Uber sets its sights on long-haul trucking and brokerage markets
For shippers, carriers, brokerages and really all other industry stakeholders that have not given much thought to the possibility of Uber becoming a truckload carrier, it appears it may be time to change that mindset. That is due to a couple of different reasons. One is the ride sharing service’s recent acquisition
of self-driving truck startup company Otto for roughly $680 million. Upon completion of this deal in August, an Otto blog posting noted that “with Uber, we will create the future of commercial transportation: first, self-driving trucks that provide drivers unprecedented levels of safety; and second, a platform that matches truck drivers with the right load wherever they are,” en route to building the backbone of what it called the “rapidly-approaching self-driving freight system.” Another reason was clearly spelled out in a Reuters report published yesterday that explained, with Otto in the fold, Uber is keen on becoming both a freight hauler and technology partner for trucking. And this comes with the expectation that in 2017 Otto-branded trucks, as well as others with Otto technology, will start moving freight headed for warehouses and stores, Otto Co-Founder told Reuters. Uber’s goals are seriously ambitious to be sure. The report explained that it is now pitching its services to shippers, truck fleets, and independent drivers, not just to outfit trucks with self-driving technology but also to be a player in the highly competitive $700 billion truckload brokerage arena, too, which is replete with major players such as C.H. Robinson Worldwide, XPO Logistics, Echo Global, and many other players. But the goals may need to be tempered somewhat, on the actual freight-hauling side specifically, with a current fleet of six trucks that Otto plans to expand to 15. What’s more, it is one thing to say you are going to do these things and truly influence the market in profound ways, but it’s an entirely other thing to execute and make that happen. That was made clear in a report issued earlier this year by supply chain consultancy Armstrong and Associates, which was based on feedback from 27 companies providing Uber for Trucking services, or “Digital Freight Matching” (DFM), which Armstrong said reflects these types of services far more accurately. “One of the key components of Uber’s model is the commodity-like nature of the ride-hailing service,” Armstrong said. “The principle behind Digital Freight Matching may be simple, but the trucking industry is not. Domestic transportation is not a simple commodity. Complexities arise in the form of specialized equipment types, shipments transported via multiple modes, and necessary exception handling for service issues such as equipment breakdowns. Shipments are high-value and time sensitive. Placing an Uber-like app atop a complex industry doesn’t truly address the problem. Shippers and Carriers alike will be disappointed if this is the extent of the ‘solution.’” And even with its now publicly stated goals to enter the freight transportation market, many industry observers do not expect immediate buy-in to Uberization within the space by Uber or other like-minded companies. Stifel analyst John Larkin made that clear in LM’s Truckload Brokerage roundtable earlier this year, noting that while Uberization is something that will evolve but not burst onto the scene either. “Shippers…are simply not going to turn over a $250,000 load to a company that has technology, but little knowledge or experience in the highly nuanced world of freight transportation,” he said. “Instead, the larger, better capitalized brokers will incrementally move us in the direction of more automated brokerage by rolling out automated modules that will gradually make brokerage less people intensive. Shippers will undoubtedly experience less heartburn with this approach.” While self-driving trucks bring potentially bring some bright spots into freight transportation, such as possibly helping to alleviate the longstanding driver shortage, it also will come with challenges, including the impact of poor transportation infrastructure, and legal ramifications that could stem from accidents involving self-driving trucks, YRC President James Welch said at this week’s Council of Supply Chain Management Professionals Annual Conference in Orlando. While it is clear self-driving trucks are a part of the future, there is a lot of ground to cover before it comes to fruition. Uber appears to be game in attempting to make a splash into the market, with an eye on becoming a market player, too. It is way to early to say what will or won’t happen, but it certainly looks like it will be an interesting ride.
Extract taken from http://goo.gl/h6SwNT
By Jeff Berman