The emergence of uberization in logistics demonstrates that a new era of logistics is becoming reality; think of competitive real-time pricing and ultimate market transparency. I will elaborate on the opportunities, challenges and benefits that have arisen with this new development within logistics.

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Uber-like platforms in logistics demonstrates that a new era in Logistics is becoming reality. Competitive real-time pricing, ultimate market transparency, and exceptional convenience enabled by rapidly emerging technology that links demand and supply in Logistics in an unprecedented way, provides the next level of efficiency savings. The benefits are too large to be ignored to wait any longer for companies to start rethink their logistics strategy and operations.

Uberization of Transportation

Uber-like platforms are here to stay, expand and become a relevant step towards Independent Logistics Grids. Independent Logistics grids enable flexible collaboration, such as ad-hoc coupling and de-coupling of logistics partners, and modular service orchestration. The long-term Uber for logistics play promises to shake up the transportation industry in a myriad of ways: expediting revenue allocation, disintermediating freight broker control of the market, and driving more efficient use of assets and working time.

 

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Figure 1 - New technologies are accelerating the pace of change for logistics efficiency and service growth

We are observing a growing number of companies looking for innovative ways to address rising logistics costs, particularly in last mile deliveries. Transport networks become more complex, geographical footprints increase, flexible delivery options expand, which make’s the task only more challenging. Based on client pilots we estimate uber-like platforms can reduce rates as much as 10 to 20 percent, and empty miles up to 15 percent.

An increasing number of companies is looking for ways to test this new type of logistics platforms and integrate these in their Supply Chain strategy. An example is Walmart, which recently announced to start a test with a grocery-delivery service with Uber and Lyft to address rising last mile delivery costs.

The significant savings potential and the rapidly developing logistics platform provider base leaves companies asking how to place these on their strategy journey towards independent logistics grids with plug and play multi-enterprise processes

Markets, Platforms and Trends

The now economy amplifies demand variability and accelerates the trend toward small volume shipments. As a consequence the focus for cost advantage shifts from collaboration via right sizing of assets and optimized schedules to aggregation and economies of scale and scope. In addition, the focus for pricing shifts from static arrangements to more dynamic spot buying behavior. Moreover, the bias of market makers towards forward aggregation shifts to backward aggregation. Practically, this means that buying power of shippers is getting more and more neutralized via Uber-like platforms.

 

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Figure 2 - Trucking Industry Markets and Platforms 

New Way of Working

Uber-like platforms lead the path to a new way of working that promises exceptional convenience, less paperwork, fewer phone calls, no back-and-forth over price and deliveries, competitive real-time pricing, transparent billing, lower fees and a marketplace that links more shippers and carriers than before. Further, it provides the basis to replace or augment a primary fleet by a crowdsourced reserve fleet, if and when needed.

For shippers this means access to trucks on short notice at a competitive price, tracking location and status of shipments without constant phone calls. For carriers the new way of working offers improved capacity utilization, avoiding deadheads and idle time, competitive upfront pricing, fast payment and less paperwork. For brokers it means to be up against a dramatic increase in productivity and price transparency that intensifies competition. Ultimately, automatic matching leaves freight brokers with fewer interventions and the risk of becoming obsolete in standard shipments. Agents can now direct more time to specialized transport and projects.

The new way of working builds on five elements: Mobile & Cloud enabled workflow automation, disintermediation, crowdsourcing, value added services, and now economy. 

 

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Figure 3 - Characteristics of the new way of working

  1. Mobile and Cloud enabled Workflow Automation
    The new way of working allows to book and track shipments with less effort through a single automated platform.  As a cloud-based solution the service can be accessed across devices, via a web interface or an easy to install mobile app. It provides a standard and largely automated workflow to capture inquires and available capacity, to matching and booking freight transport, and to billing and payment. In other words, it standardizes and automates the entire transaction end-to-end including onboarding of shipper and carriers. Aggregation across shipments and shippers increases efficiency in procurement and further reduces transaction costs. Further, two-way ratings between carrier and shippers add an institutional layer that promotes quality of service and ease to do business with, which provides relationships of trust and ensures the integrity of the market

  2. Disintermediation
    Directly linking of carriers and shippers limits the value adding role of brokers and drives down fees that can be charged. Automatic matching loads of shippers and capacity of carriers radically speeds up the process and cuts transaction costs. In this new way of working service broker fees are radically under pressure. Traditional brokers with services fees of up to 15% now face platforms that charge 5%. We expect this trend to continue and fees to drop to 1/3 of the traditional service providers.

  3. Crowdsourcing
    The new class of logistics platforms tabs into small, local transport providers and forms a fleet of the many. Providing a standard and easy gateway to connect shippers and carriers extends market reach which enables matching of many more buyers and sellers. It offers a standard way of making demand and capacity visible and finding trusted carriers available on demand.
  4. Value Added Services
    The new way of working goes far beyond arranging of physical shipments, tracking and tracing, billing and payment. It extends to insurance, credit rating and benchmarking of shipping costs and interfacing the consumer process, last mile and ecommerce.

  5. Now Economy
    All this is accompanied by an ever acceleration of time where time shift from days to intraday to real-time - for freight quotes, matching, tracking and tracing.

Future of Uber-Like Platforms

The Uber-like platforms are here to stay, expand and become a relevant step towards Independent Logistics Grids. The long-term Uber for Trucking play promises to shake up the transportation industry in myriad ways: expediting revenue allocation, disintermediating freight broker control of the market, and driving more efficient use of assets and driver’s time

An Uber-like platform for freight and cargo will likely complement rather than replace existing contract logistics arrangements in providing services to large shippers. Large shippers have overall way too many loads to move and are not seeking efficiency by switching to a service that requires matching each individual load to a particular carrier or truck. These firms need an assurance loads move when they need, in the direction they need, for a given specification and price point. However, the new concept will allow large shippers to augment a primary fleet with a crowdsourced reserve fleet to further improve economics and balance volatility and allow smaller shipper to secure competitive prices.

The concepts that will win, in our view, will be around

  1. Radically cutting search and transaction costs in less mature markets
  2. Spot market and express
  3. Offsetting excess capacity of carriers in some lanes by connecting to a larger pool of shippers and flagging special offers and deals for backhaul
  4. Giving mid and small size carriers low-cost access to state of the art logistics capabilities and connect these to large shippers
  5. Last-mile and integration with direct to consumer

We have never been closer to Independent Logistics grids; driven by digital technologies, a flexible plug and play network of logistics partners that drives maximum efficiency is becoming quickly a reality. The benefits are too large to be ignored – companies should not wait any longer with starting shaping the strategy journey in a world with Uber-like logistics platforms.

Ralph de Kok

Principal Director – Accenture Strategy

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