C.H. Robinson Worldwide to Double Spending on Freight Technology

C.H. Robinson Worldwide Inc., the biggest freight broker in North America, will double its technology spending over the next five years as it fends off challenges from a growing field of digital startups.

The Eden Prairie, Minn.-based company plans to spend $1 billion to hire more data scientists, engineers and developers to expand its technology and develop new services in an estimated $86.5 billion U.S. domestic market for managing freight transportation.

The spending plan comes as digital freight-booking startups such as Uber Technologies Inc. ’s Freight unit, Seattle-based Convoy and New York-based Transfix Inc. are jockeying to take a bigger slice of the truck-brokerage market with technology that aims to connect truckers with shippers more efficiently.

Their push to automate the manual processes in booking freight shipments, including mobile apps and clear views of capacity and pricing, is helping reshape freight brokerage.

That could reduce profitability for the middlemen that arrange the transport of goods for manufacturers, retailers and other businesses, Stephens Inc. analyst Jack Atkins wrote in a recent research note.

Some of the newer digital brokers “appear to be offering aggressive market rates to both small carriers and shippers in an effort to build scale and take market share,” Mr. Atkins wrote. “These market players are now big enough to impact market pricing, and we believe this is causing established players to accelerate technology investments to drive higher productivity as they look to defend or expand market share.”

Established transportation and logistics companies including XPO Logistics Inc. and J.B. Hunt Transport Services Inc. are also spending millions to automate and digitize their brokerage operations. XPO Logistics has increased its capital spending from $504 million in 2017 to a planned $650 million this year, the company said, much of it going toward technology.

C.H. Robinson Chief Executive Bob Biesterfeld downplayed the impact of the startups, noting the company is adding newly available technology at a rapid rate and that, after all, it handles far more business than its competitors, both tech-forward operators and traditional middlemen.

C.H. Robinson CEO Bob Biesterfeld PHOTO: C.H. ROBINSON

“We’ve been in the freight-matching business really since the deregulation of transportation in 1980,” Mr. Biesterfeld said in an interview. “We are around three times bigger than the next largest North American brokerage provider, and somewhere around 14 times larger than the combination of the two largest digital upstart brokerages.”

Founded in 1905 as a wholesale produce brokerage house, C.H. Robinson last year generated $16.6 billion in gross revenue from brokerage, global freight forwarding and other business lines.

The company is by far the largest player in a highly fragmented U.S. market. Research firm Armstrong & Associates estimates the domestic transportation management market, which includes brokerage and other logistics services, generated $86.5 billion in revenue last year. C.H. Robinson’s North American Surface Transportation segment, which provides trucking and other freight services, counted $11.2 billion in gross revenue last year.