In the fast-paced world of transportation and logistics, the ability to pivot from managing day-to-day operations to creating a strategic vision can make all the difference. Royce Neubauer, founder and CEO of Auto Hauler Exchange, shares his journey and insights in a podcast with Justin Bailey, co-founder of Rose Rocket. Here, we unpack key takeaways that can inspire those in the logistics sector looking to innovate.
https://www.youtube.com/watch?v=6ZAYFIoY3uk
From Service to Strategy: A Personal Journey
Royce's entry into logistics began in the late 1990s, sparked by watching his brother work at a burgeoning freight brokerage, Total Quality Logistics (TQL). His intrigue for the chaotic yet dynamic world of supply chain management led him to a 10-year stint at TQL, where he witnessed first-hand the evolution of the industry. By 2010, motivated by a desire for independence and a vision of doing things differently, Royce founded Service First Logistics (SFL).
The Challenge of Scalability in Service-Based Businesses
One of the fundamental challenges in the logistics sector is scalability, particularly for service-based companies like SFL. Royce noted that while service businesses are often easier to start, they can be much harder to scale compared to technology-driven ventures. Many entrepreneurs grapple with this dichotomy, feeling the pressure to innovate and implement technology without compromising their core services.
In a critical turning point around 2016, Royce realized that SFL was growing unsustainably. "We were a traditional broker stacking bodies on top of bodies to cover freight," he explained. With a growing workforce but flatlining profits, he recognized that the company was consuming itself. The realization came to a head during a meeting with his CFO, where they examined the margins and profitability. "How in the world are we making X millions of dollars, but this is our profitability? This can't be sustainable," he recalled.
This insight prompted Royce to search for technologies that would allow SFL to operate more efficiently, reducing the need for additional hires while maintaining service quality. He made the strategic decision to embrace transparency and technology, a move that, while initially alienating some brokers, ultimately redefined the business model.
Creating a Sustainable Tech Venture
Building a tech company adjacent to a service business often leads to pitfalls, and many companies fail in their pursuit of creating technology solutions. However, Royce’s approach differed. He focused on a niche – vehicle logistics – ensuring that Auto Hauler Exchange serves a specific segment within the vast supply chain landscape. This vertical focus reduces complexity and fosters a more straightforward marketplace environment.
Instead of trying to be an all-encompassing logistics platform, Royce concentrated on creating an ecosystem that facilitates communication between shippers and carriers in vehicle logistics. This targeted strategy not only differentiates Auto Hauler Exchange but also enhances its appeal to users looking for tailored solutions in a crowded marketplace.
Embracing Technology for Efficiency
Royce’s vision for logistics is clear: eliminate manual processes and improve efficiency through technology. "We’re as digitized as we could possibly get in that space," he noted, while acknowledging that the brokerage side still involves manual touches – like checking on pickup numbers and communicating with drivers. He believes that logistics should evolve beyond these manual processes, which can be cumbersome and time-consuming.
By investing in digital solutions and partnerships, Royce aims to streamline operations. His philosophy underscores the necessity for logistics companies to adopt technology that not only complements but enhances their service offerings. By doing so, companies can stay competitive and responsive to the evolving demands of the industry.
Learning to Be a CEO
Reflecting on his role, Royce pointed out that being a CEO involves continuous learning and adaptation. "If I didn't continually push myself to get ahead of the business, we would have disappeared three or four years ago," he said. He leaned on resources within his community, connecting with other entrepreneurs and CEOs through organizations like YPO. These interactions allowed him to share insights and strategies for business growth.
Royce recognized the importance of assembling a team of implementers who could bring his vision to life. "I need people that are going to be implementers and that are going to work that vision," he stated. His approach involves regular communication and meetings with his teams to ensure alignment and address questions, fostering a culture of transparency.
Royce highlighted the value of having talented operators by his side. "I can’t do their job," he admitted, recognizing that his strengths lie in vision and ideation rather than execution. "What a great privilege in life to come up with ideas and have others believe in us enough to execute on those," he remarked, emphasizing the significance of collaboration in driving success.
