Technology

Convoy Founder Dan Lewis on Supply Chain Bottlenecks and the Impact of Self-Driving Technology

Astrid Stawiarz/CNBC
  • Dan Lewis spent many years at Amazon before founding Convoy, a three-time CNBC Disruptor 50 company that connects carriers with shippers, upending the freight industry's broker-reliant tradition.
  • Lewis says it was during his time at Amazon that he saw firsthand how "the supply chain was winning" and how consumers were making decisions based on delivery speed above other factors.
  • Today, with hefty brokerage fees that correspond to the high labor demands of the task, the trucking industry has a costly problem that Convoy is using technology to solve amid growing supply chain concerns.

Dan Lewis spent many years at Amazon before founding his own company. Lewis says it was during that time that he saw firsthand how "the supply chain was winning" and how consumers were making decisions based on delivery speed above other factors.

"It wasn't the location of the store, the ambiance, the quality of the sales staff," Lewis said. "It was the fact that people could get things fast. It seemed that everyone in the country was talking about it and every other company was wondering how they could differentiate with their supply chain and avoid being disrupted."

So, he set out to be a part of it.

Today, his company Convoy, which ranked No. 12 on this year's CNBC Disruptor 50 list, connects carriers with shippers, upending the freight industry's broker-reliant tradition. Typically, carriers partner with brokers to gain a clear picture of freight availability and to match shipment loads to trucks. But regardless of how many brokers a carrier uses, that carrier still won't see all of the freight space currently available. The more brokers a carrier tries to use, the more schedules and routes that carrier needs to juggle, resulting in route inefficiencies and wasted space.

Lewis recently spoke with CNBC about the fragmented fleet management space, navigating supply chain bottlenecks and the impact that self-driving technology will have on the trucking industry.

The following Q&A has been edited for length and clarity.

CNBC: How would you describe what Convoy does in the context of various supply chain bottlenecks we're experiencing right now?

Lewis: The supply chain bottlenecks are pretty significant right now. Trucking is the largest part of how freight is transported in the world. And if you look at all freight transportation, including air, ocean, rail pipeline, and surface transportation on trucks, about 80% of the dollars go to trucks. But, one of the biggest challenges we're seeing is that there aren't enough trucks, there aren't enough drivers, and there are no trailers. There's shortages in manufacturing and other countries where they don't have the supplies or they're not able to get the pieces together in the right place.

Convoy is the first company to create a completely digital trucking network and we have tens of thousands of small trucking companies and owner-operators signed up and using our technology on their phone, which lets us tackle the trucking shortage and the driver shortage by making existing drivers and trucks more productive.

Trucking is really fragmented and there's a ton of empty miles because of that. A broker working on a certain set of loads doesn't know all the trucks, and so the best truck they think they can find to do the job is 150 miles away; so, about one-third of the time, trucks run empty. It's kind of a tragedy of the commons, where you're trying to get the right appointment for pickup, trying to get the right point for drop off, but you might not get the right appointments. And your driver may have to sit there idling in the lot for six hours and kill a day. Convoy cuts down the miles. We have optimized appointment times that make it so the truck has to idle for less time, burning less fuel and reducing cost.

Optimizing and using technology and machine learning to find the right appointment time in the right situation allows us to reduce wasted time idling and total time on the job, while also giving a lot of capacity back to the industry. That's an example of how Convoy works in the biggest part of the transportation segment for the supply chain upgrade. There's a huge amount of opportunity just in making the existing system and the existing drivers more productive. We get a lot of capacity from that.

CNBC: You worked at a lot of different technology companies, most notably Amazon, for several years before starting Convoy. Why did you get into trucking?

Lewis: Prior to starting Convoy, I had several stints working in the supply chain and technology worlds. I left my job and started to work on finding an opportunity for a business related to the supply chain full time — then I was looking at some retail ideas as well as transportation. I talked to investors who asked me great questions and one encouraged me to explore trucking. I started by talking to some family friends that were truck drivers, and actually visited several truck stops along I-5 and I-90 outside Seattle. I wanted to hear directly from drivers about the problems they were facing and how a company like Convoy could help. While they didn't open up right away to an outsider, they warmed up to me and eventually provided some amazing feedback, a lot of which confirmed that trucking was massively inefficient. I then went and spoke to warehouse operators, brokers, shippers, and everyone else who would give me time. I saw this as a pretty exciting opportunity to affect change in one of the world's largest industries. When I look back, we've made a lot of progress since then, but the problem of inefficiency still exists today and drives what we do at Convoy.

