Uber Freight is coming. What does it mean to Aljex Clients?
Let’s start out with the basics. Uber should definitely be able to take market share. If you are well financed, and Uber definitely is, and you hire the right people, and make some key acquisitions, you can scale up a new logistics business pretty quickly. XPO Logistics is exhibit A for that line of thought.
Now along comes a new competitor, Uber, with not millions to spend, but billions to spend, and if necessary – lose, to take your market share.
There is a lot of good news though.
First, this has been done before. uShip a well-funded app, went into this market over 10 years ago, with all the same basic tools that Uber is expected to have, and uShip couldn’t get enough B to B freight to disrupt the market. They were very successful, but they didn’t dramatically change the market.
Next point is I’d think that Uber would have to be considered wildly successful if they could attain 10% of the market. That would basically get them to the size of CH Robinson. If the market is growing at an overall 3% pace, and Uber gets to 10% over 3-4 years, it’s fantastic for Uber, but not that life-changing to 3PL’s that adapt to and prepare for the new environment.
The 3rd good news is that our clients are much better positioned to retain their business than taxi companies were when Uber came in. Our clients are using state-of-the-art technology, while taxi technology hadn’t changed in 60 years. As someone who has stood in NYC in the rain, trying to hail a cab, I can’t feel too bad for the taxi owners whose medallions are worth half of what they were.
Outlook for Our Clients and our Technology
For a lot of you, a lot of your freight is somewhat automated already. If you are handling LTL with our portal, a shipper can put in a shipment, get a rate, the system tenders it to a carrier, and the customer gets back delivery information. It’s all computerized and automated; once it’s setup, you really only need to deal with the exceptions. What do you think Uber is going to do that’s so much better with LTL?
For truckload, a lot of our clients receive well over 50% of their orders electronically, but there is still big room for improvement for many clients. The overall strategy should be to increase the amount of freight that each of your employee can handle in a day. Our customers already have a lot of time saving features, but the entire process can pretty much be automated. Some embrace automation, while others don’t adapt until they are forced to. Uber Freight could very well force their hand.
According to what I have read and heard about Uber freight, the plan is that they will have brokerage authority and highly automate it. We can make a pretty good guess how it will work:
- Shippers will tender the freight to Uber,
- Carriers will be offered loads on Uber’s web site and/or be offered loads via app or email,
Carriers will be expected to:
- Electronically accept shipments,
- Have their truck be tracked by ELD
- Be paid by electronic payment
The carriers will probably get 88-92% of the revenue. The key will be increasing efficiency so you can operate under the same margins as Uber. We can help you with the automation and more importantly, the transition to automation.
Just having the technology doesn’t make it happen. Transitioning to e-trading will probably be similar to the transition to e-billing. 10 years ago, when we released e-billing, most companies wouldn’t accept e-bills. Today it’s common. 5 years ago, we released cell phone tracking. Drivers didn’t want to be tracked back then. It takes time to convince your customers and carriers to do business a new way.. But eventually, people adjust and these things become routine
What else can you do?
- There are all kinds of cool apps that are out and coming out that help 3pl’s compete. We have integrations with over 45 different 3rd party apps already. I hear great reviews from our clients on many of the apps.
- Build up your electronic relationships. This is mostly accomplished via EDI. This is crucial. We have set up EDI’s for clients in the 1990’s that are still going every day. These E-relationships are sticky. They tend to promote repetitive business, the best kind of business to have; especially in this environment. The more locked in you are with your customers via EDI, the better you will weather the storm.
- Be aware and start soon. Moving the needle can take time.