Retail collapse forces trucking consolidations

May 21, 2020

Retailers are struggling and as a result, truckers are the next domino to fall. Retailers and manufacturers estimate that they will need 98% fewer trailers than they needed last year, suggesting that the coronavirus-induced recession isn't going away anytime soon — even though state restrictions on businesses across the US are lifting.

US net trailer orders fell to a multi-year low this April. On May 20th, Comcar Industries Inc., a Florida-based trucking company backed by Pimco, filed for bankruptcy protection with several deals in hand to sell some of its operations. This news came one day after Uber’s announcement that it would be scaling back its ambitions for Uber Freight.

As a result, it is clear that a wave of freight consolidation is due, and COVID-19 is the final trigger after the industry had built up excess supply over the years. Much of the shift that is occurring now started in 2018, when a shortage of truck capacity resulted in a sharp escalation in freight rates and, perhaps more importantly, an increase in the number of rejected loads, as freight carriers and drivers shunned lower-priced freight and cut back on driving time due to the implementation of new electronic logging requirements to better enforce driver hours-of-service limits.

For many shippers, the disruption in freight movement last year had ripple effects throughout the supply chain and cut into profits.

While the freight industry is undergoing consolidation, it is clear that more tech is coming. Two of the biggest challenges the industry faces are low utilization and inefficiency. U.S. studies indicate that trucks only achieve a 60-80% utilization rate. It's not that shippers don't want to load trailers to full capacity but that many factors can prohibit it. Customers do not buy a full-load quantity because they can’t consume that much material at one delivery, which results in numerous small shipments. This situation creates inefficiency in the system.

Because one way to address it is leveraging cloud computing to maximize load and optimize routes, some giants are moving fast in that direction. This week, Microsoft and FedEx announced a joint, multiyear partnership that the pair believe will allow companies to better track their supply chain and improve shipping times.

Microsoft and FedEx’s offering, which will be available later in the year, will collect data through FedEx’s IoT technology and analyze it through Microsoft’s suite of services, helping to predict issues that would slow delivery, such as severe weather or clearance issues. That information would allow companies to change routes in order to deliver goods more quickly.

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Freight Consolidation Candidates:

XPO, a logistics company with a digital freight marketplace called XPO Connect, has more than 14,000 carriers registered. The number of digital bids submitted by drivers seeking loads doubled in the fourth quarter 2019 compared with the third quarter 2019.

Uber Freight, a subsidiary of Uber, has expanded its network to 30,000 carriers. The company’s platform is designed primarily for owner-operators and small fleets operating 10 or fewer trucks.

Convoy, a smart freight company, tracks the percentage of loads that are automatically matched as a way of measuring its progress. In February, the company said it achieved a 100% match rate for a number of key freight markets, including Seattle, Portland, Los Angeles, Chicago, New York, and Atlanta. Nationwide, the match rate was 95%, compared with 25% when the company started in 2016.

Transfix, launched in 2013, has received $78.5 million in venture capital and claims to be working with Anheuser-Busch, Unilever and Target to procure freight hauling capacity through an automated network.

Funding & Deal Highlights:

Wellthy, the tech solutions platform for managing chronic and elder care, raises $5.6M in funding. There were fifteen participants in the round. Investors in previous rounds include FJ Labs, AGO Partners, HBS Alumni Angels, Sweet Capital, HearstLab, and Jonathan Bush. Founded by Kevin Roche and Lindsay Jurist-Rosner in 2014, Wellthy has now raised a total of $15.3M.

Fountain Therapeutics closes $6M Series A-1 financing. The biopharmaceutical company is building a pipeline of therapeutics to treat age-related diseases by reversing cellular age. It announced the closing of a $6M Series A-1 financing, bringing its total Series A funding to $11M. The round was led by Khosla Ventures, with participation from Nan Fung Life Sciences.

PresenceLearning secures $27M Series D growth investment led by Bain Capital Double Impact. PresenceLearning was founded in 2009 to help schools better address and serve the needs of special education students through remote access to the company's proprietary teletherapy platform and network of more than 1,000 licensed clinicians. The funding will be used to accelerate universal K-12 access to remote special education-related services, during COVID-19 closures and beyond.

Nivagen Pharmaceuticals closes $16M growth equity financing from Telegraph Hill Partners.

Hourly jobs platform Snagajob raises millions in new funding round.

ScootPad Corporation acquired by ACT.

Guild Education buys edtech venture studio, Entangled Group.

Sunset Learning Institute announces acquisition of Advanced Network Information, Inc.

Microsoft acquires RPA startup Softomotive to bolster Power Automate.

Diverzify acquires ProFloors of Florida and enters strategic partnership with Lane’s Floor Coverings and Interiors.

Hackensack Meridian Health invests in EpiBone, Inc., a regenerative medicine company.

Flotek acquires JP3, a leading data and analytics technology company.

Since last week, PrivCo has added:
71,482 Profiles | 101 M&A Deals | 160 Fundings
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