Uber, Amazon and a number of other technology companies and freight forwarders are poised to significantly alter the logistics landscape over the next several years by directly connecting shippers and drivers.
Uber has made two major moves into the freight industry over the past year – launching a self-driving truck project and debuting its new Uber Freight service at the end of December 2016.
In late 2016, Uber’s self-driving truck subsidiary Otto successfully hauled a truck filled with 45,000 cans of Budweiser on a 120-mile trip across Colorado. The driver remained in the truck’s sleeper berth to monitor the trip, and only had to take the wheel while the truck was entering or exiting the freeway.
A number of other companies have also entered the self-driving truck market, including Embark, Drive.ai, and Starsky Robotics. Google’s former self-driving car spin-off Waymo has filed suit against Uber and Otto claiming that Otto CEO Anthony Levandowski and other former Waymo employees stole trade secrets from the Google project to launch Otto.
Self-driving trucks could potentially make transportation safer and more efficient, since the trucks could continue to operate even without the driver at the wheel. For that to work in the long-haul industry, however, would require adjustments to Department of Transportation hours of service rules. And there could be pushback from drivers, unions and safety advocates.
It’s the Uber Freight division, however, that has other freight forwarders and third-party logistics companies nervous. The service provides a platform for shippers and truckers to broker shipping orders with each other.
The company is launching a marketplace to connect shippers with a truck, along with pricing in real-time that is based on supply and demand. That could mean the same types of pricing spikes that occur during peak demand times for regular Uber drivers.
Uber isn’t the only company trying to bring automation to freight brokerage. Freight management solution provider GlobalTranz Enterprises recently announced it increased its EBITDA by 84 percent in the past year, with a five-year compound annual growth rate of 32 percent.
“Our technology platform is bringing a new level of innovation to the freight brokerage market,” says Bob Farrell, the company’s CEO. “Shippers, carriers and freight agents are responding to that by bringing their freight management business to GlobalTranz and looking to us to provide broader 3PL (third-party logistics) services.”
There is a potentially large market for this type of direct service. Trucks travel empty as much as 30 percent of the time. According to Frost and Sullivan, mobile-based freight brokering like the systems Uber and others offer could help eliminate as much as 15 percent of that empty traveling.
Mobile-based freight brokerage generates approximately $100 million in revenue, according to the analyst firm. By 2025, the market will have a compound annual growth rate of 74.65 percent and generate $26.40 billion in revenue, Frost & Sullivan says.
These systems can improve on-demand and on-time deliveries, improve productivity, and efficiency, and provide better transparency/visibility of freight. They will also eliminate the paperwork, data entry and phone calls most freight forwarders use to manage their businesses.
According to Frost and Sullivan’s report, “Uber for Trucks: Executive Analysis of North American Mobile Based Freight Brokering Market,” brokers will evolve into complete solutions that include transport management systems, telematics, resource management and tracking.
“This will create and enhance business among carriers and shippers,” the report states. “Both private and large for-hire fleets will adopt this service to optimize their operations by enlisting unused capacity in their own fleets to take on extra business.
“This automated on-demand freight brokerage solution, typically a mobile-phone based application platform, marks the next logical evolution of freight matching wherein there is a seamless, transparent, objective matching of load with capacity,” adds Frost and Sullivan senior consultant Ananth Srinivasan, who co-authored a report called “Digitizing Freight” in 2016. “Every process, from finding the load/capacity, negotiating prices, agreement, insurance, fleet management, track and trace to final payment can be performed via the platform – at lower cost, higher speed and with full transparency.”
Other companies in the mobile-based freight brokerage market include Cargomatic, Transfix, Coyote (purchased by UPS), and Keychain Logistics. Keychain, for example, offers an app that allows owner operators and fleet managers to search loads and post equipment. The company also developed a pricing algorithm to provide instant rates.
More significantly, Amazon is also building an app to match shippers and truckers that could launch by this summer. The app also will provide real-time pricing, driving directions and even things like truck-stop recommendations and routing.
Amazon appears to be building its own logistics network, and has purchased trailer trucks and cargo planes. By handling its own transportation and freight brokerage, the company could avoid the typical brokerage fees, which can be as high as 15 percent or more.
In January, DHL also announced its new CILLOX platform to link shipper and carriers in Germany and elsewhere in Europe. The service provides a search and quote service, online contracting, and secure payment.
“Our main objective is to make the platform as convenient as possible in order to simplify our customer’s lives and we will continuously evolve the platform according to user needs and feedback,” says Amadaou Diallo, executive vice president of value added services and integrated logistics at DHL Global Forwarding, and CEO of CILLOX. “I’m confident we will shake up the freight forwarding business, and the digital transformation of our industry will benefit all parties involved.”
As for self-driving trucks, the notion will likely face a lot of legislative and public opposition. In part, that is due to safety fears about autonomous vehicles in general. According to a survey from AAA in March, three in four U.S. drivers feel afraid to ride in a self-driving car, and only one in five Americans say they would trust an autonomous vehicle to drive itself.
However, the long-term goal of Uber via its freight division and Otto is to establish a way to dispatch self-driving trucks to meet immediate shipping demand.
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