We all love and hate comparisons—we love when they’re made about others and hate when they’re made about us. That is why it’s so interesting to throw out the following two comparisons about the freight transportation industry and watch people try to explain why they just don’t work:
• The ocean shipping industry and the airline industry.
• Uber and any technology that seeks to tap into excess trucking capacity.
Here’s my initial thought on both these comparisons before we dive in: there are more similarities than differences, so why is most of the focus on the differences? Why are both comparisons dismissed out of hand?
Let’s take the first one—liner shipping and passenger planes. This one has been discussed so much through the years, it hardly seems controversial anymore, yet it still is.
But why? Both are capital intensive and hugely influenced by demand levels. Both use alliance structures and capacity-sharing agreements that involve partnering with competitors. Both involve the movement of entities across borders. And on a really fundamental level, both are basic forms of transportation.
So here comes the why. Despite both industries struggling mightily at various points in time, one industry has accepted technology in a way that empowers its customers to make dynamic pricing decisions.
The other industry has not ceded such control. Liner shipping retains a structure that favors long-term commitments, relationship-based negotiations and an aversion to price transparency.
This is slowly changing, but the difference is that liner carriers (and I realize that this is a generalization and doesn’t apply to all) aren’t embracing that change as much as begrudgingly watching it occur.
So if you want the main difference between the liner shipping and airline industries, it’s nothing to do with operating fundamentals and everything to do with technological approach. And it’s not just on the front end.
Then there’s the Uber comparison to any emergent technology that tries to digitize the trucking industry through unlocking latent capacity via a marketplace.
As Robert Nathan of LoadDelivered smartly wrote recently, all the things that get startups called the latest “Uber of trucking” have largely existed for decades. Marketplaces are spot markets, shared capacity models are essentially less-than-truckload, and apps that automate the connection between available loads and available drivers are load boards.
What new technology startups sometimes ignore are the domain expertise elements, Nathan wrote.
The multiple parties involved in a given shipment make it hard to reduce things down to a platform that simply satisfies the needs of two parties. That’s how Uber works—you need a lift somewhere, the driver is driving around and gets paid for part of that driving around.
In a freight move, the company tendering the load and the driver picking it up are only two players in a massive dance involving the supplier, consignee, logistics provider, carrier, warehouse, driver on the other end waiting for the load to be broken down, and perhaps even the plant or store manager if we take this far enough. Satisfying two parties is not enough from a service-level perspective.
It’s useful to make comparisons because it helps us put things in context. The airline industry is a useful muse for the liner shipping industry, not because moving 9,000 containers over 20 days is the same as moving 300 passengers for eight hours, but because of what is similar about the two industries.
My argument might seem hypocritical on the surface. On the one hand, I’m advocating ocean carriers rely more on technology and essentially forgo the relationship-led structure upon which the industry has been built.
And on the other hand, I’m suggesting that technology-driven solutions for the trucking industry may not be the answer, or at least aren’t all that new.
So here’s the larger point—comparing things provides a point of reference, and sometimes that comparison makes the status quo seem quite alright. Sometimes, of course, it makes the status quo seem downright alarming. The truth is that the liner shipping industry and trucking industry are in vastly different places. Almost an inverse place if you’re talking about capacity.
For liner carriers, capacity is overly abundant, and technology can be the pathway to pricing capacity more effectively. It doesn’t matter how good the service is if the rate doesn’t provide profitability, so why not lean toward technology that gives an objective thumbs up or thumbs down on a rate for a given container?
For trucking companies, capacity is going to be stretched, and so technology that helps to better serve customers will be more useful, not ones focused on giving the customer untethered low-rate, low-service options. The trucking company that serves its customers the best in a tight capacity market will by default be profitable.
CIO Insight: The power of comparisons
