ATL Partners

AUSTIN, Texas — The mood at Arrive Logistics’ headquarters in Austin, Texas, this week was calm, focused and determined. Founded in 2014 by Matt Pyatt and Eric Dunigan, Arrive has grown through multiple cycles at a pace that caught the transportation industry’s attention. The company now has 1,800 employees and branches in Chicago, San Antonio, Tampa, and Guadalajara and is projecting approximately $2.5 billion in gross revenue this year.

Visiting the offices Monday and Tuesday, what I heard was not the raucous cacophony of a floor of brokers haggling with drivers over high-priced day-of shipments but the steady hum of efficiently transacted business and cross talk between sales reps on strategy.

Arrive was putting a strong emphasis on collecting market intelligence, collating the data and not just distributing it across the organization but recommending and measuring ways of adapting to the unseasonable market it found itself in. Technology leaders were plugged into the dynamics of the sales floor, fine-tuning their models to capture recent volatility. New sales reps were calling on smaller shippers who still needed help with their freight, and strategic sales leaders were working hard on creative solutions that could differentiate Arrive’s services in a down cycle.

Trucking capacity was exceptionally loose — FreightWaves’ Outbound Tender Rejection Index (OTRI) is hovering around 4% — and rates were falling fast. Arrive Logistics measures spread per load, or net revenue dollars per load, a profitability metric that has seen significant compression in recent months as shippers have looked to reprice their contract freight.

But as capacity loosened, it became easier for Arrive to automate freight matching. When I visited Arrive, the majority of its loads for the day were prebooked electronically, freeing up the carrier reps to use their creativity and buying power on the most troublesome lanes. Shippers also recognized the reality of the market, and some were eager to move their freight on the less-expensive spot market, giving their primary carriers just thirty minutes to respond to tender requests before moving down the routing guide and out to spot.

At one end of the floor, Erik Loeding, a director of sales and 20-year veteran of freight brokerage who started as a broker in 1999 and spent more than a decade with C.H. Robinson, paced behind a pod of rookie sales reps. Loeding said that his team was starting to see a seasonal bump in freight out of northern states like Washington and Michigan — Christmas trees and apples — that had been obscured by widespread tight conditions and a general high rate environment the year before. The effect wasn’t large, but it was noticeable and welcome.

Most of Loeding’s team had never seen a down cycle in freight before, but he could see trouble over the horizon. He worried that the combination of loose trucking capacity and a potential economic downturn “felt a lot like 2008, to be honest,” but he stayed upbeat as he tried to communicate to his reps the reality of what the company was facing. Loeding’s pod was shifting to focus on small and midsized shippers that in many cases were too small to have contractual relationships with asset-based carriers and that were still often overpaying for transportation. These were the customers that always needed help to move their freight, Loeding explained, and they were eager to let Arrive handle it.

At the other end of the floor, Kyle Kristoferson, a sales leader coming up on eight years at Arrive, was trying to get a handle on market volatility as he quoted spot and overflow loads to his customers. Kristoferson said that contracted freight awarded just six weeks ago was already being repriced down 6-8% by the customer. The truckload market has just taken another big step down, and rates in the physical market — the actual price to move a truck — were falling faster than Arrive’s internal pricing engine showed.

Kristoferson showed David Spencer, Arrive’s director of business intelligence, a particular high-volume lane that was being quoted too high. Arrive’s internal pricing tool was showing Kristoferson approximately $680 for an important intra-Texas lane, but he had been moving loads on that lane for $400 to $450 already, suggesting that unusual volatility — in this case, downward rate movement — wasn’t being captured by the model.

After my visit to Kristoferson’s desk, I spoke with Alex Schwarm, Arrive’s head of data, about Arrive’s pricing algorithm. Schwarm was aware of the issue and said that his team was already building a solution to automatically identify when rate movements on certain lanes exceeded a given slope threshold, which would trigger the model to more heavily weight recent transactions, as opposed to historicals, when returning a price to Arrive’s brokers.

“We saw the same challenges on the upswing,” Schwarm explained, referring to the fall of 2020 and the white-hot retail peak that followed it, “where on costs, the slope was quite a bit different than normal. How do you reduce the impact of random variation while detecting signal? When you have a very fast-moving signal, you want to be able to adapt more quickly, but that has the trade-off of creating more variation in your output.”

