Most people think of Uber as an alternative taxi service. But the advent of UberCargo in Hong Kong at the start of this year means it is transporting freight as well as people now. Uber’s Toronto representative, Xavier Van Chau, describes UberCargo as a “moving service,” but one wonders if it’s not a harbinger for something much bigger coming our way soon.
Uber has been both controversial and successful in a few short years, currently taking on the taxi industry in 53 countries and 250 cities. But what would happen if it was to want a share of the motor freight business in North America? Or would it even be interested? Who knows better than Uber itself, which is currently operating its ride-sharing product in five Canadian cities?
“As we look to grow and expand to communities everywhere,” replies Van Chau cryptically by e-mail, “we will certainly consider how the platform can be used for various logistics services.”
Uber has displayed a lot of hutzpah in challenging the highly-regulated, albeit feudal, taxi industry. And it seems it is always spoiling for a fight.
“Being out in front of the taxi industry, putting a bull’s-eye on our back, has not been easy,” Travis Kalanick, the 37-year-old CEO of Uber has been quoted as saying. “The taxi industry has been ripe for disruption for decades. But only technology has allowed it to really kick in.”
Disruption seems to be this company’s credo. UberCargo moved into a market that already had a provider running a similar service (GoGoVan, which claims to have 18,000 commercial vehicles enrolled in its network, and has done work with DHL and Kerry Logistics). That seems to be Uber’s style – choose a market that’s already saturated and provide a product that’s cheaper and better. By contrast, the trucking sector, deregulated for decades, might be a much easier market to penetrate.
Of course, the Uber concept is here already. Uber-like motor freight providers are springing up almost overnight. All you need is a network of GPS-connected trucks, and a couple of million dollars to build and enable an app, and you’re off to the races, it seems.
Here are a few of the newly-minted American Uber-like providers that will no doubt be growing in number exponentially: Cargomatic, DashHaul, Keystone Logistics, and Transfix have all jumped into the fray with slightly different variations on the Uber template. Some of these services are focused on short-haul LTL service in dense shipping and trucking environments like Los Angeles, Chicago or New York, while others are interested in truckload services and America-wide coverage.
UberCargo Hong Kong, works almost exactly like Uber’s taxi app. Using a phone or computer, the customer logs onto a map of the city and places a pin where the delivery is going. The client can then track the progress of the driver that has accepted the assignment. Rates are calculated on a time/distance algorithm, with no regard to the weight. You can load up the van or truck with as much as you want and even send someone along with the shipment.
Uber offers smartphone booking and tracking, lower prices and instantaneous bill payment – what could be simpler?
“I think it’s absolutely brilliant,” says Phil Cahley, who heads up the customs and regulatory department of B.I. Logistic Services Inc. (BILSI).“It’s going to cause a quantum shift, a tsunami. If Uber achieves a measure of success in China, I really think we’re going to see something like this in Canada within the year. Whether you’re a same-day courier or handling LTL, you always have to deal with the dispatching of a load and a lag in the turnaround time or rerouting to a dock or depot. This effectively becomes an instantaneous dispatcher in real-time.”
Cahley believes single owner/operators or small fleets would be willing to accept smaller margins if the use of the vehicle is optimized and the speed of the movements are increased.
“The customer is happy because he or she can track the shipment in real time and the cost is less,” he says.
But David Turnbull, president and CEO of the Canadian Courier and Logistics Association, thinks it’s too early to tell what effect uberization is going to have on his members.
“The modern supply chain is extremely complicated and a competitive market that is vastly different from the taxi business. For one thing, Uber doesn’t have aircraft so they couldn’t coordinate express packages moving across the country, and indeed around the globe. Uber may have an interesting niche, filling otherwise under-utilized vehicles, but there’s something essentially different about the chain of custody systems the modern courier companies have evolved. I think if they’re really going after the point-to-point messenger business, which is analogous to Uber taxi, (and) they will find it’s a highly competitive business. The better operators have sophisticated dispatch systems of their own and established customer accounts.”
Turnbull suggests that Uber has been successful in disrupting the taxi business because it is over-regulated.
“However no such regulation exists with messengers or couriers, therefore this will tend to make it a more challenging environment,” he says.
Regardless, Uber is also in the messenger business and taking notes – it launched UberRush last year, a bicycle messenger service in Manhattan. Between its UberCargo trial run in Hong Kong and UberRush, they’ll likely be working out the bugs in the on-demand delivery business very quickly.
Technology moves rapidly and Uber is an example of that. It began five years ago as a tech solution for the limousines sitting idle in San Francisco. It started UberX in 2012, which allowed for pre-qualified drivers with acceptable vehicles to join its alternative taxi program and the same year it entered the Canadian market. It’s grown very fast, securing $1.2 billion in funding last year and sitting on a current valuation of $41 billion (all figures US).
