The views expressed here are solely those of the author and do not necessarily represent the views of FreightWaves or its affiliates.
In late 2017, when Uber announced “Freight,” I was about to build a digital freight brokerage, one with a very different focus but in the same pool. In the 2.5 years since, I have had a front row seat for the impact – first selling against them, and now helping companies with their digital transformations.
Before everyone starts celebrating the possible demise of Uber Freight hear me out.
Uber getting out of “Freight” is bad for freight.
I understand all the arguments about why Uber is bad for freight. I agree with some. What is lost is that the money and their prestige are EXACTLY what makes Uber uniquely situated to help our industry.
The industry needed the push (and still does)
The economics of this industry are not sustainable; but in late 2017 few felt a need to change. Uber Freight’s entrance showed how improvement has become the only path forward and helped transportation companies, shippers and Wall Street understand what needed to change, and the spark to start. CarrierDirect and I have seen first hand how the attention paid to freight tech changed almost overnight… from the inside. Providers went from “meh” in late ‘17 to “help me get started” by early ‘19.
To be clear – Uber didn’t invent “Uber for Trucking” just like Tesla didn’t invent electric cars. However, the spotlight on Tesla pushed electric cars from the concept-car stage to the road because suddenly the industry had an imperative, and an ecosystem (more on that later) for change. Before Uber Freight, J.B. Hunt was already working on 360, and C.H. Robinson had bought Freight Quote. Hunt, Robinson, and others deserve a ton of credit for looking through the windshield and trying to be different when most didn’t – they just didn’t need Uber for the idea. Uber increased the stakes, drove the imperative, and undoubtedly helped get the buy-in for what companies wanted to work on.
Beyond technology, the infusion of “Silicon Valley” to freight shined a light on everything inside the four walls of transportation providers – from organizational structure to process improvement. As an example – a core tenet of startups – “start with the customer at the center” has made its way to freight and we have seen that change the conversation with our customers. As Uber Freight has gained its footing, trucking companies and intermediaries are feeling the pressure to put their customers (shippers, BCOs and, for third-party logistics providers, PT carriers) at the center of the buying journey. Peter Rentschler, CEO of CarrierDirect, observed that while rarer than before, an integral part of several projects over the last year or more have focused on this customer experience.
Especially with the current economic and freight environment, we need the challenge that Uber brings to freight.
Make freight sexy again (MFSA)
In the same way Uber has spurred the industry to action in ways that others did not, it gets eyes on the industry in the way others just don’t, and has brought the ecosystem to change. Uber’s involvement in the space was able to ‘Make Freight Sexy Again’ in the eyes of investors and talent.
Believe it or not, the money in Uber’s war chest is actually HELPFUL. First, it is part of what allowed companies to effectively sell the need to invest in technology – adapt or die. By Q1 2019 venture deals outpaced the deals in ALL of 2017, enabling startups to enable legacy providers. Shelley Simpson of J.B. Hunt has spoken clearly to the market since the inception of 360 – invest today, profit tomorrow. Instead of “who needs that in freight,” the market has come to understand this investment is about defensibility. The “low margin future” we have all heard about for the last 10 years was here, even if it was artificial and, in essence, Hunt sold the vision to the market.
The Uber “factor” has also been an MFSA for talent, too. We have some incredible leaders in the industry (like the aforementioned Shelley Simpson); we just need more! We need more visionary leaders who will continue to push the industry forward. The first step is we need more talent to CHOOSE freight – not just engineers but sales and operations, too.
Uber elevated the profile of the industry to talent. Here’s an example – because of the recent layoffs, Uber put together a “talent board” for severed employees. You can go on, search for talent, and be connected. I looked at a Business Analyst from NYU’s school of business who had interned at Bloomberg. He picked a job in freight because of Uber. This has created the ecosystem, and these folks will help all of us shape the future of freight to be a better one.
Without Uber, the spotlight diminishes. Before you go dancing in the streets at the prospect that Uber might shut down Uber Freight, remember that it may be the competitor making us all better.
Brad
RE: Rates. I personally cannot believe based on what I have seen that any carrier could sort of hook their wagon to uber and make a profit commensurate to the risk in owning trucks. That goes from single man/woman owner ops to several hundred truck fleets. So in my view if the technology cannot get a carrier really engaged its another tool (among several) to extract spot capacity, filler miles, etc. Regardless of how good the technology is that is a recipe for all the same problems other pure brokers have without a sticky carrier base. Advertise 50,000 carriers strong in your “fleet” when you maybe have 50 asset carriers that actually care about your business. I personally think those low-priced filler miles are better moved by actual people than an app; it takes some selling to get a truck to run a crappy cheap load! But I can see the reason as to why people would be excited about what Uber is doing. So I am not that much of a boomer to not see WHY it could work – but until they offer the actual assets something to get excited about -I don’t see the service side getting there. Especially if/when trucks get tight.
