The Uberization of Trucking Part 1: Overview
For decades city-dwellers all faced the same headache when it came to haling a cab. Taxis were limited, drivers were unreliable, costs were expensive, and even getting a ride usually came down to whomever was willing to make the biggest scene on the sidewalk. Enter Uber and ride-sharing. The market was ripe for disruption and a simple concept with an intuitive and reliable app-based interface was able to spread across the world almost overnight.
Create a pool of independently contracted drivers and connect them with every single person who has a smartphone and a destination while allowing the app to instantly handle the matchmaking. Ever since Uber proved that this concept was viable the race has been on to bring the same technology to every other industry on four-wheels. From food delivery to freight.
So, what is the Uberization of trucking? Instead of matching a rider with a driver, Uberized freight would use app based technology to match cargo with empty space on trucks. Just as carpooling isn't a new concept, neither are trucking consolidations, they'd simply be going digital.
In the past, if you wanted to set up a trucking LTL consolidation program you'd typically contact a broker or a 3PL and have them arrange that for you through their network of preferred carriers. There would be a disconnect between the shipper and the carrier as the 3PL would handle the cost negotiations and logistics. In order to leverage rates, a shipper would often give a guarantee of volume and set up a routing schedule.
The Uberization of trucking aims to eliminate the need for 3PLs, routing schedules, or guaranteed freight volumes. Instead, you'd simply log in to the app, list your cargo dimensions and destination, then the next nearest trucker could be scheduled on-demand to pick-up the load. This means that shippers no longer have to sit on loads until they reach minimum quantities and carriers have more opportunity to fill their trucks along their routes.
Sounds like an ideal situation on paper, but moving freight isn't as easy as moving riders. Freight can have specific handling instructions, temperature requirements, and compliance concerns. Small pick-up and delivery windows as well as back-house costs could lead to added rates and fines. Additionally, capacity is already a major issue with carriers and until that strain lessens, you may not find many partners willing to join an Uberized network.
As the world of freight evolves, trucking most certainly will to. While Uberized freight is not the ideal solution for every situation, new technology presents new opportunity for independent carriers as we usher in a new age. As the largest trucking companies in the world continue to consolidate and grow even larger, rate opportunities will shrink for shippers, and smaller carriers will struggle to capture market share. The Uberization of trucking may be coming at a perfect time to counterbalance these future concerns.
Read on next week as we cover The Uberization of Trucking: The Players in part two of this blog series.