It’s almost too obvious to note that founders Travis Kalanick and Garret Camp are not transportation people, but come from technological backgrounds at UCLA and the University of Calgary, respectively. And this fact may account for their ability to devise a new approach to traditional logistics challenges.
The company’s experimental division, Uber Garage, has come up with some quirky variations including helicopter rentals, on-demand ice cream trucks, and a Christmas tree delivery service, demonstrating the versatility of its app and its adaptability to diverse scenarios.
Transportation consultant Dan Goodwill of Dan Goodwill and Associates thinks that Uber has an interesting concept that might work in certain aspects of general trucking.
“Uber would be a good fit in the local cartage and general freight truckload sectors. The key is that you have to have access to a lot of shippers, truckers and drivers, preferably in defined geographic areas. In the long-haul, LTL, refrigerated or heavy-haul sectors, it would be more challenging,” he says.
“In the trucking sector, a lot of companies are lagging behind when it comes to embracing new technologies, with the exception of a few that are doing really nifty things, and some of them are doing things similar to Uber. But I get the sense that many are reluctant to get involved in things like social media and new technology. They’re still doing things the way they’ve always done them and only grudgingly accept change. It is interesting that a lot of the people who are entering the freight technology space are coming from outside the trucking industry,” Goodwill adds.
Cargomatic, just over a year old now, offers P&D service within a 150-mile radius of downtown Los Angeles and Manhattan for truckers looking to fill empty space in trucks that are en-route to other calls.
Unlike UberCargo in Hong Kong, it is not interested in van loads of furniture, but rather skid loads or larger shipments, for its conscripted legion of straight trucks and tractor-trailers. According to COO Brett Parker, the service has some 600 commercial trucks under its umbrella in L.A. and another 100 or so signed up in the Big Apple (NYC).
Liability issues are handled by the fact that these start-ups enlist small existing carriers or owner/operators who already have their own operating authority, insurance and expertise. The drivers and small carriers are pre-certified by the providers and many have TSA approval so they can pick up and deliver at airports and dockyards.
“We like to work with fleets of six trucks or less, which is 85% of the market of commercial trucking in Los Angeles,” says Parker. Transfix, on the other hand, a TL Uber-type provider, chooses to work with fleets with 30 or less trucks for its broader, America-wide catchment.
Uber has come up with a figure of 20% which they skim off each ride-sharing transaction. The American Uber-clones similarly take 20% from each move they assign.
The rate is usually based on a weight-distance algorithm, and the client is usually given an hour of free unloading time, after which a detention charge kicks in. In some cases the provider allows for negotiating between the shipper and carrier, and in others the rate is pre-determined, but the 20% cut for the tech intermediary is pretty standard.
Quick-pay turnarounds are one of the most attractive features of this technology in a sector where 30-day terms or longer have traditionally been the norm. Cargomatic pays its drivers fully within seven to 10 days from when the photo of the signed POD is received. Other start-ups are offering 24-hour payments, something that is unheard of in the industry.
Uber-like technology could have a profound effect on all aspects of ground transport, from the mom-and-pop couriers working out of the kitchen, to the industry giants like FedEx and UPS, although the behemoths will have the resources to withstand the onslaught. Similarly, this concept could disrupt the traditional LTL and TL carriers if it gains widespread acceptance.
But the biggest casualties could be the man-powered load brokers. Keychain Logistics, which says it has 10,000 drivers under its umbrella, promotes itself as “Broker-free shipping: Book qualified carriers and never pay broker fees again,” its Web site claims.
Traditional load boards charge carriers a fee to be part of their network and some make sizable commissions from each move. But this technology may eliminate many of the middlemen and make it easier for drivers. Instead of going to a truck stop and checking a load board, or waiting days for a backhaul, drivers can immediately book on calls when they’re empty. The smartphone also eliminates the fax machine and having to wait hours for documents in a truck stop. As well, most of these start-ups don’t charge a membership fee and the apps are available free of charge.
As far as Canada goes, no truckers are using Uber-type technology yet, to connect loads and drivers, though the start-ups I talked to all expressed interest in engaging with the great white north. The GTA, Toronto-Montreal corridor and B.C.’s Lower Mainland would all appear to be ripe for a disruption.
Mike McCarron, trucking entrepreneur and veteran of the industry, expresses some interest in this new wave, but thinks its effect will be minimal on the larger haulers and the businesses they service.
“The current model of uberization will have some impact on the transactional side of business and could replace some of the action on the load boards,” he says. “However, I don’t think it’s going to make much of an impact on the mainstream, everyday movement of B2B business.”
But Chris Capua, director of corporate development for Transfix, disagrees. “The industry is fragmented and 50 years out of date. There has to be a better way to do business,” he claims. And B.I Logistic Services’ Cahley concurs: “Density, enhanced load and technological improvements should always improve the price,” he says.
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