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Has the Uber Freight Wave Crested?

Posted By Gail Rutkowski, Wednesday, April 26, 2017

We Americans love our heroes. We love building them up, idolizing them and worshipping them almost to a fault.  But more than that, we love tearing them down. You can go high, but only so high or we’ll pull you back and remind you that you are at our (or social media’s) mercy.

 

Uber, the darling of taxi riders everywhere, entered the freight world over a year ago launching speculation whether the tech company could replicate their success in the taxi industry.  While Uber has been quiet about their plans, other tech firms have attempted to mimic the idea of uniting purchasers and suppliers through smartphone apps.  Some of these companies have gained traction in the market while others have followed a different path.  But the bottom line is more drivers have more apps on their phones and tablets.

 

Uber’s success in the taxi industry was the result of superior technology, but they also added unregulated capacity into a heavily regulated market.  Trucking is already unregulated and Uber has no assets.  Now what does this mean to the traditional freight broker?  Is Uber just a broker with better technology?  Many brokers feel they have been offering technology and systems to augment their personal relationships for years.  “The purpose of (a technology) platform is to eliminate waste,” said Andrew “Drew” McElroy, CEO and co-founder of Transfix, which has distributed its app to 25,000 drivers and handled 20,000 truckload shipments last year. “We’re trying to aggregate this capacity and provide them with tools,” especially for reducing deadhead, or empty miles. “When you apply technology to scale, you create a virtuous cycle,” McElroy said.

 

While everyone has been watching Uber, no one has noticed that another 800 pound gorilla has been getting ready to launch.  Amazon has been in the process of launching initiatives that will disrupt the transportation industry by eliminating the middle man (3PL’s).

Now 3PLs are actually quite cost effective, even non-asset based ones. Aggressive pricing can be locked in based on the amount of volume a 3PL can acquire.  Carriers would much rather be guaranteed a larger number of shipments from a 3PL than one or two shipments thrown to them sporadically.  Having a steady stream of shipments keeps their trucks running so it makes sense for them to negotiate better pricing with a 3PL to ensure those loads are theirs.  If Uber Freight functions anything like their ride-sharing service does, they will likely charge a surge fee at their discretion.  It also seems reasonable to assume that a hands-off approach to pricing via an app in a dynamic marketplace won’t get you the best deals if you have multiple loads to ship.  So long story short, it’s expected that long term and volume freight likely won’t be affected by Amazon and Uber, but they will probably take spot market freight that does not require any type of white glove service away from brokers and 3PLs.

Technology continues to surpass our expectations on a regular basis, but not every element of a complicated supply chain can be accounted for in an app – at least not in the near future.  Getting a person from point A to point B is a much simpler process than moving freight, therefore the things that a human broker handles are vital in smoothing out difficulties that can, and often do, occur along the way.  At this early of a stage in their development, it is hard to imagine how services such as Amazon and Uber, that seek to cut out critical processes, will actually provide value in the end beyond giving you a price and a truck at your door.  So, can Uber be over before it even begins?

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Terri Reid says...
Posted Monday, May 1, 2017
Interesting comments, Gail. I guess only time will tell.
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