Cargomatic plays the role of hero, swooping in to help unclog America's largest ports

By Michael Carney , written on March 6, 2015

From The News Desk

Southern California ports typically handle 40 percent of all US container imports, and yet, for much of the last year, that flow of imported goods has slowed to barely a trickle. A protracted labor dispute between Pacific Maritime Association and the International Longshore and Warehouse Union has left critical goods sitting on ships in the harbor waiting to be offloaded or, often more frustratingly, piled in container stacks across the port waiting to be unloaded and cleared of customs.

The Union workers signed a tentative contract in late February, but that agreement only marked the beginning of what will surely be a months long process of digging out from under the massive container backlog. Frustrating as this is for companies and consumers desperate for access to these goods, it also marks a massive opportunity for entrepreneurs capable of adding leverage and improving efficiency within port operations. It's no exaggeration to say that billions of dollars of lost business is at stake.

One company making a name for itself of late is Los Angeles-based on-demand trucking platform, Cargomatic. The company has been described as an “Uber for trucking,” owing to the fact that makes it possible to request cargo transportation and take advantage of excess capacity in the local short-haul network with the push of a mobile app button.

Typically, individual truckers are assigned to individual containers, meaning that they are forced to wait, often time several hours, until their particular cargo is freed from the stacks and ready to leave the port. The ports attempt to schedule these pickups using fixed appointment times, but given the backlog, delays are common and the daily procession rarely unfolds as planned.

Cargomatic is making it so that available containers can be loaded onto the next available truck – typically one that has made an inbound delivery to the port and would otherwise leave empty for the return leg. It’s a system that borrows from the “free flow” (aka, “peel-off”) process utilized by many retail giants (think Amazon or Best Buy), that prioritizes getting cargo off the port as quickly as possible, rather than matching specific cargo to specific trucker.

Typically such an approach requires massive scale, but with Cargomatic, smaller retailers can get the same efficiency benefits through aggregation. Crane operators at the port can simply stack all the containers belonging to Cargomatic customers in a single location and load them onto arriving trucks one at a time, without perviously arranging a route and destination for each driver. All delivery instructions are available to the driver in the Cargomatic app – deliveries are limited to a 150 miles from the port – and payments are similarly processed automatically in-app.

Cargomatic claims that its Free Flow program has reduced the average turn times for its truckers by as much as 50 percent, allowing them to complete more trips per day, and thus earning more money and more quickly unclogging the port. The innovative system has received praise from LA Mayor Eric Garcetti, who has been a strong advocate of the local startup and technology community since the early days of his pre-election campaign.

It’s worth pointing out that all drivers on the Cargomatic network are all vetted by the company, and must be appropriately licensed and insured. Put another way, these are not UberX-style newbies looking for a quick way to make some extra cash. It's more akin to the early days of Uber’s black car service where professional drivers were picking up extra fares during the downtime from their full-time job. Cargomatic is a means of unlocking excess capacity in the existing trucking network. Historically, there has been enormous inefficiency and illiquidity in the system, particularly during the recent port slowdown.

The idea for Cargomatic was born out of co-founder and COO Brett Parker’s experience growing up in a trucking family. With first-hand experience with the challenges of local logistics, not to mention the regional relationships and credibility within the freight community, it’s no surprise that his solution has been quickly welcomed by an otherwise overburdened industry. That said, the luck of launching this service shortly before one of the worst labor disputes in recent memory should not be understated.

Cargomatic has raised $10.6 million to date, including an $8 million Series A round in January, with the funding led by Canaan Partners with participation from Volvo Group Venture Capital, Rob Estes of Estes Express, Morado Venture Partners, SV Angel*, Sherpa Ventures*, Winklevoss Capital, Structure Capital, and individual angels.

Collectively, this group is betting that with the freight transportation industry dwarfing the livery business, an “Uber for trucking” could be orders of magnitude larger than the original on-demand transportation startup. Helping the nation’s largest and busiest port recover from an otherwise debilitating mess is one way to make friends in high places and position the company for continued success. With the Ports of Los Angeles and Long Beach now humming at record speeds, Cargomatic already has its eyes set on the rest of the nation’s antiquated port operations.

(*Disclosure: SV Angel and Sherpa Ventures are investors in Pando.)

[Image via GCaptain]