Boris Pevzner, Co-Founder & President
"Most people are surprised to learn that the US trucking industry is larger than the entire GDP of Sweden, Austria or Switzerland,” begins Mr. Pevzner. Unsurprising is the industry’s enormous growth potential given the rapid growth in e-commerce and on-demand consumerism. Currently, e-commerce represents 15% of US consumer habits – a percentage that is sure to increase as Generation Z enters the market and future digital generations emerge.
Mr. Pevzner is meeting us today at a shipping site in New Jersey to discuss how Carggo, founded in 2016 by Felix Lyubashevsky and co-founded by Mr. Pevzner as its CEO, is set to disrupt the seven trillion dollar global logistics industry.
“In 2016, Felix realized that mid-market shippers in the US were paying brokers and other intermediaries up to 40% to connect with carriers. He also noticed the many logistical inefficiencies of this brokerage model. For example, 30% of trucks quite literally ‘haul air’ on their return routes. This led Felix to ask a fundamental question: why hasn’t the logistics industry used today’s technology to ship smarter? And this led to the creation of Carggo, the world’s first AI-powered digital freight platform,” explains Mr. Pevzner.
Shippers and carriers can now turn to the digital Carggo platform for fair prices, efficient routes, and on-time shipments, and are no longer tethered to the archaic and overpriced brokerage model.
“The days of the solitary trucker hired through brokers and communicating through dispatchers on cross-country hauls are rapidly coming to an end,” Mr. Pevzner announces with a touch of nostalgia. He has watched the industry evolve since 1991, when his mother ran operations for a family owned trucking company in New York City. “My mom hired me to create the (web) site in 1991...and given that date...it very well might have been the first trucking website in America.”
The trucking industry has come a long way since 1991. Shipping routes now tend to be shorter to cater to an on-demand public. Self-driving trucks already began making deliveries on American highways. And yet, with all these changes, the business model for booking freight trucks has remained mostly unchanged for decades. “You wouldn’t believe the amount of cold-calling that still happens. And the websites today are not much more advanced than the one I created for my mother 30 years ago.”
How is this possible?
The Broken Brokerage Model
Hundreds of thousands of freight shippers operate in the United States – from large enterprises to mid-market and small businesses. These shippers must somehow match their needs with an estimated 800,000 carriers and 5,000,000 trucks throughout American highways. However, a whopping 97% of the carriers have fewer than 20 trucks in their fleet. This means there is a massive demand for shipper and carrier scheduling and communication.
How do shippers and carriers currently interface?
“Believe it or not, mostly through old-fashioned freight brokers,” replies Mr. Pevzner.
When asked to list the three main reasons why the archaic brokerage model has failed the modern trucking industry, Mr. Pevzner does not hesitate.
"Thanks to the new Carggo Platform, booking a freight truck is now like buying a product through Amazon"
“Unjustifiable brokerage costs, poor reliability, and low fleet utilization.”
Virtually all shippers today use brokers to interface with carriers despite the digital revolution that has transformed most other industries. These shippers are charged as much as 40% for these services. The fees are arbitrary and inelastic.
And they do not ensure reliability or convenience.
“Let’s say you are a shipper, and you want to check on the delivery status,” explains Mr. Pevzner.
“You are forced into a telephone game where you call your broker, your broker calls a dispatcher, and this dispatcher tries to locate the driver who may or may not be looking at his phone in the truck at a rest stop, basically a logistical nightmare for which you are paying a premium.”
Beyond these daily inefficiencies, there is a global impact from this antiquated model.
“With much of today’s freight transportation operating inefficiently through brokers, over 30% of today’s truck miles haul nothing but air – which is inefficient and clearly not great news for the environment. Felix and I envisioned a platform that would act as the one space to cover the entire shipment process from quotes and booking all the way to safe delivery and supply chain data analytics.”
How is Carggo doing that?
“Through Digital Logistics and Platform Thinking,” is Mr. Pevzner’s concise reply.
Digital Logistics and Platform Thinking - Carggo to the Rescue
It is no coincidence that Felix Lyubashevsky founded Carggo in 2016. As a global entrepreneur who has successfully founded companies in the energy, transportation, and logistics sectors that have reached billions of dollars in market value, Mr. Lyubashevsky discovered that the US $700B freight transportation industry has been one of the slowest to think about tech solutions. And it was full of brokers who are incentivized to buy low and sell high, keeping the market dysfunctional and inefficient.
“Felix recognized that logistics is built into every product in today’s economy. Consumers want to bite into a juicy, fresh apple that they ordered 30 minutes ago online. What many consumers don’t stop to consider is that each bite of this apple has a bit of logistics within it,” smiles Mr. Pevzner.
