Jason: How does a procurement mindset inform the starting of a new company? What will you do differently?
Sean: It's really amazing how much my procurement background has been helpful in the launch phase of Partage. Two things stand out in particular:
- Buying is selling: You can't be hard to sell to if you want to work with the best suppliers. In fact, you have to have your act together and sell to them so that they understand why they should put hard work into getting your business. I learned that lesson back at CombineNet and over and over again since, and it's really paid off in the last month. Whether we were looking for employees, an office, software, a marketing agency or a bank, we kept the "buying is selling" principal in mind and it's worked perfectly.
- Option value is real: For every decision, we've worked very hard to have multiple options that we were happy with. That has both forced us to discover all of the great companies that are out there, and made negotiation easy. We've been transparent about our process with all of our potential suppliers, and when we're successful at generating multiple options, every one of them gets better. Freemarkets made a huge splash 10+ years ago with variations on this technique, and the ideas work just as well now even for a brand new business with virtually no leverage.
Jason: Why can't this category be strategically sourced by companies today?
Sean: Partial truckload is difficult to source with asset-based carriers because they can't commit to having a capacity available in the lanes that you may be moving unless your lanes are extremely consistent. Five to twenty-five thousand pound shipments are just too big to dependably "fit" in the available space in LTL networks, and finding a single truck with space available running that lane is like finding a needle in a haystack. Imagine if you were a traveling salesman and you wanted to set up a car pool. It just wouldn't work that well because you couldn't find someone or a few people that would regularly be traveling with an extra spot in their car to the towns that you needed to go to each day. You could probably find someone going where you need to each day, but it would require constant effort to stay abreast of who is going there with space available right now. You could always hire a cab or buy a car, but those are expensive and inefficient options. We're the company that will stay abreast of what's going on in the market each day so that no matter where you need to send your partial truckload shipment, we'll be able to find a good option.
Jason: As markets like the one you're targeting become more efficient, do you ever foresee the creation of forward markets?
Sean: There's a long way to go before that happens. You can already hedge fuel, which is a big component of cost, but the transportation market is not currently built around contracts with guaranteed capacity. They exist, but only in certain situations where the shipper has enormous buying power, or where a third party has guaranteed pricing in order to secure a demand commitment. But, most contracts have ways to get out of them, and I don't see that changing quickly. Partage will probably provide more firm pricing options over time, but I think that this transition will be gradual.
Spend Matters would like to thank Sean Devine for his time and insight, and wishes him the best of luck with Partage.