Logistics is evolving fast, with new technologies supporting the emergence of solutions that are disrupting the status quo. In many markets, a small number of large players dominate, holding a large portion of the overall pie, with the size of operators’ fleets and a track-record on delivering (literally) helping them secure and maintain their advantage and win long-term contracts.
But with service expectations growing, there’s room for innovators to gain a foothold and make an impact.
One such example is Uber. Having disrupted the taxi industry in markets around the world with its peer-to-peer platform, and moved into food delivery with Uber Eats, it’s now seeking to leverage the model in the logistics space. Uber Freight – the banner under which Uber’s logistics arm operates –has been active in North America for the last couple of years. It operates in 48 US states and generates over $125m in quarterly revenue, benefiting from the diverse make-up of the US logistics market.
Seeking to build on success
The geographic scale of the US means independent and small players have a significant share of the market. This is good for Uber Freight and has allowed it to establish itself as a legitimate rival to existing players. It has worked with Nestle to pilot its service on several “lanes” with success. Robert Fisher, of Nestle North America’s procurement team, saying, “The data that Uber Freight is providing with Facility Ratings in their platform is a great validator for making improvements to our operations, whether that means reorganizing personnel shifts or even moving to a bigger facility.”
This gives an indication of what Uber is trying to achieve. It’s seeking to add value – beyond cost – where traditional players are not, and it has now turned its attention to Europe, which has a $500b trucking market. Uber Freight began its European expansion in the Netherlands, with Germany – Europe’s biggest market – next on the list. The growth potential of Uber Freight is directly influenced by the make-up of the market it is operating in. As with the US, fragmented markets, where small players and independents over-index, will be easier to crack. Markets dominated by established 3PL’s will be harder. To succeed in Europe, Uber Freight will need to adapt to markets dominated by small firms, rather than independent operators, which have been the backbone of its US effort.
But Uber Freight isn’t alone. It’s one of several start-ups that utilise a technology platform and are looking for a slice of the action…
The principle is relatively simple – Uber Freight matches shippers with truckers in a similar way to how it matches taxi passengers with drivers. Unsurprisingly, it’s targeting cost and service with the whole process – from matching to payment and reviews – all encompassed within its technology platform. Ultimately, Uber Freight’s ambition is to digitalise the logistics industry.
The on-demand nature of Uber Freight's proposition challenges the long-term, contract-based approach traditionally favoured by most food and grocery businesses. Beyond this, Uber Freight identifies several “value-adds” that set it apart.
What’s different and why it matters
Aside from upfront pricing and instant booking, Uber Freight supports:
- Faster payment to drivers – fifteen days is standard in the US, but Uber Freight aims to complete transactions in three. This has the potential to help Uber attract and “retain” a pool of drivers who keep coming back, and this is key, because Uber Freight must establish itself as a reliable partner. To do so, it must attract a sufficiently large pool of drivers to deal with “normal” demand but that can also cope in times of increased demand.
- Live communication with drivers – via the app, which has the potential to reduce money spent on administration. The potential to share up-to-the-minute information on consignments along the chain is significant, although the value of this very much depends on what businesses choose to do with it and the behaviours it drives.
- Evaluation of premises – either collected from or delivered to. Drivers can assign premises a rating, giving independent drivers a new way to assess whether to take a job.
- Intelligent freight planning – analysing data at a market or regional level. This has the potential to help customers uncover hidden opportunities but requires scale to be effective.
As you would expect in such a competitive industry, Uber Freight will need to navigate several hurdles.
Perhaps the most challenging will be convincing businesses to fundamentally change their approach to logistics. This means moving away from established partners. The adage “if it ain’t broke don’t fix it” springs to mind. There has to be something more on the table to entice business to take a risk.
Uber may seek to engage on “problem lanes”, where there is little to lose for businesses unhappy with their current level of service. The key is to provide businesses with the confidence it can consistently deliver – in goods time and bad.
Large businesses, like Nestle, will always consider the impact of a logistics change on its customers and a new approach to logistics cannot introduce risk. Uber Freight is a new business seeking to expand into new markets. The viability of its model in challenging times is largely untested and its rivaling well-established competition.
The industry has many question marks hanging over it, with the need to decarbonise, the gradual shift to alternate fuel sources, and an ageing driver population in key target markets all challenging one of Uber Freight’s key selling points – its prices.
Finally, how will traditional operators respond? It’s inevitable that the big players will develop and incorporate alternatives to Uber Freight’s key features. If this does happen, the risk-reward dynamic will change.
If Uber Freight succeeds, the impact on freight could surpass the impact on rides. More drivers may become independent if using Uber Freight is more rewarding with the effect of increasing others’ capacity constraints. And there is the prospect of jobs being combined more flexibly and the market becoming more responsive and efficient.
If you want to hear more about Uber Freight’s business and its expansion into the European market, come along to the IGD Supply Chain Summit in London on 15th October and hear from Daniel Buczkowski, Head of European Expansion, Uber Freight.