Freight management goes digital to overcome the capacity crunch. From the early 2000s until the present, a new model of consumption has been gaining momentum. It is the so-called sharing economy. In contrast to the traditional business model, it connects customers and suppliers through digital platforms providing shared access to skills, assets, and services. Here is how it differs.
The model has proved effective for B2C businesses like AirBnB and car2go, and now it is slowly disrupting the asset-heavy B2B environment. A number of agricultural companies are making use of rental platforms as Trringo, an India-based online service providing a farm equipment for rent. Construction companies, in turn, exploit the same approach renting out machinery 70% of which would usually remain idle.
The problem of unused resources is common for the supply chain and logistics industry as well. The American Transportation Research Institute reports 20% of miles are run empty, which totals over 65 billion empty miles per year. Obviously, sharing economy is able to facilitate the global supply chain management and reduce financial burdens. In logistics, it is also referred to as uberization.
Simply put, uberization of logistics acts as a matchmaker between supply and demand enabling shippers to select carriers online without intermediaries and long-term lease contracts. The end goal of uberization is to boost transport efficiency and lessen logistics operating costs.
Let’s perform a quick recap on the uberized freight management solutions market.
Who Funds Uberized Freight Management?
Although the sharing economy has been around for more than a decade, it is only today that uberization of logistics is taking place. The major game changers behind global supply chain management go beyond e-commerce expansion (Statista claims the market currently amounts to $1,785,733) and rising fuel prices (in 2016, the price tag was $40.68 per crude oil barrel, whereas in 2018 it reached $70.28).
A severe shortage of drivers puts another log on the fire. Business Insider reports the USA alone will miss 175,000 truck drivers by 2026. Three more things constraining freight management include inefficient truck driver coordination (Carrier Detention Survey states 63% of drivers waste up to three hours at shipping docks), empty truck miles, and underutilized warehouse space.
It is no coincidence uberization of freight management is being heavily invested now. Alphabet has spent $185 million for a trucking network Convoy, which streamlines brokerage processes for Anheuser-Busch InBev and Unilever. Maersk, a Danish shipping leader, has announced a $21.6 series A funding for Loadsmart, a US-based freight booking system. This startup is developing an AI-powered solution for shippers to book trucks in seconds at a fixed price without human assistance.
An ever-growing interest in on-demand freight management startups gives the green light to the synergy between Freight as a Service (FaaS) and Mobility as a Service (MaaS). ABI Research foresees FaaS will make up to 30% ($900 billion) of transportation revenues in 2030.
What value can be delivered through these digital freight sharing services? Here are some key highlights below.
What Capabilities Logistics Uberization Gives
The number of supply chain experts who see uberization as a good way out has multiplied by four times as compared to 2014.
Here is how Chris Cunnane, a Senior Supply Chain and Logistics Analyst at ARC Advisory Group, commented on the freight uberization in his interview with Logistics Management:
“There are hundreds of millions of dollars pouring into the market, on both the long-haul and last-mile side. Uber and Amazon are both developing apps to become the “leader” of the digital freight matching space, since they have the capital and they have the contacts. Other key players include Fourkites, Cargomatic, Convoy and CargoX, among others. However, this is more on the long-haul side of the market. For last-mile, more than $500 million of funding has been raised by start-ups, and this looks like the more viable option, with companies like Instacart and Deliv proving their business model.”
Retrieved from https://www.logisticsmgmt.com
Even though most of the emerging logistics uberization platforms are too weak to compete with domestic transportation giants like Schneider National or XPO Logistics, they still have great potential. The benefits they can provide include:
- Optimized asset usage. It comprises efficient use of trucks, inventory, containers, and storage space, since nothing stays underutilized with accurate truckload and capacity forecasting.
- Straightforward billing experience. As freight brokers are not involved in the transportation of goods, payments are made directly to carriers, without delays.
- Real-time freight tracking. Shippers can check a current cargo location at any point in time. Real-time communication with carriers and automatic system alerts keep shippers notified of the pick-ups and drop-offs.
- Shipping flexibility and last mile delivery success. Last mile deliveries appear to be the least efficient stage accounting for 28% of the total transportation costs. With on-demand freight management platforms, last miles become less wasteful owing to the multitude of crowdsourced delivery opportunities.
- Improved cost efficiency. This benefit comes as no surprise, since optimized carriers and assets usage allows tapping into each carrier performance and taking immediate action in case of emergency. Furthermore, sharing one’s own assets creates extra rental fees for the revenue funnel.
That said, an uber freight app is definitely a reward for shippers; however, its adoption is happening not as fast as one would like it to be.
What May Impede Uberization of Supply Chain
Complex freight and logistics regulations seem to be the biggest obstacle holding uberization of supply chain back. Electronic document management has not been widely adopted by the state authorities as well as ‘old-timer’ logistics companies.
Add to the list strict insurance practices, a great variety in compliance rules on goods transportation and trucking work guidelines. It requires time to launch fully automated operations and switch from too detailed contracts with freight brokers to digital on-demand freight management systems.
Uberization of supply chain requires a careful liabilities review. Who would be held accountable for late deliveries? What guarantees should be carried out by uber-like freight app owners? These questions remain subject to thorough analysis. Additionally, app providers need to take effective cybersecurity measures to prevent software vulnerabilities and minimize the chance of hacker breaches.
What does uberization mean for 3PLs? Apparently, they should adopt the change. It implies a complete revision of freight consolidation strategies, logistics rates, and values delivered. In order to keep up with the times, 3PLs need to implement smart transportation management systems able to integrate with logistics uberization apps.
Key Takeaways to Let a Freight App Take Off
So, can a freight shipping app keep afloat and win a wide target audience regardless of the existing impediments? These are the takeaways we find to be the most crucial:
- Know transportation intricacies inside out
- Grow abilities to scale, allowing shippers to take advantage of carrier capacity at affordable rates
- Keep prices down owing to brokerage operations automation
- Establish well thought-out policies to guarantee efficient online and offline user experiences
- Embed emerging technologies like blockchain and the Internet of Things to increase user security and connectivity