Freight brokerage pricing algorithms typically try to smooth out recent variation and noise from trend lines so that sales reps can quote relatively consistent pricing to their customers from day to day. But smoothing out volatility implies giving increased weight to history, which can obscure moments when the market is undergoing a bigger shift. Schwarm said that his team of approximately 25 data scientists and engineers generally had to predict pricing on three different time scales — booking time, quoting time and contract time. In other words, he had to be able to deliver rates for day-of or next-day booking, quoting for freight to be moved in a few weeks and then longer-term contracts that would hold for several months if not a full year.

“At a high level, what we’re trying to do is something that a lot of industries do already,” Schwarm said. “And there are established methodologies for being able to deduce a shift in the slope of this line and measure it. Identifying inflection points is a similar problem that you want to solve. There’s a whole bunch of research on signal processing for how you identify those shifts and the different techniques involved. Using the same kind of analysis that you might apply to a stock or the price of a commodity, we can apply those same techniques to identify those kinds of signals.”

Moments of extreme volatility — when the slope of a rate time series suddenly steepens — are comparatively rare, but correctly identifying them and adapting to them has important implications for Arrive’s ability to win freight and move it profitably.

While Arrive’s technologists worked closely with floor managers on making sure that the pricing engine was tuned sensitively enough to keep up with a chaotic market, one that was unusual in loosening rapidly during a week that was supposed to be the start of retail peak, Aaron Galer was crisscrossing the country, collaborating with enterprise shippers on the more esoteric problems in their supply chains. Galer, a senior vice president at Arrive who came from procurement at Amazon, was using the breathing room created by abundant trucking capacity to consult with shippers on deeper problems of network optimization and supply chain operations. I spoke to Galer on the phone from Arrive’s offices.

“Now is the perfect time to steal market share from our competitors,” Galer said. “It’s the perfect time to hustle harder and work to add value to our customers beyond simply providing a truck — it’s a more long-term, sustainable way to grow our organization.”

Galer said that he was regularly engaged with the sales floor on an ad hoc basis to help them do research on leads and work on their pitches, helping them dig deeper into strategic problems that Arrive might be able to help with. One customer had a few lanes in their network that they ran 30 or 40 times a week, but the nature of the freight was such that loads weighed out before they cubed out, increasing the number of shipments required. Galer’s team figured out that on these lanes they could source carriers with triple axle trailers that would better distribute the weight and cut the number of trucks required by 33%.

Arrive also prides itself on using its resources to support its customers in ways that third-party logistics providers typically don’t. Galer said that an Arrive team physically inspected every step in the life cycle of a shipment of green coffee beans — which are exceptionally sensitive to their surroundings, readily absorbing aromas from their environment — and determined that the method a carrier was using to clean its trailers was leaving a chemical residue that harmed the beans. In that case, Arrive was able to determine another cleaning and loading process that ensured the integrity of the cargo.

In another instance, a telecom provider was using a less-than-truckload carrier to move freight out of remote locations but ran into service issues when the single provider available experienced tight capacity. Galer said that Arrive collaborated directly with the LTL carrier on moving linehauls and zone-skipping the telecom’s freight deeper into the LTL network. That approach allowed the customer to accelerate its freight velocity and save money at the same time, while still maintaining the pickup and delivery service it was accustomed to from the LTL provider.

Galer said that the shippers he talked to were placing a renewed focus on very high visibility compliance numbers because they were seizing the opportunity presented by loose trucking capacity to focus on their own networks. They wanted at least 90% of their shipments tracked with a high degree of granularity so that they could study their own networks and make strategic adjustments to human resources and workforce planning.

“Nowadays the conversations I’m having with shippers, if you’re in the network, the focus has reverted back to 2019 initiatives,” Galer said. “They’re no longer as worried about OTIF or tender acceptance — if you’re low on the scorecard, you’re getting kicked out of their network. Now it’s to the point that what shippers look at most is visibility and getting 90%-plus of their shipments tracked consistently, or every 15 minutes.”

Galer said that shippers were focusing on strategic initiatives and attempting to streamline and improve their supply chains as a competitive advantage in order to grow with their own customers, and that 3PLs needed to be willing to partner with them.

“There’s a finite window when shippers actually have the confluence of bandwidth, resources and price all on their side and they are actually able to go after their [strategic] initiatives,” Galer said. “They’re actually serious about these things now. It’s a unique point in the cycle, and if you’re not on board or you’re just trying to wait it out, if you’re not prepared to help them solve issues, it’s going to be tough out there for you.”