The Disruption Uber Has Brought To The Taxi Business Is Coming To Trucking
In the U.S., over 70 percent of all freight movement is hauled by trucks of various types and sizes. Needless to say, any improvements in freight efficiencies will have a cascading positive impact on all corners of the world’s largest and most dynamic economy. The last time the U.S. transportation and logistics industry experienced revolutionary changes was in the 1990s, when IT induced remarkable efficiency gains. We are now at the cusp of a similar revolutionary transition in the trucking industry with Uber for truck-type apps entering the market, but this time the competition will be high and the solutions a lot more fragmented.
Picture this: a bearings maker in San Francisco needs to urgently ship 20 boxes of bearings to an elevator manufacturer in Seattle. An “Uber”-type app for freight transportation can now connect the shipper to a truck that is scheduled to leave the shipper’s area for Seattle. The driver is happy, as she/he can now get more payload to carry (which otherwise could not have been located on an on-the-fly, ad-hoc basis), gain revenues, and reduce empty miles. The shipper is happy because he/she can ship freight on an ad-hoc, on-demand basis. The app provider is happy as it has created a new business opportunity in the market helping efficiently connect demand to supply, and finally other motorists and the environment are both happy as we reduced empty miles (hence congestion) and also emissions. Moreover, shippers are billed immediately and carriers are paid immediately, and the transaction is executed in a swift and seamless manner with the app provider benefiting from each transaction. Each year, on average, 20 billion empty miles are incurred by trucks, which cost the economy billions of dollars in fuel, congestion, environmental damage, and lost man hours.
A recent study by Frost & Sullivan forecasts that by 2025, $26.4 billion of all truck freight movement revenues will be enabled by mobile freight brokering. Smartphone/mobile device-based freight brokers are attempting to rise above traditional brokerage firms by offering higher asset utilization and expedited revenue allocation to carriers; peer-reviewed and rated carriers; and an expedited on-demand, ad-hoc demand response service to shippers. Start-ups such as Cargomatic and Transfix from California and New York, respectively, are targeting a host of market sectors such as long-haul, regional, and local trucking, and carrier types such as for-hire and private fleets. The growth potential of this industry is promising, and that has attracted an array of investors, ranging from truck makers (e.g., Volvo) to logistics behemoths (e.g., UPS).
The North American trucking industry is facing an acute driver shortage, which by some estimates stands at a deficit of 400,000 drivers. An even more disturbing trend is the record-low levels of young drivers (21-25 year olds) in the overall driver population mix. These challenges can deal a serious blow to our economic growth if not addressed immediately. Smartphone-based freight brokering, among many other innovations, can help reduce the severity of this shortage; when coupled with autonomous driving, truck connectivity and infotainment, and cabin comfort and convenience-focused enhancements brought by truck makers, it can also attract younger drivers.
Thanks to several innovative technologies that are being developed today, soon a truck will be driven autonomously for extended periods of time, offering a safe driving environment on highways and enabling the driver to use his/her smartphone/mobile device to get connected to the world outside and vice versa. This will also help the driver locate nearby freight and carry it to its destination if the truck is also headed there. These productivity gains and freight efficiency gains will benefit both the driver and the fleet he/she represents. This will also reduce empty miles, congestion, and emission footprint of commercial vehicles. At the heart of this change will be mobile devices like smartphones that will enable people to connect freight to trucks, with spare freight-carrying capacity on an on-demand, ad-hoc, networked manner. There will be concerns, just like there are concerns surrounding Uber in terms of track record of the fleet, driver, equipment that represents carrier capabilities, and type/nature of freight, etc., that will present initial hurdles and psychological inertia, but with extensive vetting, reviewing and checking mechanisms, companies offering mobile freight brokering services can present trucks that can deliver the highest uptime, fleets that present the highest trust and confidence ratings, drivers that drive safely and reliably, and a service that is fast, effective, safe, and efficient.
However, the one thing that will be different this time will be that competition will come from several quarters. A Light Commercial vehicle manufacturer in India told me last month how they were developing a similar solution for their light trucks in India, as they wanted to increase the earnings capability of their independent trucks drivers to take more jobs on the fly. Similarly, I have seen and heard of solutions from entrepreneurs, in addition to leasing, telematics services providers and even telecom operators. It will be fun as I don’t see one “Uber” being the market leader in the trucking industry.
This article was written with contribution from
Wallace Lau, Sr. Industry Analyst, for Frost & Sullivan’s Automotive & Transportation research practice.
Sarwant Singh
Contributor
I write about Mega Trends and Future of Mobilityfull bio →
Opinions expressed by Forbes Contributors are their own.