The success of the Lyft and Uber business models for basic taxi services has excited shipper and consumer expectations. Technology can deliver “faster than fast” service and delivery! Logistics industry experts are predicting similar web-enabled on-demand services to emerge for the transportation of freight across the country.
The potential for “on-call” consolidation of freight shipments is often referred to as the “Uberization” of the shipping industry. If adoption issues (to be discussed later) can be worked out, it has the potential to evoke changes in the logistics industry which will benefit consumers, shippers and drivers. Certainly it has sparked some animated conversations among supply chain industry experts including: 3PLs, manufacturers, brokers, shippers, and operators. Everyone is discussing the benefits and challenges of this technology.
What Is the Uberization of the Logistics Industry?
Over the last two years, “Uberization” has been a particularly frequent topic of discussion among commercial dry-goods haulers. Uberization of this industry requires that a computer-technology be implemented among truckers to enable freight consolidation along common routes. This system enables truckers to make the most of available space in their rigs, ultimately providing more efficient and faster delivery. A recent study by Frost & Sullivan estimated that mobile “brokering” will affect $26.4 billion of all truck/freight revenues by 2025.
Benefits of an Uber for Bulk Transportation Industry
Uberization has gained traction in the transportation industry because of the benefits it offers. Not only would a computer or mobile application provide drivers with increased payloads on shorter timetables, but it would also reduce empty miles and congestion on roadways. In addition, transactions between manufacturer’s, shippers, carriers and the consumer would be faster. The mobile app would also enable carriers to bill shippers and get paid electronically without delay.
Other benefits include:
- Real-time cargo location updates
- Truckload and capacity forecasting
- Optimized truckloads to reduce empty miles and first and last mile parameters
- Improved utilization of assets and resources such as trucks and containers
- Real-time communication between all parties involved in the transportation cycle
Problems With the Uberization of the Logistics Industry
With great innovation also comes great challenges, just like Uber’s car sharing service which faced a multitude of regulatory obstacles and consumer adoption hurdles there are risks inherent in this business model that still need to be addressed.
For the logistics industry to evolve towards this model, a mobile application for pick-up and delivery would need to be in widespread use. Additional changes to freight regulations, insurance practices, and compliance would need to be implemented. These additional considerations include environmental compliance and safety as well as loss and carrier risks, between shipper-carrier, shipper-broker, and broker-carrier. Contracts between these parties are increasingly complex and detailed. Consider what would happen to insurance premiums for companies that are outsourcing their shipment services to a carrier via an apps? Who is responsible for late deliveries? In addition, the technology could be vulnerable to hackers and ne’er-do-wells who might gain access to regulated shipments. Change has been slow for these reasons as well as fragmentation within the industry and its lack of common ground on the assumption of liability.
Furthermore, many larger shippers and carriers have established long-standing relationships that they may be hesitant or unwilling to risk giving up for the perceived efficiency of a mobile application.
What Does This Mean for 3PLs?
While most 3PLs have focused on increasing companies’ rate options for the year, they must dial up on service, strategy, and value for companies looking to cut cost in logistics. In addition, 3PLs will begin to face added pressures to implement well-developed freight consolidation programs while driving their compliance cost down to as low as possible.
In addition, to stay ahead of the trend, 3PLs with transportation management systems (TMSs) should incorporate the technology required for integrating Uber-like apps into their systems in the near future.
The Value of 3PLs Over An Uberization of Logistics
Some have proposed that the hand-held technologies that make Uber possible, could erode the value-add of third-party logistics providers (3PLs). The true value of 3PLS is in providing transportation strategies, freight management and insight into operations. The 3PL contributes to a stronger brand for customers by adhering to promised deliveries and superior customer service. These benefits can not easily be usurped by technological advancements. In the future, computer or app-based freight shipping may become a reality, but it is not likely to replace 3PLS entirely. Ultimately, everyone must learn to apply these technological advancements to improving the transportation industry.