Unban taps rising demand for logistics platforms without intermediary fees

A furniture company in Yongin, Gyeonggi Province, is dispatching trucks using CJ Logistics’ “Unban” platform.

South Korea’s logistics industry is in the middle of a fierce battle for the “middle-mile” (or business-to-business (B2B) logistics of transporting goods between companies) market worth 33 trillion won ($25.03 billion) annually. With the recent surge in fuel and labor costs, Korean companies are increasingly using logistics platforms to reduce the fees they pay to intermediaries.

According to industry sources on Sunday, it has become common for shippers who commission freight transport to deduct 10 to 40 percent from their freight charges as intermediary fees. In some cases, these fees can even exceed 50 percent, leading to a significant increase in logistics costs for shippers.

A report by the Korea Transport Institute also showed that 99.3 percent of intermediaries were small companies with capital and asset valuations of 500 million won or less. The higher fees also increased inefficiency and shippers were forced to pay high fees as they could not find freight trucks without intermediaries. There were many cases involving multiple intermediaries and transport companies particularly where there were five or more transportation steps due to the closed nature of the intermediary logistics market. When a shipper entrusts transportation to an intermediary, the intermediary re-assigns the cargo information to transport companies. Transport companies then contract freight truck drivers and perform the actual transportation. Since shippers and freight truck drivers lacked accurate information, intermediaries and transport companies had room to intervene.

To address these issues, major local logistics companies such as CJ Logistics Corp., information technology (IT) companies like Kakao Mobility Co. and telecommunication companies like SK telecom Co. and KT Corp. are introducing freight brokerage platforms to the middle-mile logistics market. However, most freight brokerage platforms are related to intermediaries, leading to concerns that cost savings may not be possible as they simply facilitate connections between intermediaries and freight truck drivers.

However, CJ Logistics’ “Unban” platform, introduced in July, directly connects shippers with freight truck drivers, as the company realized this method would result in minimal cost savings.

Unban utilizes data accumulated by CJ Logistics since its founding in 1930 to set and provide optimized transportation costs. “We calculate the most suitable freight rates by considering basic information such as the type of cargo and driving distance, as well as factors such as weather conditions and fuel prices,” an official from CJ Logistics said. “Using Unban can lower transportation costs by about 10-20 percent compared with those for intermediary shipping.”

Unban allows shippers to upload cargo information to the platform, and freight truck drivers decide whether to accept the transportation request, similar to how passengers request rides on Kakao T. As there is no intermediary between the shipper and the carrier, it is possible to reduce logistics costs. “Freight truck drivers used intermediaries to secure good cargo assignments,” an industry insider said. “With Unban, they no longer need to contact intermediaries.”

Another industry insider pointed out “the IT industry is trying to secure transportation volumes through intermediaries to grow their businesses quickly,” adding that “existing problems such as information monopolization and excessive fees will not be solved by joining the current multi-level market structure.”

The logistics industry expects that the introduction of freight brokerage platforms will benefit freight truck drivers. After the Covid-19 pandemic, the government introduced a safety fare system for these drivers, which led to an increase in logistics costs, but this increase mainly benefited intermediaries and transport companies. To address this problem, Minister of Land, Infrastructure and Transport Won Hee-ryong expressed his commitment to improving the structure of the freight transportation market through a “Freight Transportation Industry Normalization Plan” unveiled in February 2023.

Experts point out that various incentives are needed to encourage platforms that directly connect shippers and freight truck drivers. One proposed idea is to classify transactions that involve direct connections between shippers and freight truck drivers as “direct transaction revenue,” allowing shippers to deduct corporate taxes and truck drivers to receive fuel subsidies. This is similar to the Ministry of Oceans and Fisheries’ “Excellent Shipper Certification” program, which provides benefits such as corporate tax reductions and reduced port facility usage fees for shippers who use Korean-flagged vessels.