In our May issue last year, American Shipper ran a commentary from Robert Nathan, chief executive officer of LoadDelivered Logistics, detailing why he thought the “Uber for freight” model wouldn’t work.
A month earlier, I argued in a column in our April issue that dynamic pricing and matching of capacity was more a priority in the overtonnaged liner carrier market than it was in the trucking market.
Well, both these views are about to be tested. That’s because we are no longer talking about technology startups with Uber-like models addressing the idea of freight matching. We’re talking about Uber and Amazon addressing this market directly.
In late October, Uber announced it was starting a new division called Uber Freight, with designs on reshaping the long haul trucking industry.
Then, last week, Business Insider reported that Amazon is building an Uber-type app that would match drivers with shippers of freight, thereby bypassing the traditional brokers that facilitate those matches.
For the brokerage industry, this quickly went from a venture capital-backed startup threat to a private equity-backed enterprise-level threat.
First things first – just because Uber and Amazon want to enter the trucking market and upend it the way they’ve done countless other industries doesn’t mean they will succeed, despite their financial might.
Trucking remains a fragmented industry because it is highly regional, highly relationship-based, and prone to wild differences in quality and safety. To wit, think back to the last few rides you’ve taken with Uber. Some have likely been fantastic, others above average, and others mediocre. Those variations in service are tolerable when we’re talking about a 15-minute ride. But those swings in service aren’t so tolerable when a supplier has to meet a one-hour delivery window for a retailer. Or when a plant is held up waiting for delivery of a part.
The interest of Uber and Amazon also obscures the fact that brokers and the software providers that support them are in a much more advanced technological position than other industries that the tech giants attacked. Think of how opaque and inefficient taxi dispatch systems are relative to the freight optimization engines deployed by C.H. Robinson, XPO Logistics, and Coyote Logistics (now part of UPS). That’s not even talking about smaller technology-backed brokers that have married parts of the Uber model to the ground realities of trucking. Or the dozens of transportation management systems used by shippers to contract directly with carriers and brokers in a structured and optimized way.
In other words, Uber and Amazon may see the truckload market as this vast ocean of disorganized capacity suppliers trying to find a sea of similarly disorganized owners of freight. But those oceans and seas are pretty well mapped at this point.
All that said, the industry should ignore the investment Uber and Amazon are making in freight at their own peril. Amazon’s appetite and aptitude for tackling new market segments has been well-documented. But in freight, they have a market that is not only screaming for consolidation and incremental automation, but one in which their own operations can tangibly benefit. They can serve customers and themselves at the same time.
Uber, meanwhile, has rewritten the book on unlocking latent capacity, and it keeps getting new rounds of funding without a lot of notoriety. While its $65 million purchase of the autonomous vehicle technology company Otto made headlines, read this list and you’ll see that gamble is a relative drop in the bucket.
Also remember that while the top end of the brokerage market is very automated, mid-sized brokers are far less so. And the trucking companies those brokers tap into are often even further behind. Witness the technologies being provided by companies like LaneAxis, Cargo Chief and even C.H. Robinson to empower those trucking companies with basic business management and tracking tools. Those tools help small carriers bridge the automation gap, but they also help brokers build relationships with those smaller carriers.
If Amazon and Uber, with their already established brand recognition, can tap into those unsophisticated trucking companies with easy-to-use technology that finds them freight, tracks it, and helps them manage their business, they will inevitably get a share of the market.
The question is whether those technologies would make Uber and Amazon true disintermediators, or brokers themselves. It’s the question Nathan asked in his commentary back in April. Is digital freight matching in 2017 just an evolutionary load board, or is it truly a different kind of animal?
Amazon and Uber have the clout, the cash, and the patience to find out.