CNBC: Regardless of how fragmented the market is, what's Convoy doing to convince both truckers and brokers to de-couple and use your services over other competitors ... especially in an industry that's so relationship-based?

Lewis: We're the only broker right now that's completely focused on smaller carriers that never get access to high-quality, pre-loaded trailers, like those at Procter & Gamble or Unilever, because the companies that win those contracts tend to not work with long-tail trucking companies. But, they're all using our tech. It's too expensive and too complicated for our competitors to call and directly access long-tail trucking directly. They do it for others, but we can do it directly through our app.

Another thing we do is we pay them really quickly, because we're able to track everything you do on the app. Additionally, if you get delayed at a facility, our technology detects that. The other thing we'll do is we'll automatically combine multiple jobs together from multiple shippers and offer them back to our carriers as one job. That's very rare, and most people would have a hard time seeing all the variables in their heads and matching opportunities up like that. We go out of our way to help carriers manage their business.

On the broker side, you can imagine buying something on a site like Craigslist, where you're having to negotiate back and forth, and still, you don't know if they're going to choose you, if they're going to respond, etc. That's the normal broker experience, whereas Convoy is like buying something on Amazon, where you just go to the site, there's a price, and you can decide if you want it or not.

CNBC: Do you still consider Convoy to be the "Uber for trucking?" How has the competition shifted in recent years, especially as supply chain pressures have continued to mount?

Lewis: When we got started that was just an easy way to describe what we were doing. We were competing against other brokers and a couple of digital entrants at the time, and we were kind of relegated to picking up the pieces of the more transactional, less mainstream freight.

Today, we have better visibility and a really powerful network of small trucks that operate with high quality and are managed on a single platform. We are now outperforming the top asset-based carriers and brokers in the country and we've created several really innovative trailer programs that give our shippers a lot more flexibility during all this volatility we're seeing. We went from being a niche provider to working with some of the largest shippers in the country.

We went from competing for some of the smaller pieces of the industries to being a top-tier, innovative trucking solution for the top shippers in the country, and we're winning awards as their top providers. That's a pretty material shift from simply being "the Uber for trucking." I actually had a customer the other day who I thought was still thinking of us as a broker, until I realized they'd elevated us to the asset carrier level, like a JB Hunt or Schneider. This partnership model we have is really valuable because we see all these insights and data that allow our customers to see what's going on in their supply chain.

Today, there's no trucking operation in the United States that is able to get access to freight that we couldn't get access to because we're not able to perform at a certain level. We're performing at the highest level, which I'm really proud of. I know that there haven't been a lot of new entrants that have really changed the dynamic, with the exception of those getting in on the financial services side or those trying to create virtual fleets where they can effectively aggregate some small carriers into a natural asset carrier-like entity, but we haven't seen a lot of new players in our space.

CNBC: What role do you see Convoy playing if self-driving technology becomes more widely embraced? Does it change your model?

Lewis: I still think that the idea of no truck driver in the cab and the trucks running fully autonomously is really far away. But, I think it could have a big impact in the next few years — it's just a different model. Currently, drivers are limited based on their hours of service. So effectively, in nearly all cases, under all weather conditions, and in all states, every driver follows that same protocol, which means it's not that hard to figure out how to manage someone's hours of service and consider signing truck drivers to jobs. You can factor that in because it's all the same.

There's a lot of other variables we deal with though ... it's not likely they're going to flip from fully manual to fully autonomous overnight. It'll be years of mixed fleet transitions; you'll have regulations that probably differ by state (the states have already been regulating autonomous in different ways); you'll have rules and technology limitations based on whether snow is covering the road; I think it's going to get much more complicated, before it gets simpler, to orchestrate transportation with self driving. And unlike when that happens, companies that are trying to do this manually for the person considering those variables are going to really struggle and it might actually be impossible for someone to factor all that in when they're trying to figure out how to optimally dispatch and orchestrate a trucking network.

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