Moore on Pricing: Making the leap to Uber trucking

Recently, Uber announced that they’re beginning to coordinate small package express deliveries by their independent cars in New York City—competing, of course, with global players like FedEx, UPS, and even the bicycle messenger services.

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Recently, Uber announced that they’re beginning to coordinate small package express deliveries by their independent cars in New York City—competing, of course, with global players like FedEx, UPS, and even the bicycle messenger services.

This development raises many questions for small shippers as to what could come next in terms of rapid innovation in the package and urgent delivery space. Is it possible that freight brokers may be in the same boat as regulated yellow taxicabs?

This year, nearly a dozen companies are stepping up to create connectivity that supports new pricing models that enable new Uber-style shipping process options. In the meantime, Silicon Valley is salivating over the $700 billion U.S. freight transport market, as investors are pumping money into dynamic delivery solutions where shippers can get service within minutes from a fleet of part-time, independent carriers.

Some are cloud-based services squarely aimed at big rigs that desire to replace traditional freight brokers. This will require operating at an industrial scale and the ability to provide dozens of trucks daily—an operation enabled by direct shipper TMS to carrier TMS connectivity. 

While small truckers should welcome this new feed of spot opportunities, it’s important to remember that some very small entrepreneurs—some with only a pickup truck—will be also be getting those feeds. This presents a dilemma for freight brokers and 3PLs with brokerage pricing models, as the collaborative nature of dynamic rate quoting via “app” will often involve process compromise for both the shipper and carrier.

The last two decades have seen a movement toward enabling non-professionals on the shipper side to be able to arrange freight through basic TMS tools and one-call dispatch at brokers. The brokers, just like overseas freight forwarders, have provided value by being experts in arranging seamless shipping, knowledge of regulations, and the handling of Customs paperwork. 

These new apps will provide enhanced billing, accurate tracking, and variable pricing that will change based on shipper needs—such as time of day, release values, loading, and unloading options. Just as an Uber driver might tell you to walk to the corner so he can find you, an independent truck operator may need special considerations in order to provide low-cost, fast service. 

The brokers will not necessarily be in a position to make process changes—like last minute extension of loading hours—in order to get a low-cost pick up. In these situations, the carrier will want to interact with the shipper’s operations management.

The shipper could do this with a smart phone, while an intermediary broker may slow the process. Maybe the shipper will decide to just use the app. However, if a shipper is simply moving a high volume to the same destinations each day, dynamic, variable pricing may be too much trouble for such a small benefit. 

But this new paradigm enabled by technology should give even this group of high-volume shippers pause. Remember that each day is different for the carrier, and many of their variable costs are due to shipper operational decisions.

If shippers can increase their flexibility at shipping, receiving, and insurance coverage they can share in carrier cost reductions in real time. Even a one percent reduction of $700 billion is $7 billion—and wouldn’t it be nice to grab some of that?

About the Author

Peter Moore
Peter Moore is Adjunct Professor of Supply Chain at Georgia College EMBA Program, Program Faculty at the Center for Executive Education at the University of Tennessee, and Adjunct Professor at the University of South Carolina Beaufort. Peter writes from his home in Hilton Head Island, S.C., and can be reached at [ protected]

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January 2016 · Parcel Shipping · TMS · All Topics
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