It is Mr. Pevzner’s appreciation for logistics and for what he calls ‘Platform Thinking’ that has led him to be called the Henry Ford of IT. “A former client of mine called me that,” laughs Mr. Pevzner, “I think it was his way of complimenting the effects of Platform Thinking on enterprises old and new.” Mr. Pevzner went on to explain that Platform Thinking – a philosophy he developed while at MIT – can be applied to any B2B market. He stresses the importance of Fairness, Reliability, and Scalability.
“In my last venture (a seasoned entrepreneur, Mr. Pevzner previously founded and ran Collectrium, a digital platform for private art, that he sold to Christies in 2015), a platform was needed in the private art space to allow art dealers and art buyers to interface. It’s hard to imagine, but the same concept applies to the trucking industry. We have disintermediated shippers and carriers and are providing them with a fair, reliable, and scalable way to connect and do business.”
We asked Mr. Pevzner for a demonstration of how Carggo’s digital logistics platform is effectively cutting out the middleman to the benefit of shippers, carriers, and the trucking industry as a whole.
Digitizing Freight Shipping
“Let’s say you’re a fruit packing company in New York and you have a freight of juicy apples headed for Chicago. Until recently, you’d call your broker and relinquish all control. The broker would then find a carrier and arrange a pickup through email or phone. And as I mentioned earlier, good luck trying to contact the carrier or track your shipment. Your hands were tied.”
This is where the Carggo digital logistics platform changes the game.
“As you can see on our mobile app or on our website, the shipper from New York now gets an instant guaranteed price for the shipment, books it online with a reliable, high-quality carrier, and is able to track it in real time all the way to delivery in Chicago.”
Carggo has replaced arbitrary brokerage fees with fair and transparent pricing.
“Our real-time pricing engine finds a fair market rate for each load by using machine learning algorithms and big data. We make our low flat-rate service fee visible to both shippers and carriers, because we don’t believe in buying low and selling high.
This lets shippers compare rates for the loads across multiple pickup and delivery options, giving them full control to schedule around their needs, not ours.”
And the telephone game?
“That is eliminated as well. Shippers can track their shipments in real time from pickup to delivery without needing to call a broker or dispatcher. They receive ETA updates and proactive alerts on in-transit events so they will be the first to know if there’s a delay; or if a carrier is early, they have the option to open a dock earlier.”
What about the empty hauls?
“Before I get to that, I’d like to add how important real-time shipment tracking is to the industry. Do you know what happens under the legacy brokerage model when a truck is late? The warehouse workers have no way of knowing of the delay, and the other trucks are forced to wait in line until the late truck arrives. This ripples across the entire supply chain and causes untold loss of revenue…”
Because of the apples you mentioned?
“Exactly. If one of those trucks is hauling fresh apples, a long delay can render the entire shipment unsellable. Now let’s get to your question about the empty hauls. Even before the shipment has arrived to Chicago, the Carggo platform starts looking for loads originating in the Chicago area to keep that truck full. To accomplish this, we had to invent some clever freight matching technology that takes into account the many intricacies of the trucking industry, such as hours of service regulations and specialized equipment. It eliminates the miles and miles of hauling air we saw under the brokerage model.”
We are sure the truck drivers appreciate the extra work too.
“Yes! And we have heard how much they appreciate our electronic, 48-hour quick-pay service. Hauling is a tough life, getting paid shouldn’t be. A driver can now make a drop-off, get paid, and pick up the freight for another shipper without leaving the truck.”
Before concluding, we asked Mr. Pevzner about the future of Carggo.
The Global Logistics Industry - Carggo’s Future
The United States logistics industry is in a word - booming. Currently at $1.1 trillion dollars, it is forecast to expand 10% annually.
“Yes. Those apples are going to include more and more logistics within each bite as e-commerce continues to grow. Felix, given his vast experience with logistics, anticipated this growth when he founded the company. He and I teamed up to develop a platform that is not only fair and reliable, but also able to scale to this rapidly expanding market.”
A bit like Amazon, as you mentioned when we first began?
“Absolutely. It’s difficult to remember the early days of just books. But, under the hood, Amazon was doing much more than book retail. They were building a platform for online consumers in a burgeoning e-commerce space. We, at Carggo, are doing the same in logistics.”
One last question before we go. How does your mother feel about your return to the trucking tech space?
“She loves that we remain a trucking family (Mr. Pevzner’s mother retired in 2018). My mom has always taught me to embrace change. She told me the other day that she might want to get back in now because Carggo would have made her job a lot easier.”
We are sure many others in the industry feel the same way.
“Thanks to the new Carggo Platform, booking a freight truck is now like buying a product through Amazon...” - Boris Pevzner, Carggo CEO and Co-Founder.