The company now says it is prioritising profitable growth and shall make some announcements regarding its transport management offering in the not-too-distant future.
Following Olivier Prigent’s arrival, trans.iNFO took the opportunity to quiz both Olivier and co-founder Maximilian Schaefer on where the company is heading, as well their thoughts on numerous pressing issues impacting the European road freight industry.
Read on to learn Maximilian and Olivier’s thoughts on:
- Why InstaFreight is prioritising profit over sheer growth
- To what extent the EU Mobility Package is harming the environment
- What benefits could be unlocked via an EU-wide 44-ton limit
- Why empty capacity is still a major contributor to CO2 emissions, and what can be done about it
- How funded training could alleviate the driver shortage
- What investors are looking for in the current economic climate
Thanks to you both for talking to us at trans.iNFO.
Let’s start with Maximilian if I may. How have things developed at InstaFreight since you started the company? When you look back, have things panned out more or less as you would have liked as far as InstaFreight is concerned?
Maximilian: Well, I’m still as fascinated with the market now as I was on day one. I think we’ve had an impact on the market, and you can see that in people like Olivier joining us from big companies and believing in our vision.
When I look back, I also realise that the pure digital freight forwarding model by itself was not alone going to disrupt the market, but in particular, the transport management angle that we have, because that is really something that doesn’t exist in the market right now.
There are platform businesses and freight forwarders, but the combination of a platform and a freight forwarder is really new. I think the moment we moved into this innovative field was also when we saw all the growth happening. Over the last four years, we’ve grown by over 1000% – it’s remarkable growth that is also putting the organisation under a lot of stress.
I’m happy with how we navigated what happened with Covid, the war in Ukraine and the changes in the interest rates and so on. You go through different stages as a company and right now our focus is more on profitability than growth. Overall though, I’m pretty satisfied about where we are right now.
Moving on to Olivier now – first off, why have you taken the decision to join InstaFreight? Secondly, how do things look at the moment with regards to the LTL/FTL balance?
Olivier: Well, it’s not the same philosophy at InstaFreight in contrast to well-established big companies such as DHL or DB Schenker. They have a different approach to the logistics industry and its services.
For me this means of course a cultural change but a very positive one. The atmosphere here at InstaFreight is distinct from what I have experienced in my career so far, for example during my spell at DHL. I really like this start up vibe, the enthusiasm and the pace.
We had and still have the possibility to create new, thereby efficient solutions for our clients and now it’s a big challenge for us to generate even more value for our customers in the future.
What specific improvements have you made to your platform in recent years for the benefit of carriers?
Maximilian: We started off just focusing on single individual loads. For carriers, they could just pull a few loads that were attractive to them. Over time, we moved into offering additional packages to the carrier that would give them more mileage.
We were really tendering larger packages to carriers and also offering carriers the opportunity to provide dedicated charter operations to InstaFreight.
I think what we do quite well is to make sure carriers have an attractive mileage when they drive with us. We can do this thanks to our efficiencies and the algorithms, which make us quite competitive in the market.
At the end of the day, that is what carriers are looking for. They’re able to do mileage when driving with the forwarder, and that is one of the key functionalities.
We also have a Partner Plus program for other carriers or forwarders too, but I think the core facet of InstaFreight is to provide significant mileage on attractive trade lanes for carriers.
On top of that, particularly for individual loads, we are very good at drawing spot loads from our customers. It’s a key competitive edge we have as a digital forwarder to provide attractive solutions to shippers in this segment. We can do this because we’re able to see where we have available capacity based on our data.
Of course, the spot prices are more attractive compared to the contracted loads. A lot of carriers were really benefiting from the fact that we had a price advantage on the spot loads too.
What we were then doing was giving a lot of nicely paid spot loads to some of our best performing carriers that we had in the system. So Class A carrier partners in particular were benefiting from nicely paid spot loads.
I think the combination is attractive. On the one-hand, we are providing attractive mileage. On the other hand, the spot business is the icing on the cake.
Speaking about product features, carry-on mileage is important, and also an attractive rate per kilometre. I think we provide a nice mix of those two.
How has the EU Mobility Package influenced the European road transport market in the last 12 months or so?
Maximilian: From an ecological standpoint, the Mobility Package is a disaster. We can see that already. Right now, there’s 25 – 30 % of empty mileage in European FTL transport.
I did a few calculations on this, and you can really say that the Mobility Package has led to an increase in empty mileage that’s roughly worth 7 million tonnes of CO2.
In Germany, there’s been discussion about limiting speeds on the Autobahn to 120 or 130 km/h. That would yield a reduction of 3 million pounds of CO2.
The Mobility package has cost us double that, which is just crazy. I also think implementing this now, when we are looking towards eco-friendly transportation, and when capacity is so scarce, has been the wrong step.
I think it was basically just a nightmare. It’s here to stay and it’s not going to go away, but unfortunately it’s been implemented wrongly.
Olivier: I agree with Max’ assessment.I think it was a political decision and we have to work with this introduced Mobility Package and the current situation of transport logistics in general. The last few years have been a big challenge for the industry, as Max mentioned the pandemic, the war in the Ukraine amongst others, and it’s not easy to find perfect solutions all the time. But it is also fun to develop new ideas and create new ways.
There has been talk of an EU-wide increase to a 44-ton weight limit for road transport, simplifying cross-border routes in which countries have differing regulations. If introduced, what kind of impact would this have?
Olivier: A positive one – because it means that we can get a lot more goods transported with every truck.
We would have less trucks on the road, and it would aid the environment and improve the driver shortage problem, a big obstacle in our market for smooth operations, too. So it would be important if these plans will come to fruition.
