Can a 15-year-old company employing over 800 staff be a start-up? We talk to Trans.eu CEO Piotr Hunker

Can a company founded 15 years ago that employs over 800 people be considered a start-up? “Yes. Every company should from time to time, and these days especially freight forwarding companies.”

You have been around for 15 years, you employ more than 800 people in 10 countries and yet you claim to be a start-up. Something is not quite right here, is it? 

Now what is a start-up? Isn’t it just a new word invented by the venture capital industry? Back in the day, this word was not so popular and despite this, companies were still being created. Each new company was simply a fresh business set up by enterprising people with an idea, with energy, with competence, often with minimal family capital, willing to risk what they have and work 12 hours a day or more.  

The so-called traditional and often large companies of today used to be feisty start-ups, founded by daring people, which is why they succeeded. And it was harder back then because there were no such instruments of financial support in the beginning in the way start-ups have today.

From a business point of view, a start-up is simply a new business, a new product, a new offer on the market, and since this is a time of technological revolution, business models revolve around the use of this technology. 

As a result, they can offer the market something superior, more productive, with better customer experience and a competitive advantage. Venture capital simply wants to make money from the founders’ entrepreneurial spirit, they have their own business investment model. They help new companies get started and are an important part of helping them when no bank even wants to talk to them.   

This has its advantages, but as the companies grow, it also has its consequences.  At a certain point, venture capital starts to think unlike an entrepreneur, not from a long-term perspective, but a very short-term one with a focus on results, rapid growth at any price, and most importantly – the potential valuation of the company so that VC can make a good return on their investment. They are less interested in the future of the company or its customers. It’s always a matter of give and take.

Okay, I understand what a start-up is for you, but I still don’t understand why you consider Trans.eu to be one of them?

Because we are starting our business virtually from scratch, with a completely new product. 

In economics, the concept of an S-curve depicting the life cycle of a product is well known. Every product goes through successive phases – launch, growth, maturity and decline. This also applies to freight exchanges. 

It is a business model that emerged in the market some 20 years ago as the Internet became more widespread to meet the market’s need for bringing together dispersed partners for so-called spot loads. 

For 15 years, Trans.eu has been such an exchange and been dominant in Eastern Europe. We have been quite successful; in Poland, there is hardly any forwarding agent who would not use Trans.eu. We are also used by most Polish carriers. Roughly 70,000 people sign in every day and complete half a million transactions each month. We have built quite a sizable business on this. 

But a freight exchange really is just a bulletin board. Some people offer freight, others have available vehicles, they meet there, discuss and then send each other orders, usually by e-mail. 

This is no big deal in terms of technology, what matters here is the scale, the so-called critical mass of a community actively working together. What we have here is a classic network effect. 

However, unlike other freight exchanges such as Timocom or Teleroute, we have added an important feature to Trans.eu, namely digital deal making and negotiating via context messaging instead of conventional phone calls and emails.  We have always been a very innovative and high-tech company. They even say that one revolution is already behind us – we moved forwarders, at least Polish ones, from phones to messengers, and that was many years before Facebook or WhatsApp were available. And this has also greatly increased their productivity and therefore also their competitiveness in Europe as well as their speed of operation…

Well, you’ve built up a sizable company, you’ve made a revolution, so why bother trying to become a start-up again?

When Logistics 4.0 was introduced and we understood what it really meant, we realised that we were coming to the end of a certain era and that our old product was no longer relevant. 

It was then that we took the strategic decision to invest several million euros in developing a brand new platform. A web-based, cloud-based, easily scalable platform, and most importantly, one that connects all stages of the logistics process in road transport, i.e. the shipper, forwarder and carrier into one digital freight data flow chain. Both in the carrier sourcing phase, when a carrier needs to be found or selected for a particular load, and in the freight delivery phase, when monitoring of the order is needed. 

Only under these conditions is digitisation, and therefore transparency, optimisation and even accurate CO2 emissions calculation possible. Traditional exchanges still use the telephone to close the deal, thereby breaking this digital information chain.  After accepting the transaction, everything has to be entered manually into another application, e.g. the shipper’s TMS. We prefer to simply integrate with the TMS so that this digital chain is maintained at all times. And instead of manual filtering and searching, there is time to apply suggestions based on algorithms and use data science for optimal matches. It is a world of new opportunities. This is how productivity is increased. 

Just as an interesting aside, in March 2021 we completed the migration of all customers, that is 37,000 companies, from the old freight exchange to the new platform. It was a really hard process, there were difficulties, risks and pain, but we made it, and now we are as good as new. Just like a start-up. 

So what would happen if you had not done this?

If we hadn’t started this business all over again, I have no doubt that in a few years we would be end-down, and instead of this, we are a start-up (laughs). 