Launching Auto Hauler Exchange
As Royce transitioned into the current phase of his journey with Auto Hauler Exchange, he explained the platform's purpose. "Auto Hauler Exchange is a B2B marketplace in the vehicle logistics space." The development process involved extensive interviews with carriers and shippers to understand their challenges. A common theme emerged: the need for greater transparency and efficiency in the vehicle logistics sector.
Carriers expressed frustration over underutilization of their trucks, while shippers struggled with tracking their shipments. This feedback shaped the foundation of Auto Hauler Exchange, aiming to address these pain points and streamline the connection between shippers and carriers.
Royce elaborated on how the platform ensures safety and efficiency by monitoring carriers for proper authority, insurance, and DOT ratings. "We make sure everybody's safe," he emphasized. He also pointed out that brokers typically pay carriers faster than they themselves get paid, acting as a financial arm that floats capital – an advantage that Auto Hauler Exchange can leverage without the overhead costs associated with asset-based carriers.
By digitizing carrier procurement and payment processes, Auto Hauler Exchange aims to simplify the logistics experience. "We can build in FinTech options," he explained, allowing payments through platforms like Venmo, Cash App, or ACH, streamlining the financial side of transactions.
From the shipper's perspective, Royce acknowledged their frustrations with third-party brokers. "What if we could just connect you directly with the carrier?" he proposed. This direct communication allows shippers to have access to drivers' cell numbers and real-time tracking, eliminating the usual bottlenecks of traditional brokerage models.
The Complexity of Power Dynamics
Royce also discussed the often-overlooked power dynamics in the carrier-shipper relationship. "Although the carrier may look like the ultimate, 'please, sir, can I have some freight?' they possess an incredible amount of power," he explained. This power is vital to recognize, as the industry has largely overlooked the need to build products that protect, sustain, and grow carrier businesses.
He emphasized the genius of creating a first-party visibility product, which fosters direct relationships without obfuscation. In contrast, traditional brokerage models often introduce a third-party visibility layer that complicates the carrier’s role. "When you provide a third-party product, you're effectively obfuscating that transaction," Royce pointed out. "But with what we're doing, it's a first-party relationship, and that’s extremely powerful."
Addressing Industry Challenges
Royce acknowledged the myriad of products designed to enhance broker and shipper profits, but cautioned that this approach could lead to a dire outcome. "If you continue to bulldoze the carriers, there will be nobody left to move your freight," he warned. Instead, he believes that creating products that empower carriers to thrive is essential for a sustainable logistics landscape.
Reflecting on the demands of vehicle logistics, Royce noted that this segment relies heavily on professional drivers who face unique challenges. "Vehicle haulers have to get out in the rain, sleet, snow, load their own trucks with cars, and ensure everything is secure," he said. With many drivers being pushed away from the industry, there's a pressing need to create tools that allow them to maximize their trailer capacity and revenue.
Solving Real Problems
Royce underscored the importance of solving real problems within the logistics space. "If this product were just specific to dealers, it probably wouldn't work," he noted. Auto Hauler Exchange addresses a broader ecosystem, including direct-to-consumer shipping, OEM shipping, and dealer-to-dealer logistics, making it versatile and beneficial for carriers of all sizes.
For those looking to disrupt the transportation industry, Royce advises starting from the carrier perspective while ensuring that the problems being solved are significant and varied across the industry. "If you don't have institutional knowledge, you may not know what to fix or how to fix it," he cautioned. His own experiences shaped the insights necessary to navigate the industry's complexities.
Conclusion
Royce Neubauer's journey from a young logistics enthusiast to a successful entrepreneur illustrates the transformative potential of technology in the logistics sector. By embracing a clear vision and maintaining focus on specific markets, he has carved a path that not only benefits his businesses but also sets a precedent for others in the industry. As logistics continues to evolve, the lessons learned from Royce’s experience are invaluable for anyone looking to innovate and thrive in this dynamic landscape.
