Freight-Sharing Apps: The Uberization of Supply Chains
Published on Feb 8, 2018
The success of ride-sharing companies such as Uber and Lyft have many players within the freight industry looking to replicate the technology in their own supply chains. As supply chains become ever more tech-driven, success in the industry will largely be determined by how quickly and effectively companies can embrace current and future technological trends. Freight sharing applications have the potential to be one of these transformative trends. Today, we will define the function of these apps, discuss its potential for supply chain management, identify some of the barriers to entry of this technology, as well identify some of the key players in this space.
Freight Sharing Apps: What are they?
Before we can get into the details, lets first define what exactly freight share is and how the application is designed to work. The trucking industry, by its very nature, is highly fragmented. There are countless carriers and innumerable daily trucking shipments. This fragmentation makes it incredibly difficult for shippers to identify areas of capacity at advantageous rates. Currently, prospective shippers can contract with a third-party logistics company or broker to help identify and negotiate the optimal trucking routes and rates, but this system isn’t perfect. Freight-sharing offers an alternative that focuses on convenience, speed, and flexibility as its competitive advantages. These applications can supplement or even replace the traditional middleman approach to freight brokerage by utilizing a “share economy” model made famous by Uber. The apps are designed to connect a shipper with a carrier and schedule a shipment at ideal pricing based on a variety of factors such as weight, class, distance, etc. The application utilizes algorithms that analyze the unique needs and inputs of a customer and finds the most optimal carrier and rate match. After the match is completed, both the shipper and carrier have the option to accept or decline the arrangement. All of this can be done in the palm of your hand with a mobile device. This technology can go together with LTL shipping. LTL as a mode can pair with freight-share to maximize the benefits of both, creating great value for both shippers and carriers.
The largest areas of potential for freight-share is in convenience and flexibility. The ability to obtain accurate and competitive quotes from a variety of carriers all from a mobile device has the transformative potential to reshape the entire freight industry. Companies would be able to quickly book shipments without the need for extensive communications between shippers, middlemen, and carriers. Freight share could also help alleviate concerns over volume, by efficiently identifying excess capacity and consolidating shipments. Identification capabilities could be boosted even further if freight-share apps are paired with transportation management software (TMS) as well as automated driver technology. By combining these technologies, freight companies could create a seamless supply chain in which booking, loading, and delivery are all conducted with minimum inputs or interference from parties outside the system. It's easy to get starry-eyed overall this potential, but there are some hurdles to overcome before the full capabilities of this technology can be realized.
There are still many barriers preventing this technology from being implemented to its full potential. The first is the highly fragmented nature of the trucking industry. Because there are so many players in this space, it will be difficult to identify all the capacity available at a given time. Freight-share apps need to build an extensive user-base, both in shippers and carriers, before it can be realistically useful. This will be a huge challenge for freight-share tech companies to overcome. They will have to effectively market to, obtain and retain a large pool of shippers and carriers. This difficulty will be furthered heightened by competition in freight share, but we will discuss the specifics of various companies in the next section. The next barrier for this technology is cost. It will be quite expensive to integrate this technology into current processes. The costs rise even further when you consider the price tag of implementing automation into the supply chain. Driverless technology is key for freight-share to achieving its full potential, but the cost of converting fleets would be astronomical and a highly preventive barrier for most carriers.
There is a mix of start-ups, successful related-industry companies and established industry veterans pursuing freight-share. New players such as Cargomatic and Convoy have risen to prominence in the last few years. They utilize technology very similar to that of Uber in a bid to replicate the success the Silicon Valley giant has had in the ride-share space. Speaking of Uber, they have also begun their entrance into the freight market. They recently launched their Uber Freight app as an extension of their ride-share model into the freight industry. Even Amazon is causing stirs as it continues to build its own freight and transportation services throughout the country. Freight-share appears to be one of the avenues the e-commerce juggernaut is pursuing. Time will tell which of these companies will ultimately be successful in implementing freight-share, but all see the massive benefits the technology can provide.
Freight-share is a new and intriguing entry into the freight industry. The potential of this technology cannot be denied, but there are many hurdles that must be overcome before any real pay-offs can be seen. If you have any further questions regarding freight-share or the supply chain in general, then please contact LTX today! We would love to answer any questions you may have.