Uber Freight Comes Out of Hiding

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2Q 2017 | IN-4590

The Bureau of Labor Statistics (US Department of Labor) counts transportation and material moving as the fourth-leading job classification in the country, with 9.7 million workers. Uber Freight has been unveiled to provide full truck load, on-demand freight brokerage, and cloud services for a range of customers from smaller owner-operators to mid- and large-carriers. The shippers will pay spot or contract rates, and the app will confirm rates and loads in seconds, including a one-click sign-up and an offer of a seven-day payment guarantee.

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One-Click Disruptor

NEWS


The Bureau of Labor Statistics (US Department of Labor) counts transportation and material moving as the fourth-leading job classification in the country, with 9.7 million workers. Uber Freight has been unveiled to provide full truck load, on-demand freight brokerage, and cloud services for a range of customers from smaller owner-operators to mid- and large-carriers. The shippers will pay spot or contract rates, and the app will confirm rates and loads in seconds, including a one-click sign-up and an offer of a seven-day payment guarantee.

Uber began testing last year between Austin, San Antonio, Houston, and Dallas, but should be available now across the U.S. Its strong capabilities to optimize supply and demand, along with an alleged acceptance of margins 1/3 of that from competition, will clearly disrupt the middlemen or brokers that have historically enjoyed a 12% fee for service.

Uber's purchase of Otto last July (2016) for a US$650 million investment set the stage for future Uber Freight autonomous development. What is notable, though, is the leadership of Uber Freight by Lior Ron, formerly an Otto co-founder. The Google/Waymo vs. Uber/Otto battle included a recent federal injunction against Uber and Otto. The Freight team, however, is not part of the Uber Advanced Technologies Group.

Fragmented and Inefficient = Opportunity

IMPACT


Offline/analog is still alive in freight; the middlemen continue to operate utilizing phones, whiteboards, paper logs, and bill of ladings. Additionally, payment may take 30 days or more. Numerous companies are getting onboard with load optimization solutions, and several contenders include Convoy, Loadsmart, Flexport, and Transfix. Moreover, the larger freight disruptors gained about US$206 million in funding over the last few years. 

One of the key advantages of Freight as a Service (FaaS) and online brokerage is its ability to materially increase load/fill factors (currently around 70% in the U.S.), which in turn drives lower prices and/or higher margins. These digital disruptor value propositions include much improved transparency, ease of use, prompter payments, improved efficiencies/OPEX, as well as enhanced customer service. Driver benefits may include fleet management solutions, real-time load tracking, and more frequent support for locating parking at truck stops. The Uber Freight app will help drivers locate loads, which are classified by location, deadline, and needed equipment. Commercially-licensed drivers must first sign up and be approved (clean record, required insurance, and obey federal regulations) prior to utilizing the Uber Freight app.

The vast differences between refrigerated, controlled (chemicals), and bulky items will add another layer of complexity beyond the various sizes and luxury levels of the Uber automotive model. Additionally, and importantly, as the ELD Mandate commences in December (2017), additional scrutiny will be placed on a driver’s Hours of Service (HOS) even if he or she is near a potential additive load.

The Battle Looms

COMMENTARY


Will the disruptor become the disrupted? Amazon is also lurking in this space, perhaps as early as mid-year, with an on-demand freight solution like Uber Freight, and with an even broader strategy across the entire supply chain coming at some point. It is developing an extensive logistics infrastructure by leasing cargo planes and obtaining U.S. and Chinese freight forwarder licenses for maritime shipping. Jeff Bezos also invested in competitor Convoy, which is also located in the Seattle area.

Uber is scaling quickly; it is going viral with YouTube ads and generating buzz at a recent Mid-America Trucking Show exhibition, as well as trying to generate excitement with its core audience of truck drivers with a barbecue reception. Uber Freight already developed and expanded operations including in Chicago. It also brought senior talent onboard like Bill Driegert, formerly an Amazon Planning and Innovation Director.

Yet, it is too early to count out other long-time industry veterans such as UPS and FedEx. Despite the massive market size, like many other technology innovations before it, there will be a future consolidation with likely no more than a handful, at best, of clear winners.

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