Uberization of Freight

The Uberization of Freight – Communities in the Logistics Space

The “sharing economy” is rapidly changing our behaviors as consumers. Uber, Airbnb and Lyft are just a few of the many platforms that are helping people sell, share, and rent their unused assets. The “Uberization” trend is disrupting traditional business models and touching nearly every corner of our lives, and even the logistics industry hasn’t escaped its touch.

With the Uberization of freight comes a variety of tools powered by cloud technology. Shippers are using smartphones and mobile apps to gain access to otherwise-empty trucks while also dealing more directly with drivers (versus just carriers and freight forwarders). These tools are letting individuals and companies communicate dynamically with each other to share assets and make deals. Since these tools are almost universally cloud-based, they aren’t limited to old-fashioned desktop PCs. Instead they go where their users go, from the warehouse floor to the office to the road.

Communities are springing up around these “sharing economies”, adding new levels of usefulness for their members.  For the transportation industry, the Uberization trend is helping shippers connect with thousands of independent drivers that have empty truck space. Despite popular belief, individuals who own and operate their own trucking businesses comprise a large chunk of the U.S. trucking industry. These 350,000 registered owner-operators either lease to carriers or operate under their own authority, which makes reaching and connecting with them extremely difficult. What better way to find independent drivers than through a community that connects directly with them and allows shippers to secure otherwise-unused capacity on their trailers?

This level of Uberization should be a lifeline for shippers that are feeling the impact of the capacity crunch and truck driver shortage. Exacerbated by regulations like the electronic logging device (ELD) mandate and a strong national economy, these challenges aren’t getting any easier for shippers. Much like its pioneering cousin did with personal transportation, the Uberization of freight trend is focused on matching capacity to specific shipper needs. In the not so distant future, it will become the norm for shippers to leverage communities based on the cloud to gain visibility and book freight with an ecosystem of carriers they would never otherwise have had access to. This will help to lessen the impact of the capacity crunch and driver shortage by reducing the number of empty miles driven.

Participating in a community that provides access to an ecosystem of carriers not only enables a high level of load matching, it also streamlines the entire transaction and enables solid shipper-carrier relationships (a must-have in a world where trucks are expensive and hard to come by). This strategy has been wildly successful for Uber, and is demonstrating enormous potential for the logistics industry.

Kuebix Global Logistics Community

Global Online Logistics Community: If You Build It They Will Come, Sometimes

Over the past decade, there has been a focus in the transportation industry on creating new avenues for finding capacity, getting better rates and improving customer service. To this end, a number of online communities have popped up with the promise of freight savings through matching carrier capacity to shipper demand.

However, over the years many of these communities have failed. Here are 5 reasons:

  1. A focus on spot rates only
  2. No support of negotiated carrier rates
  3. No direct connection to carriers
  4. No sticky factor to keep the shippers coming back
  5. High barrier of entry to get shippers on boarded

Many online logistics communities were originally established as a marketplace for volume spot transactions. A major reason these communities failed was because they focused on just a small piece of the way companies ship freight. On average, 90%+ of freight is booked via negotiated carrier rates, leaving just 10% or less for volume spot rates. Most communities built around volume spot rates alone failed because they didn’t offer access to the negotiated carrier rates that companies use to ship their freight the vast majority of the time.

Many communities also underestimated the importance of long-standing carrier relationships. However, direct connection to carriers was not possible until just a few years ago when carriers began exposing their APIs for rating, booking and tracking on their websites. Now technologies like Kuebix can build direct connections to carriers, allowing companies to view all their carrier rates, book shipments and track freight on one platform.

Communities also need a “sticky factor” to entice members to join and keep them “glued.”  An online logistics community must offer a tool that logistics professionals use every day, like a transportation management system.

Finally, a community must have a very low barrier to entry. Free versions of technology are very appealing for this reason. Think about what would have happened if, when Facebook was started, people were charged to connect to the network and use its features. Because Facebook is free, millions of people were able to join the community without any barriers.

The idea of building a community that offers dramatics savings by matching carrier capacity to shipping demand is appealing, but communities that are not built with shippers’ day to day needs in mind are destined to fail.

Learn more about Kuebix’s Free TMS and the Global Logistics Community. Try our new Freight Rate Calculator.