On-demand trucking is here but it’s not the Uber counterpart you’d expect

By Louis Bedigian

Despite the media hoopla, industry players say that mobile trucking brokerages are quite different from ride hailing services.

Ivan Tsybaev, CEO of Trucker Path, said his firm is "definitely not Uber for trucking" and urged the industry, as well as the media, to stay away from that "misleading" comparison. "What we're doing is a marketplace," said Tsybaev. "It's really hard to compare that to something like Uber. I would say it's closer to eBay than Uber."

Barry Conlon, founder and CEO of Overhaul, concurred with that assessment. He remarked: "In my world it matters what make of car that guy is in, what brand of motor oil he's using in his engine, if he's going to turn left or right. All of these details constitute a virtual market, which is very specialised – it really requires a deep knowledge and understanding of the industry."

Conlon went on to say that if an Uber car breaks down, passengers can get out and hop in another. The same cannot be said for the cargo inside a truck, which could have an "economic impact" to every party involved. "You have to plan for that," Conlon added. "There is no similarity between Uber and the mobile brokerage space as it exists today in the North American transportation industry. The two are not a match in any way, shape or form. It's a far more complex solution that's built around relationships."

Wallace Lau, team leader and industrial principal at Frost & Sullivan's commercial vehicle research programme, said the so-called "Uberisation of trucking" was simply coined to attract attention. "It's worked because it has generated so much publicity for a lot of these start-ups," said Lau.

That's not to say there aren't some similarities. Both trucking and ride hailing start-ups have developed technology platforms to simplify various tasks. "Then the differences come in," Lau added. "Obviously with Uber you're running a taxi business. It's a lot simpler to take a person from point A to point B. In the freight industry there's a really big difference in terms of the fundamental practices and all the paperwork you need to do, all the relationships you need to build, understanding what kind of freight you're moving."

Building stronger relationships

While it was fairly easy for Uber to approach potential customers, Tsybaev said that mobile brokerages must lay the groundwork before they can do the same. "We used a user approach," Tsybaev explained. "We built a relationship with truckers first by providing value for that group. Once we got that critical mass of truckers we were able to attract the other side of the marketplace, which is mostly freight brokers that we work with."

Kelly Frey, vice-president of product marketing at Telogis, a Verizon company, warned that some relationships could actually suffer as technology plays a bigger role in this space. "You won't know your driver, perhaps, as much as you do today," said Frey. "You won't know what loads they like or how to keep them happy."

Frey believes this issue could correct itself once things have settled down. He added: "You could argue that the market demand system will align drivers more with the trucking companies they want to work with and provide the style of work they want. People will migrate to areas where they can make money or they're treated well or trained well."

The challenge of expansion

Newcomers may dream of luring large and private fleets to their platform but Lau said there could be some barriers to achieving that goal. For starters, private fleets may only work within their own firms and have no need for outside assistance.

Said Lau: "It really comes down to how they run their operations. Large-size fleets typically have dedicated contracts or they could be working with specific freight brokers already. That's where the challenge comes in."

Lau explained that the value proposition is to help fleets optimise their asset utilisation and capacity. If a fleet has seasonal fluctuations, the company could benefit from a platform that can "quickly find some freight to utilise their equipment better – instead of just sitting in the lot. Is it something a lot of these fleets will start considering in the future? I think so."

A good overhaul

Frey said the trucking industry needs a "good overhaul" from start-ups and industry stalwarts. He expressed disappointment with the capacity utilisation in North America, where more than 20% of cargo space is not being used.

"That's really, really inefficient," said Frey. "The reason we get away with it in North America is because our fuel prices are low compared to Europe. Europe has about 9% better capacity utilisation than North America [because it's] more expensive to move trucks. They pay more for fuel and taxes. Their labour is more expensive, so they've got to be better and more efficient."

Frey added that whenever there are "systemic" problems – in this case driver shortages and out-of-control insurance costs – a newcomer could make waves. "There's absolutely room for a disrupter," said Frey, but it is not yet clear if any start-up will succeed in helping the industry attract more drivers.

"Drivers are leaving for one reason alone: they cannot make a living in the trucking space," said Conlon. "It's getting harder and harder to do that. The hours, the new emissions standards, all of these are making it harder on the driver to actually make a buck. The brokers, and in most cases the large carriers, are often not treating the driver very well."

No revolution

Looking ahead to the near future, Lau doesn't expect mobile-based freight brokerages to revolutionise the entire trucking industry. They could still make a significant impact, however.

"They're really disrupting the role of the freight broker right now," said Lau. "They're trying to improve the relationship and the image of what a freight broker provides to the industry. They don't want to be the enemy of the shipper or carrier, they want to be there as the middleman and offer a win-win situation for both parties."

That goal cannot be achieved simply be launching a trucking start-up. According to Lau, there's still "a lot of concern/complaining between the different parties when they're negotiating." Thus, mobile brokers must gain the trust of shippers before they will be accepted. "A lot of these companies are struggling," Lau continued. "But the companies that have shown promise – there are only a couple – are really showing the potential of what this could actually provide to the industry. They're still technically freight brokers trying to add in a layer of technology and a new way of reaching out to customers. It's a spin on the freight brokering process."

As expected, mobile devices are leading the charge. Said Frey: "I think everybody running a large trucker company or brokerage is embracing mobile. They're realising that these closed, proprietary systems that used to be in the trucks are broken. They need flexibility with mobile applications, open systems and one platform to do their routing, scheduling, tracking and all that stuff. I think the megatrend of the technology refresh that's hitting the trucking industry is fundamentally changing the way they're doing business."

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