There’s a lot of focus on the driver shortage right now, not least in Germany. Although there’s been a fair amount of discussion around accessing talent pools from outside Europe, we have seen signs of funded/subsidised training bringing European residents into the industry. Is this something that can really make a difference?
Maximilian: I think there’s a lot of evidence that suggests that this is helpful. At least for the German market, back in the days when there was compulsory military service, a lot of the drivers were trained by the military.
That led to a lot of young blood going into that profession straight after their military service. A lot of people wanted to receive training to become a truck driver. Once compulsory military service ended, the problems of succession in the truck driver industry mounted up.
I think that’s strong historical evidence which suggests making training more available could certainly help. There are also a lot of drivers in the last mile delivery space driving sprinters that I could imagine would be tempted to work in HGV transport due to the regulatory framework.
It goes without saying that sustainability and decarbonisation is another big topic in European road freight right now. What role is InstaFreight playing with regards to this?
Maximilian: We are particularly focusing on solutions for shippers. Today, a lot of the shippers can implement a platform solution to manage their 20 – 50 hauliers. However, this by itself doesn’t really allow them to manage their spot business more effectively. This is because the vetting and onboarding of additional hauliers is taking too much time. It is complicated and can’t be solved by platform solutions.
Consequently, there is not enough liquidity in the spot market when it comes to loads directly coming from the shippers. This is really increasing the empty mileage in the market.
Let’s say for example you are a big shipper. You have an inbound department and you have an outbound department, the same truck that’s standing there is organised by the inbound department may well be subcontracted by a carrier of your outbound department, but it’s not being used to make the next load.
A lot of other platform companies in the market are saying that they are trying to solve this problem. I think InstaFreight is super-well positioned to solve it.
If you are a shipper, we offer you spot business at an open book fee. And you can have InstaFreight as the contractual party. We tell you who the carrier that is driving the business is, and we are charging you an open book fee.
Let us further assume the carrier is charging 600 Euro, and we’re charging 600 euro to the shipper and we are taking a transparent handling fee. By doing that, the shipper taps into our network and immediately gets access to 25,000 carrier companies.
In any other platform that the shipper has today it don’t get a pre-vetted, pre-installed carrier base on top of the platform. And we are really the only one that is providing a gateway, so that you can immediately send a transport order with InstaFreight as your contractual party and not the carrier.
This means you only have to vet one company instead of 1,000. That’s really something so that we can show the empty mileage of a shipper falls when using our technology.
When you look at the alternatives for a more sustainable transport out there, there’s rail. But there’s not enough capacity on rail to be very honest. Of course, there are future technologies. For now that’s unfortunately not enough yet.
There is support by the government too [e.g financing for fleet upgrades] and those are great tools. Nevertheless, a lot of carriers are hesitant to invest in future technologies at the moment because many of them haven’t had the best experience when it comes to LNG.
A lot of them invested in an LNG fleet that’s basically standing still now. I think the best we have for now is to improve efficiency and cut empty mileage.
That is where we are going with our spot product in transport management, which is providing a very strong alternative for shippers.
The drive towards reducing empty capacity arguably doesn’t get that many headlines. Is this because it just isn’t as obvious or as attractive-looking as upgrading fleets to zero-emission vehicles?
Maximilian: I think we’re just not aware of the numbers. It doesn’t sound so fancy, but the European cross-border market is emitting 200 million tons of CO2 a year. Germany is emitting 600 million tons of CO2 and 120 comes from traffic.
Now, of that 200 million tonnes of CO2, 30% comes from empty capacity. So we’re talking about 60 – 65 million tons of emissions caused from that. That is half of the total emissions of German traffic. I don’t understand why no one is talking about this enough. When we think about all that can be implemented in the next five years, improving efficiency and empty mileage will be one of the best leverage factors.
The economic climate has certainly changed in recent months, with big names announcing redundancies – including technology businesses in the supply chain and logistics space. When it comes to investment, what do you think this means for those companies involved in the digital transformation of logistics?
Maximilian: Well, as for the investment landscape, I do think there’s still a lot of investment. However, investment is more targeted towards earlier stage companies, and a little bit less towards the middle stage companies. So a lot of innovation is still being funded.
In the Series B and C type of environment, there’s a little bit less investment at the moment, because for those companies to move also towards an IPO as an extra channel, the markets have become a little bit less attractive. Let’s see how long this continues; it’s hard to say if the situation will remain for the short or long term.
As regards the layoffs you referred to, it’s only natural that at some point some companies will see their metrics become more targeted towards profitability than growth. That can mean less focus on not just growing, but growing in a healthy way that’s sustainable and profitable. At the end of the day, companies are there to generate stakeholder and shareholder value.
That only works if you become efficient and profit driven. So we’re seeing a lot of companies in the industry really trying to focus on profitable growth.
I wouldn’t say this is a bad thing; it’s healthy to control your costs – irrespective of being a scale up or or grown up. It’s just part of providing a competitive offer to customers.
Finally, just briefly – what can we expect to see from InstaFreight later this year?
Olivier: It’s a new and interesting chapter for me – but in a familiar world where I can contribute with my career know-how. We’re working on our processes every day to be even more efficient, more flexible and faster.
We want to respond to the needs of our customers, bring added value and be one of the best destinations for 3PL and 4Pl business in the European road freight market.
Maximilian: For us it’s about growing profitably and sustainably to create value to our customers – shippers and carriers. When you have a compelling value proposition, growth comes naturally.
I think there’ll be some cool announcements from us in the near future too, particularly for transportation management. So stay tuned for more on that.