It’s a new beginning for us, a new business, a new product, a new market, new customer segments, new opportunities, a new adventure and a lot of fun creating something big and important. And this is also important for us and our employees. 

Of course, it is much easier for us than for typical start-ups, because we already have customers, we have a huge community, we have experience in what we do (which can also be an obstacle in taking risks), and we also have a company that is financially sound. We could afford such an investment. But still, we are a start-up, albeit maybe a bit of a second-hand one (laughs). 

Just like you, Logistics 4.0 will sooner or later affect everyone involved in the transport industry, which as we know is very much based on manual operations at the moment. I particularly see room for optimisation and digitisation for freight forwarders, who are, after all, in the middle of the entire logistics chain and could optimise a lot by using algorithms or AI, for example, which you mentioned. How do you see it? 

Exactly. It will affect everyone, but in my view especially shipping companies. Their business is already facing strong pressure from so-called digital freight forwarders like Sennder and InstaFreight, and in the US from companies like Convoy and Uber Freight. 

Ironically, if you look only at their age, they may be called very much start-ups, but there are huge venture capitals behind them. Who are they? They are simply freight forwarders! They do the same thing that freight forwarders have been doing for years, they offer shippers support in transporting their goods, using carriers to do so, all in exchange for a freight forwarding commission. 

There is really no new business model in this, but there is a huge competitive advantage over traditional freight forwarders – thanks to technology. This advantage is based on three pillars. The first one is a better service for the shipper, e.g. instant and automatic spot price calculation, visibility, digital flow of documents, streamlined billing, accurate reporting. In the US, for example, they give shippers a special portal to register freight and a guarantee to pick up any freight at the price offered. They are heralding the end of the tendering era. 

Meanwhile, the classic relationship between a freight forwarder and a shipper is based mainly on time-consuming e-mail and telephone communication and verbal price negotiations

There you go. But it does not stop there. The second area of technological advantage is the markedly higher labour productivity of their freight forwarders. It is at least several times higher than in traditional forwarding. Their work is faster, supported by algorithms that match the carrier to the load and digital workflows, they make fewer mistakes, less copy-paste or manual verification, less cumbersome telephone or email communication. This is a huge advantage. 

Moreover, in order to grow, they need less experienced and trained, and therefore cheaper, workers in freight forwarding. A traditional company needs an expert forwarder, with vast industry knowledge and relationships, who is well paid. Digital freight forwarding, on the other hand, gets a new forwarder up and running in a month or two by teaching them how to use the app. 

And the third pillar?

The third area of advantage through technology is flexible access to capacity, that is, to carriers, especially spot carriers, and these are mainly from Eastern Europe as they are plain competitive. 

Apparently, many shipping companies have thousands of carriers in their TMS databases but fail to use them digitally. They just stay in the database. They are not in fact digitally connected, they are not matched by algorithms, their data is not updated, they do not use applications that are digitally connected to the freight forwarder or their TMS. And flexible, reliable and fast access to carriers digitally connected to the forwarder will become a must in the coming years, as the key to competitive advantage. 

Everyone expects the capacity shortage problem to grow in Europe due to driver shortages. To this end, digital forwarders are regularly expanding their community of carriers and training them in the use of their app. Acquiring carriers is the most difficult challenge for them, which is why they even resort to freight exchanges all the time to attract them. All digital freight forwarders hope that one day they will have such a large number of loads that carriers will be looking for them every day. Time will tell whether this will be the case. 

What do you think? Will they succeed? Will they attract enough carriers? Or will they disappear from the market, like any passing trend?

It is a struggle against time, and they will succeed if they manage to establish their own community of carriers and have sufficient volumes before other forwarders wake up and go digital, too, to offer shippers a similar level of service.  

Today I would say it is one nil for digital freight forwarders, but the match has only just begun. Even more importantly, digital forwarders use the simple lure of faster payment. As long as carriers work digitally, on their terms, they get paid after a few days. This is an important added value for the carrier in a world where you get paid after 60-90 days. 

Digital freight forwarding is challenging and competitive not only for traditional freight forwarders. They are a new form of fulfilment of spot requirements, and therefore also in competition with every transport exchange in Europe, which have so far dominated the spot market. Obviously, conventional freight forwarding TMSs are also at risk, because the elimination of traditional freight forwarding means the elimination of their customers, their core business model. That is why we are building alliances with them. 

Are you suggesting that traditional freight forwarders could disappear from the market? After all, there are thousands of freight forwarding companies in operation today, employing thousands of people and serving thousands of companies. And so far, it’s more the digital freight forwarders that are struggling – take, for example, Uber Freight, which hasn’t done well in Europe

Unfortunately the case of Uber Freight, basically their failure and the somewhat unusual takeover by Sennder, has lulled our vigilance.  

