News and Press
01
03
2017

25 Pallets Going to Chicago: Is There an App For That?

by Andrew Koval, Manager, Carrier Services on March 1, 2017

uber freight

25 Pallets Going to Chicago: Is There an App for That?

If you’re in the logistics business—as a buyer or seller—you no doubt have heard about Uber’s slow, but deliberate emergence into the shipping industry. Will the company disrupt trucking the same way it transformed the taxi business? Maybe.

 

But, for Jill or Joe shipping manager at Any Company, Inc., what does Uber’s entry into the trucking business mean? Can a freight buyer use their smartphone app to send a nearby LTL truck to their dock with the ease of grabbing an Uber to the airport? Maybe someday, but we’re not quite there yet, and some analysts argue the freight industry will be harder to disrupt than the ride-hailing market because so many other factors complicate the landscape.

 

Uber’s 2 Big Initiatives

 

Uber has two initiatives in the over-the-road trucking industry. The first is a company named Otto, a self-driving (autonomous) trucking business it acquired in 2016 for more than a half billion dollars. According to Business Insider, “Otto’s focus was to build self-driving truck (autonomous) kits that equipment manufacturers or freight networks could buy and install on their own, but it also secretly harbored a desire to create its own ‘Uber for trucking’ marketplace.”

 

The biggest benefit of autonomous and semi-autonomous trucking is that it will reduce the driver shortage. But, until autonomous trucks are legalized and become mainstream (Perhaps a decade or more away) the driver shortage will continue to plague the industry. Semi-autonomous trucks, however, could appear sooner than later on the nation’s highways. Here, human operators are on board to run the digital cockpit and only intervene in an emergency. With its heavy reliance on computers, semi-autonomous truck operation could become more appealing to today’s digitally-oriented millennials, who have resisted truck driving as a career choice.

 

The second Uber initiative involves Uber Freight, a brokerage company it bought last year. The company’s value proposition is pricing based on real-time supply and demand, sometimes referred to as surge pricing.

 

I’ve compared any potential Uber offering against what’s now available through the hundreds of freight brokers and 3PLs in the industry. Points of comparison are around customer service, the app, and pricing.

 

1. Customer Service — Poor customer service was a big issue with the ride-hailing industry, which left a large opening for a competitor that offered a better choice to come in and take market share from the sector leader. Taxi companies and drivers were not, for the most part, customer focused and became complacent. They could deliver mediocre customer service because customers had no other options.

 

But in the brokerage world, customer service is king. Indeed, many shippers want high-touch service, advice, and solutions from suppliers, and its hard to deliver that with an app.

 

2. The App — Before Uber, to get a taxi you either had to flag one down and out maneuver the competition—especially if it was a peak time—or call the company. Now, with the app you can enter your location and a car will be sent to you. You know when the car will arrive, what kind of car and who’s driving it.

 

Brokers, however, already have an internal app or platforms, that help them find the best carrier based on established criteria. These platforms feed into external sources, like DAT, which has a load board that in turn connects brokers to carriers. Also, sophisticated brokers, LPS included, use an internal platform that helps the company find and choose the right carrier based on a number of criteria. Once the carrier is confirmed, the broker or 3PL communicates the pick-up time, the carrier’s name and detailed information about the truck. Brokers can even provide real-time tracking information to customers.

 

3. Pricing – A taxi always has a fixed price for its customers. Uber, on the other hand, introduced demand/peak pricing, which allowed them to adjust pricing based on supply and demand ratios. This model works in Uber’s favor because when they have too many cars sitting without fares, they can lower the rates to move the vehicles instead of having the asset sidelined, losing money.

 

In the same fashion, the truck market has been operating this way since deregulation, using load-to-truck ratios. Here, savings are absorbed by customers when there is an imbalance of supply and demand in the market. Hence, a discounted load is better than letting the truck standby idle.

 

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