emerge is often used in combination with their shipper customers’ TMS. However, the system can be used standalone, and some shippers do use Emerge this way.
Shippers can utilize their own network of carriers that is kept in their transportation management system. In a TMS, there is a record of preferred carriers by lane. For example, if a shipper needs to ship goods from Chicago to Detroit, the TMS will have a record that on this lane, the transportation planner should contact Carrier A first. If A can’t take the load, then tender to Carrier B and see if they will take it. The Emerge solution requires that tenders generated by a shipper customer’s TMS be sent through the Emerge platform.
With Emerge, if a tender is accepted by an incumbent carrier listed in the TMS, there is no fee. If loads are not accepted by carriers the shipper is already working with, shippers can tap into the marketplace to access new capacity. The Emerge marketplace has thousands of carriers. If the Emerge marketplace is used to secure capacity, there is a small add-on fee built into the marketplace rate.
Spot versus Contract Rates
When a shipper works with a carrier on an ad hoc basis, to cover a load their regular carriers can’t take, they pay a spot rate. Spot rates are higher than contract rates.
But if a shipper wants to cover a lane on an ongoing basis – so they are not continuously scrambling to find a carrier willing to cover their loads – they will look to establish a rate based on a contract. A contracted rate is a price that will be used when the companies do business on a lane on an ongoing basis. Often the parties agree that a contract rate will be honored for the coming year. Before establishing a contractual relationship, shippers will want to do some due diligence. They will send carriers a request for proposal (RFP).
The visibility Emerge has to the marketplace allows it to leverage that data to understand the dynamics of the market. This data-driven knowledge set enables Emerge to help shippers find new capacity. Once carriers are identified that may be a good fit for a lane the shipper needs help on, the Emerge solution can generate a request for proposal. The Emerge RFP is free for shippers.
If shippers need to create an RFP, the Emerge platform makes it easy for shippers to invite carriers on the platform to submit a proposal. Because Emerge streamlines the RFP process, shippers are able to expand their bid invitations to include more carriers. Carriers in the Emerge marketplace have visibility to a shipper that needs carriage on a lane that is a good fit for that carrier’s networks.
The Emerge marketplace has carriers of all sizes but, in particular, provides new opportunities to small carriers. Smaller carriers get much of their business from brokers. With Emerge, these carriers now have real-time access to loads from Fortune 500 shippers that have typically not done business with smaller trucking firms. For a small carrier, finding loads is often a messy process involving looking at multiple load boards or broker portals. The Emerge marketplace can help carriers get their loads covered in a faster, more efficient manner.
It is all these tenders by big shippers, routed through the Emerge platform, that has given Emerge visibility to billions in freight spend; they believe that by the end of the year they will have visibility to freight spend comparable to the biggest managed transportation and brokers in the market.
A Public Cloud Architecture
A public cloud architecture is at the heart of what Emerge is doing from both a procurement and a benchmarking perspective. In this architecture, the application and data reside in the Cloud – on the Internet – instead of on a server behind a company’s firewall. Public clouds have a multitenant architecture. Each tenant’s application provides solutions, data, and a user interface specific to them.
Google maps would be an example of this kind of application. It is on the Internet, all the logic and data are on servers hosted by Google, but each user sees their own instance of the application. Dick is asking for the best route from his house to a local restaurant. Jane is asking for the best route from Boston to Chicago. Both Jane and Dick can configure the application to their needs – designating their own home address to enable faster routing, for example. And the application can pull up data on Jane’s recent trips based on her individual driving history, but Google does not show Jane where Dick has been driving.
The advantages of a public cloud go far beyond sharing a costly infrastructure. In the case of Emerge, their platform connects many shippers to many carriers. Because of this, it is feasible for Emerge to provide freight analytics.
Scale is Necessary for Freight Benchmarking
Emerge is not the only technology vendor providing freight benchmarking on a lane-by-lane basis. Several managed transportation providers, service providers who provide planners to procure and execute loads on behalf of their shipper clients, can also provide freight benchmarking. Managed transportation providers have visibility to the procurement of all the shippers they work with. Large managed transportation providers will have visibility to over $10 billion in freight spend. This is called freight under management (FUM) in the industry. A large FUM allows a managed transportation provider to do better procurement on behalf of their shipper clients because they understand what the average shipper pays on a lane, which lanes are hard to source, and which carriers really like to work in certain lanes. A large FUM is what is necessary for statistically meaningful freight benchmarking analytics.
The Emerge network was built with the permission from their tenants to use their confidential data for specified purposes that do not impinge on proprietary data. In this case, shippers have given Emerge permission to aggregate and anonymize their data for analytics. Shippers are able to get benchmarking data, but they know the data related to their shipments – including the price they paid for those shipments and carriers used – will not be shared with others.
Views into this aggregated data are what allows Emerge to tell a shipper that the average rate for a move for a refrigerated truck whose origin is Chicago and destination is Detroit is $885. However, the price you are paying is too high – 75 percent of the shippers moving freight on this lane get a better rate.
Knowing if current pricing is at, above, or below the industry average, empowers shippers to make better procurement decisions. If the price on a lane is too high, the Emerge platform streamlines the procurement process. This speed and agility in the RFP process make it feasible for shippers to conduct bid events at a frequency that meets their business needs.
ARC only knows of two TMS solutions that have the right architecture and the right client permission contracts in place to allow for freight benchmarking. Several managed transportation providers can also provide benchmarking. In both cases, the benchmarking must be paid for. The shipper either needs a subscription to a TMS or have a contract in place with the managed trans provider.
But Emerge is free for shippers to use, both for RFPs and for benchmarking. The free RFPs and increased procurement agility are what have attracted large shippers to the platform. The access to new business opportunities has attracted carriers. This value proposition has allowed Emerge to grow its visibility to market freight spend very quickly. They already have visibility to billions in freight procurement. In short, they have the scale to do robust benchmarking.
Market volatility is at an all-time high. The freight market has always bounced back and forth from environments where shippers had the upper hand to situations where it is difficult to get loads covered and carriers therefore have the upper hand. But these market shifts are occurring more often.
It is the volatility that makes new approaches to freight procurement so important. A large shipper can’t expect an annual bid cycle to be sufficient. More and more often, lanes will need to be put out to bid. Emerge has created a flexible tool that allows for this agility. The platform can tell shippers when their current lane rates are unacceptable based on the benchmarking, and then provide a mechanism for quick RFP.