There have been claims that the devil is not as black as he is painted and traditional freight forwarders have started to feel confident again. After all, the market is all about strong relationships with shippers, often local and long-standing, and customer service is also important for customers who have very complex and specific needs. No algorithms can replace this. 

This is all true, but in the short term. In the long term, it is better price, productivity, competitiveness, better customer experience that wins. Today, digital freight forwarders still seem to be a minor threat as they specialise in simple FTL cargo, but step by step they will be able to offer increasingly complex services. 

The winds of change have begun to blow. For now, slowly but persistently, because change is driven by such powerful technological advantages that there is no turning back. Uber Freight in Europe is just a stumble because they wanted too many things too fast and somewhat naively thought that the market in Europe was much the same as in the US. 

This does not change the fact that traditional freight forwarders have only one option: They need to go digital. They must offer shippers the same quality and customer experience, be just as productive and have the same broad and flexible access to the capacity of digitally connected carriers. There is simply no other way. The only question is how quickly this will happen, but the revolution is already underway.

It’s easy to say ‘become digital freight forwarders’. Digital forwarders have raised millions of euros from VCs to develop these technologies, and employ hundreds of developers. You yourself said that Trans.eu spent many millions of euros on the new platform. How would a medium-sized, family-owned freight forwarding company find the resources and know-how to do this?

It’s simple! It is not unusual for the smaller and weaker to have to fight effectively against the larger. Larger companies own and develop their own technology and smaller companies buy it as Software as a Service. Here, to be more specific: Digital Forwarding Technology as a Service, or DFTaaS.

You don’t have to own the technology to benefit from it. There are already some solutions available on the market. This is also the main challenge of our new platform Trans.eu and specifically Trans for Forwarders – to enable traditional forwarders to transform themselves into digital forwarders by connecting them digitally with their shippers on the one hand and with the largest shared community of carriers on the other. 

Carriers work for many different freight forwarders and do not want to use a different application with each one. Ultimately, this allows for gaining a significant advantage over digital freight forwarders like Sennder – thanks to this shared, digitally connected community of carriers. 

In addition, forwarders get access to algorithms, instant pricing, load pooling mechanisms at both contract and spot levels, supported by visibility, mobile apps for carriers and integration with the TMS they use. 

We firmly believe that the technology we are building can serve thousands of forwarding companies in Europe and not a handful of digital forwarders selected by venture capital, or so-called start-ups. They will certainly have their place in the market, but let’s give every freight forwarder the chance to become such a digital start-up. These traditional entrepreneurs have worked many years to build their freight forwarding businesses and should not give up.This is much more fair. 

It does level the playing field, but I don’t suppose every freight forwarder is ready for such a change…

This technological revolution is truly changing the world of logistics. Revolutions are never easy, there are winners and then there are victims. It is a threat that can turn into an opportunity for every freight forwarder. 

The longer we wait, stuck in the status quo, the greater the risk of failure. We believe in the power of community, the power of network effect. But of course, change is needed first and foremost in the minds of the managers behind the freight forwarding companies. 

If they recognise that change is inevitable, if they are willing to fight for their future, if they have the energy of start-ups, similar enthusiasm and courage to digitise their companies, they will become leaders of change.  Or, sadly, they will only wake up when they gradually begin to lose their customers and their shippers to digital forwarding.  

For now, companies like Sennder or InstaFreight are not targeting the giants, the big shippers, because they are not yet able to provide them with the scale and offer for complex services; these are still the domain of the major logistics operators. 

For the time being, Sennder or Instafreight are focusing on medium-sized and smaller shippers, which today are often served by local forwarders.  On the other hand, in fact, the changes are already happening – there is no shortage of pioneers, we already have a really large group of such leaders, let’s call them early adopters in start-up language, who are gearing up with us to transform their companies using our technology.   

There is one more important aspect that you have not mentioned. How will all these changes affect the rates in transport – the earnings of freight forwarders and carriers?

This is an important question. This is also an important part of what we do. In fact, our mission is even more ambitious – we dream of making the world of transport SMART & FAIR. 

We want it to become not only digital but also transparent through technology. ‘Smart’ seems obvious, I have said a lot about it before. ‘Fair’ means that everyone will be treated fairly and earn a decent wage, according to the fair price principle. 

This challenge, however, is the most difficult one and change will not happen as long as the policy of tendering down prices from the top by using the economies of scale and leverage of huge corporations, the main providers of cargo for transport, prevails. This forces the whole system to look for the cheapest and not necessarily the best, or most fair, solutions.  But I guess that’s a topic for another interview.  

Thank you for talking to us!