Selling Outcomes Rather Than Features Propels Transplace

Transplace CEO Frank McGuigan said 2020 should be a good year for the company, based on contracts signed in 2019 that will be executed next year, but the freight markets could see a bumpy ride.

Benzinga · 11/14/2019 14:05

Transplace CEO Frank McGuigan said 2020 should be a good year for the company, based on contracts signed in 2019 that will be executed next year, but the freight markets could see a bumpy ride.

"We believe it will be a soft year for freight but more volatile," he told George Abernathy, president of FreightWaves, during a discussion at FreightWaves LIVE in Chicago on Nov. 13. McGuigan said plenty of shippers are planning for flat growth, and some procurement services are suggesting they could see a 5-10% savings on rates in 2020.

The comments were part of a wide-ranging discussion with Abernathy, a former president of Transplace, that included expansion plans and a look at 2019 revenue projections. The comments also solidified how Transplace, a transportation management services and logistics company based in Frisco, Texas, views itself.

"We get asked all the time about features, and my first question is, ‘What are you looking for?'" McGuigan said. Transplace was one of the early adopters of artificial intelligence, and the executive noted repeatedly that the company seeks to offer outcomes, not features.

"TMS (transportation management services business) is pulling the company forward … and making it an outcome company," he said.

Transplace will book approximately $3.2 billion in revenue in 2019, with 16% revenue growth over 2018. It currently has $10 billion in freight under management in its network. McGuigan said 30% of Transplace revenue is generated from intermodal and truck capacity (brokerage) business, and 10% comes from its customs brokerage. The company is now a top 10 brokerage in North America.

Abernathy asked about the $400 million Series D round of funding announced by Convoy on Nov. 13 and its impact on Transplace's value, and McGuigan said he didn't think it would have an impact but that Transplace works with Convoy and other digital freight startups.

"Our job as a representative of the shipper in the market is to find [capacity and solutions]," he said. "What they're doing makes sense to me. What they're doing is smart and they'll be successful, but so will Echo (Global Logistics), Coyote and C.H. Robinson."

Transplace has broken ground on a new location in Northwest Arkansas, home to several large shippers. McGuigan noted that the company simply ran out of space in its current location.

"You have great companies like J.B. Hunt (NASDAQ: JBHT), Walmart Inc (NYSE: WMT) and Tyson [Foods] (NYSE: TSN)," he said. "To me, the essence of Transplace is now in Northwest Arkansas."

Transplace continues to invest in its products, including significant investments in artificial intelligence, so it can take advantage of opportunities as they arise.

"The easy part is recognizing the opportunity, the difficult part is [acting on it]," McGuigan said. "We want carriers to stay in our network."

AI is helping Transplace "build insight into data," allowing it to more easily identify which shipments in its system are most likely to suffer a failure of some kind, for example. It is also helping drive better efficiency and reduce empty miles.

"We want our technology to do everything," McGuigan said. "Logistics in some areas is the difference between profitability or not, or maybe it's between empty shelves or not."

Anything that can improve those processes is part of the outcomes Transplace is trying to achieve. "It's understanding and managing the difficulties of the supply chain," McGuigan said.

On whether Transplace could be in the market to make an acquisition, McGuigan said the company is unlikely to do so just for the sake of doing something.

"The markets are expensive for sure," he said. "If it's not a good fit with our core platform, we're not that interested."

McGuigan noted that expansion into Europe is part of the 2020 roadmap and Transplace is exploring Trucking Freight Futures,  a collaboration among FreightWaves, DAT and Nodal Exchange, but they need to be the right fit for the right customer.

"In a market like this with 97% acceptance rates [maybe they don't fit], but maybe if you are getting 85% like in 2018, that 12% spread means millions of dollars for some companies and that's worth Freight Futures," he said.

Image by Peter H from Pixabay