By Kashif, Investment Analyst at PrivCo, a private company financial intelligence platform
The trucking business in the United States is big. According to the Federal Motor Carrier Safety Administration’s (FMCSA) 2016 statistics (based on 2015 data), there are 11 million freight trucks on the road, carrying 14.5 million tons of cargo over 280 million miles. It’s the circulatory system of the material economy: 70% of all freight in the country is moved by trucks. Collectively, the industry employs almost seven million people –more Americans than almost any other– and driving trucks is the most popular job in 30 states. There are still driver shortages, and a major industry group predicts an additional need of 900,000 drivers—human or robot—by 2025.
All this is currently worth over $700 billion a year, about 4% of 2015 GDP.
With millions of businesses utilizing millions of trucks operated by hundreds of thousands of trucking companies, thousands of brokers are usually employed to facilitate shipments, charging about 10-15% of the gross shipping costs. The top 25 brokers in the U.S. earn (and cost trucking companies) over $23 billion annually in aggregate.
Amazon, already a giant in logistics and a self-proclaimed transportation service provider, is now rumored to be working on an “Uber for trucks”. Details are scant, but the goal is to eliminate third party logistics companies and their accompanying costs, replacing them with its own platform. While its Uberified name oversimplifies its function (freight and logistics are much more complex than ridesharing services), the end product will likely be a quotation system where companies can post shipping projects and be matched with the best bids submitted by freight truck operators.
The end result will likely be great for Amazon, good for manufacturers/retailers/wholesalers in need of cheaper shipping, negative for logistics firms, and unclear/neutral for trucking companies.
Amazon isn’t the first to attempt to disrupt this highly entrenched and lucrative business. Uber, for example, recently acquired the startup Otto to help it develop a self-driving truck. While initial tests have been promising, regulatory pressures and lack of enough real-life road data will keep automated freight at bay for several years. That buys Amazon lots of time to get companies to adapt its centralized trucking marketplace model before autonomous trucks and delivery drones reduce costs and render many workers obsolete–not too different than what’s going on in ridesharing.
We looked through PrivCo’s private company database to find some of the most prominent privately-held players in the trucking business–including both trucking companies and brokers–to determine how much of their businesses are exposed to Amazon’s encroachment on their turf.
Trucking Companies:
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The companies below are the largest privately-held trucking businesses in the United States. Trucking companies of this scale are usually vertically-integrated and include logistics operations. According to a trucking industry consultant at McKinsey, mass adoption of a centralized marketplace like Amazon’s Uber-for-trucks platform could reduce or eliminate logistics revenues. Trucking revenues could go either way: while trucking companies could be exposed to far more shipment opportunities, price discovery on Amazon’s platform could bring prices down in an Uber-esque race-to-the-bottom for trucking rates. We provided pie charts to show the portion of revenues at risk for each company.
Schneier is, by all measures, a trucking giant. The company drives over 8.2mn miles a day using 10,000 trucks, 34,000 trailers, and employs almost 12,000 drivers. It handles longhaul, regional, expedited, bulk freight, warehousing, brokerage, and logistics/supply chain management as well. The mostly family-owned company announced it will go public sometime in 2017, and sources indicate it seeks to raise $700mn at a $5bn valuation, although an S-1 has yet to be filed.
Estes employs over 16,000 to manage and drive a fleet of 6,700 trucks and 30,000 trailers across all 50 states. The largest privately-held less-than-truckload (LTL) carrier–which puts multiple deliveries in a single truck–operates 200 terminals and seeks to expand this year, betting on a better 2017 despite risk of oversupply in the LTL market. Some are concerned that LTL carriers will follow the trends of the truckload (TL) industry and ocean liners, which overpurchased capacity just a year ago. A more universal logistics platform like Amazon might help alleviate this issue.
Third Party Logistics Companies:
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The third party logistics companies below are true middlemen, playing the role of dealmaker in the shipment of goods without owning any of the equipment used in their transport. They are, for the most part, brokers who facilitate LTL or TL shipments, and are at the biggest risk of being disrupted. The industry has recently seen a great deal of consolidation and acquisitions, partly due to slowing growth in the logistics business, as shown in the chart below. If Amazon should follow through on its ambitions at scale, broker commissions could take a hit starting in 2017 when the platform launches.
The country’s second largest freight broker has grown consistently since its founding in 1997 as a produce shipper, with just a minor revenue hiccup during 2009’s recession. The company has had a 27% CAGR from then until 2015 and now employs 3,200 people.
Americold provides logistics for temperature-controlled shipments and warehousing. The company got its start transporting ice and coal using hay to insulate, and through a series of warehousing and distribution acquisitions, became the largest temperature-controlled logistics company in the world.
As one of just two UPS resellers in the United States, Worldwide Express holds a privileged position, but its business relies heavily  on this key partnership. The UPS Worldwide Express service, introduced in 2007, provides next-day delivery to run-of-the-mill destinations as well as less-frequented locations like Myanmar and Albania. While this may not run into Amazon’s offering, the company is heavily involved in domestic LTL and TL logistics.
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