As far as the back office, I speak from experience as a carrier – if there is a problem on one of the Uber loads. Appointment time, pickup #, anything at all that needs to be dealt with on a normal type load – Uber is simply not equipped to handle it. The app has a single pickup# in it – you can’t ask the app for a different one. You need to call in and talk to a person….and guess what Uber doesn’t have many people that answer the phone and those that do usually don’t have the answer. Detention – forget about it. Layover, nope.
Problem management is not happening in my experience. And I get they are losing money so they are gonna have to be tight with the money stuff but again as a carrier why do i care? certainly uber doesn’t care about the carrier side of things. Anyway, in my very limited experience the app only works acceptably on the smooth loads…..and well its trucking. what percent of them are smooth no small hiccup loads?
Ben
When ever I see someone talking about race to the bottom or cheap rate carrier I know that is a substandard carrier.
Someone that can never get past the first couple loads with great service that gets them recognized as someone that even gets to look at the better paying freight.
These are drivers that bought a job and have the attitude that the industry owes them. Ones that don’t understand the industry that they are in and that they are being graded at some level on every single load.
I’ve seen and participated with business professionals that get rates from Uber and many of the “cheap brokers” that are far above market rates because they have proven to be reliable and professional.
But these drivers that complain will likely never understand this because they believe they are entitled and that service is not a factor.
jim
I can almost hear the Uber Freight boardroom
” put our money into the technology and make it all back by taking high percentages from the stupid truckdrivers who are desperate to be independent, it worked on rideshare autos”. Goodbye Uber.
Ben
Time to get a little industry education.
Uber has always been about building a system to provide services on low margins.
Guess you are listening at the wrong door.
Rick
You mean they’re built on negative margin? If the service is superior Ben why can’t they make margin yet? They have the carriers and they are top 20 in terms of full truckload broker size. So make some money already. The problem is they didn’t build anything better than what convoy, chr, Jb Hunt and others already have and then on top of that they don’t have the industry knowledge or enough headcount to successfully service their customer. Been in the conversation with big clients basically saying yeah we would be dumb not to take freight prices under market for our non time sensitive stuff but we know that’s not gonna last and the service is subpar.
Ben
Well at close to a $800 million run rate someone is taking it.
Should take a look at management. Personally, think the bench is too deep. When operating on reduced margins the idea is you don’t need high priced sales people at that level. Don’t know the numbers but would think their cost per load is higher than the analog broker. Maybe not the ones trying to play digital. Some of these guys think bolting wing on the back of a pinto makes them fast and cool. It doesn’t.
I don’t think any of the digital brokers or the analog ones playing at have it figured out. Seems too much old school broker mentality that is the issue is being brought into companies that should be innovating.
They need an Amazon during the book seller days.
Erick Mann
I feel like digital brokers are a solution to a problem I don’t face. My customers require increasingly higher levels of service, not increasing commodity levels of service. The brokers I choose to work with – the talent, not the software, makes the difference. I spent a weekend with one of my brokers… he was on the phone constantly – including dealing with a driver family member passing, which gave me flashbacks of my asset carrier days. I feel AI is a ways off from being able to deal with issues like that – all too common in transportation – and my customer service is not the place to develop the technology.
Ben
When did anyone say the only solution for the industry?
For much of the commodities being shipped the intermediary model we have today is unsustainable. Digital brokerage done right will drive margins down and make the industry more efficient.
Reduced margins isn’t reduced profit. It is likely reduced headcount that can be a little scarey for people playing a defensive road trying to justify rather than lead.
Bob Peterson
I don’t understand how a race to the bottom with super efficient technology and the brightest minds helps the freight industry in the long run when you are talking about small owner operators? Soon automated trucks will be here, which would replace hundreds of thousands of hard working individuals with decent paying jobs, to maybe an equivalent to working at speedway, holding a steering wheel for $10 per hour. Then with API, tracking and other technology pushing further efficiencies in the market place or even the development of DAT providing data, both of which will erode and crunch the broker, eliminating another couple hundred thousand good paying jobs to companies run by 10 people on $10 margins.
If you’re saying this will help customers keep rates down and maybe pass on the savings to consumers, then I can see your point. But I think those people cheering are doing it rightfully so. Quoting to make negative margins and offering poor service to a customer isn’t a cutting edge idea, it’s a huge boondoggle that will die in the night, leaving an industry heading towards what the mortgage industry saw happen during the 2009 housing crisis.