Q&A: What’s App Follow-up and Freight for Thought with John Sutton
Following the release of “What’s App: How Tech Will Meet Truckload in 2017”, author John Sutton was solicited for commentary by Gartner, a global advisory firm that studies the effects forward-thinking technology has on different market sectors and the delicate economic “ecosystems” in which they operate.
The commentary has been condensed in the Q&A session below:
Question from Gartner:
Does Sunset envision Uber Freight as a service partner to help fulfill client quests?
Answer from John Sutton:
At present, Sunset does not see itself working with Uber Freight directly. However, we do anticipate working with the same truck capacity being exposed by Uber Freight. If asset-based companies find success using Uber Freight and being solicited for their trucks rather than soliciting shippers and brokers for loads, they’ll likely be open to solicitation from outside companies…more than they were before.
This market shift has potential to add a whole new type of capacity to a constricted marketplace, especially in the dry van sector.
Q: If Uber is successful in grabbing a large share of drivers, could this put downward pressure on line haul rates?
A: While we do not predict pressure on the line haul rates/fair market rates that are paid to the asset- based trucker to go from point A to point B, we do predict margin compression for 3PLs competing with readily-accessible freight that Uber Freight is bringing to the marketplace.
This will likely not be as immediate of an impact though. Currently, CDL owners are fighting the new tech of ELDs & speed limiters that are being forced upon them via federal regulation. With the current attitude towards technology that is meant to “optimize” over-the-road trucking being perceived as more of a hindrance; Uber Freight may not be well-received out of the gate.
Q: What, in your opinion, would be the biggest roadblock to asset-based trucking companies buying into Uber Freight right at release?
A: A few things come to mind:
- Throwing more technology into the day-to-day operation of drivers that often want to be left alone to work is a potential roadblock.
- Mid to large asset-based companies aren’t likely to even be available to begin experimenting with Uber Freight capacity due to current contracts with established shippers/customers. Typically renewed by dedicated fleets in Q4 2016 and Q1 2017, Uber Freight’s spring release came right in the middle of annual contract negotiations. Contracts won’t be broken by shippers to try testing the waters in an unproven marketplace like Uber Freight.
- Once smaller companies begin reporting benefits, larger trucking companies may re-evaluate the percentage of their capacity they can free up to “chase freight”. But, at the current moment, it is too risky to move away from their contract freight.
Q: Uber Freight claims to feature seamless, on-the-spot rate confirmations along with seven (7) day guaranteed pay. While these features are very appealing to asset-based companies, do you feel they will be able to implement them successfully?
A: The 7-day guaranteed pay will be extremely appealing to smaller, asset-based companies whose goal is to get paid as soon as possible. Many of these smaller companies will often surrender 1-5% of their linehaul for a load to get paid in 48 hours or less by a shipper or 3PL rather than the standard 30-60 days it takes many shippers. Uber has already proven they will make sure their drivers (on either Uber Taxi or Uber Freight side) will get paid quickly, at any expense. In the first half of 2016 alone, Uber lost $1.2 billion but kept drivers paid the entire time. Their reckless debt management could be a huge disruption to a long-preserved economy that is the truckload marketplace.
The rate confirmation implementation is a different story. If no company in the industry has been able to seamlessly implement direct-to-smartphone rate confirmations before despite hundreds (if not thousands) of attempts, what makes Uber Freight believe they’ll be able to pull it off? I’m not convinced their implementation will be perfect initially, by any means. Manually entered pickup numbers will be often transmitted erroneously and drivers will then find themselves on long holds like they’re used to with CH Robinson, TQL, Coyote and other large third-party companies.
It’s as simple as a typo: an 8:00am pickup time will be entered and transmitted erroneously as 8:00pm, the driver misses a backhaul shipment that was supposed to get them home for their daughter’s birthday. Often, if a shipper or 3PL’s customer service in these situations leaves a driver with a bad taste in their mouth, they won’t take another load from them. Uber is not immune to customer service issues; only time will tell how they overcome them.
Q: Uber Freight’s app will attempt to automate the function of tracking truckload shipments and monitor driver behavior through the driver’s smartphone. How do other shippers & 3PLs think they can compete with this?
A: Freight visibility has been the name of the game since late 2015. Currently, any 3PL or 4PL worth their salt can provide on-demand, up-to-the-minute tracking services. This is largely due in part to the e-commerce boom; consumers can track their packages from dock to delivery, through final-mile delivery services like FedEx, USPS, and UPS. This consumer trend has pushed the issue further into the large-scale logistics arena, and is a contributing factor to regulatory implementation of ELDs.
Between in-cab GPS, QualComm and services like Four Kites/MacroPoint/etc., there is no reason for a shipper not to have access to visibility from their current transportation providers. Here at Sunset, freight visibility is the norm, not just a perk. We’re already seeing a trend where customers are abandoning their remedial transportation providers to get on board at well-rounded 3PLs & 4PLs like Sunset not only for the customer service, but for the immense visibility we can provide before, during, and after shipment.
Uber Freight’s shipment visibility will be flashy at first, but many predict their customer service for shippers will be lacking. Customers will then begin to shift to the transportation providers that operate in that “sweet spot” of fantastic customer service paired with strong technology offerings.
Stay tuned for more commentary as things unfold regarding Uber Freight, and how the impacts of “fast transportation” makes its way to the masses.
*The thoughts & opinions presented from John Sutton do not necessarily reflect the views of my employer or any affiliated organization.