A conversation with Drew McElroy, co-founder and CEO of Transfix, and Mark Young, director of transport procurement at the Anheuser-Busch Companies.
SCB: Mark, what was the situation that obtained prior to your relationship with Transfix? Tell us why that might have been good, but perhaps less than optimal.
Young: Prior to working with tech-enabled carriers such as Transfix, our data was very inwardly focused and kind of one-dimensional. It lacked depth, and led to a lot of our decision-making being very price-focused.
SCB: Drew, what are your views on that?
McElroy: As a general rule, we like to think that we, through our mobile application, make data available to our customers and ascribe it to a cost. The whole trick is figuring out what it costs do different things within a supply chain. Truly quantifying that enables our customers to decide ultimately what's best for them, and that can be manifested in detention, decisions about spot versus contract, and appointment types or times — really, anything that you do. If you know what it's going to cost directly, you can make more informed decisions with that information.
SCB: Drew, tell us what services Transfix provides.
McElroy: Transfix is a digital freight broker. We’re a 3PL [third-party logistics provider] focusing explicitly on executing truckloads on behalf of our customers. The difference is that everything we do starts with our own mobile application. Among other things, we track and understand the behavior of our drivers in real time. And that does a lot of things. From a cost perspective, it streamlines the cost base by which we operate. It also allows for matching many trucks with many loads, as opposed to doing it as a one-off. Ultimately that allows us to talk to our carriers and drivers about massive increases in utilization. If they get more miles with us, the implicit trade-off is that we pay a little bit less per mile.
If we have a lower procurement price with a lower cost base, we're often able to save shippers money. Beyond that, we know where the trucks are, because we have real-time visibility. We know where they're going, and when they're supposed to be there. It creates a situation of management by exception, which saves costs on behalf of shippers. They no longer need to babysit every load. If there's a problem, we will tell you. Over time we will capture a tremendous amount of data about your supply chain. Ultimately, that data helps you to understand what's happening, and make affirmative decisions in a better way for your business.
SCB: Mark, compare the situation that you had at Anheuser-Busch prior to the relationship with Transfix. How would you characterize the situation that you had at that time?
Young: It was very one-dimensional, very siloed, and the data was focused on that single dimension of price. Whenever we bring in data-enabled carriers such as Transfix, they can give us insights affecting price that we might not have previously known about. We can evaluate ourselves more thoroughly. We find out things like how we’re driving price with carriers, and we start to get closer to a total cost of operation. We've really been focused on total cost of operation as opposed to price, understanding everything that goes into the service costs for a carrier on a given lane. It has started to drive a more complete picture and give us greater transparency, which is one of the biggest things we're focused on.
SCB: How long has the relationship between Anheuser-Busch and Transfix been going on?
Young: I think we started this relationship about three years ago. Right, Drew?
McElroy: That sounds right — this will be operating year three. One of the things I find interesting is that it's a journey, and we're just getting started. Three years in, I’d like to think both AB and the market are maturing. It seems to me that as we move forward, the value creation continues rather than plateauing or ceasing to exist. That's one of the things that's most exciting to me.
SCB: What about the actual solution? Drew, what is the service that you’ve provided to the Anheuser-Busch Companies?
McElroy: We execute truckloads on their behalf, both contract and spot. That’s the fundamental service: we pick up at point A, and deliver to point B.
What I think differentiates us from other companies is the way in which we do it, and the experience that it generates for the customer. We don't make lots of phone calls and find one driver for one truck. We algorithmically say, "How many trucks are there, and how many loads? What’s the optimized solution in terms of dwell time and empty mileage for this dataset?" In so doing, we create a better financial result from an ROI perspective for the carriers, which also unlocks a lot of things for us. Ideally and most of the time, they see flawless execution throughout. When there’s some sort of hiccup in transit, we tell them in advance, so that there's no scrambling or missed delivery appointments. We know the driver's behind schedule a day in advance.
It's about excellent execution and exception management. From a strategic perspective, we’re able to enrich their supply chain with the data we collect. That manifests itself for different companies in different ways, depending on what their goals are. In the case of AB, we've been talking a lot about facility performance and how we understand the tradeoff between wait times and time of day for appointments. Understanding the exact costs of those different levers allows them to make decisions that ultimately impact their business.
SCB: Mark, everyone’s concerned with the data that they have and how it can be utilized. You're now getting data that you didn’t have before. What specifically are you receiving from Transfix, and how is that enabling you?
Young: There are a couple of types of data we're getting from Transfix. Whenever you get data back, it's going to do one of two things. It's either going to be on top of data that you already collect about yourself, and validate it or show gaps, or it's going to be new insights. One of the things we already were tracking was the performance of our facilities. But we weren’t using the same metrics that Transfix was giving us — there was a gap in our metrics.
They were able to provide additional data on how operations were impacting our costs. They could say to us, "What's the retention rate whenever a driver picks up his first load at this facility?" And you could see that as wait times increased, that retention rate would start to decrease. That correlation goes right into the cost. So there were two pieces: identifying the gap in measuring, and getting additional information about how that translated into cost.
McElroy: I'll provide one more example if I may. From a price benchmarking standpoint, we're able to provide AB a price on every single truckload they execute. That’s either an opportunity for savings vis-a-vis what other price you're seeing, or it's a validation of how well you buy. Understanding that pricing environment and what's happening on a lane-by-lane basis can be pretty powerful as well.
SCB: Mark, could you sum up how Anheuser-Busch’s business has been improved, enhanced or favorably changed because of this relationship?
Young: A key component of what we're trying to drive is transparency between shipper and carrier, so that both can benefit: the driver experience on the carrier side, and cost savings on ours. The more we can expand this transparency, the more we can drive efficiencies. That's going to translate to a better cost, but it will also have other impacts. It will result in better conditions for drivers. The less time they waste waiting to get loaded, the more money they can make.
Time is money for drivers and our carrier partners, and we know that. Also, the more transparency we have in sharing data, the more we start to eliminate other things like empty miles and CO2 emissions, and create more efficient supply-chain networks all around.
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