The Rise of Digital Freight Brokerage: How Uber Freight Works

By July 30, 2019 Parcel Market Trends
what is uber freight and how does uber freight work

The concept of Uber is well accepted in the United States. Using an app, a person seeking a ride inputs their ride request information. Almost instantly, a price quote pops up, sometimes with several options. The rider accepts the service with the best fit and can track the car’s arrival at their door. During the ride, they can track it to the destination via GPS in real time. Fast payments and easy payments are a hallmark and consolidated in the platform. Sounds easy? It is.

Uber liked the concept so much, it spread its wings, expanding the concept into Uber for trucks. What is Uber Freight? Uber Freight launched in May, 2017. Using the technology platform (via Uber Freight app or website), shippers can input load details into the system. Truck drivers or dispatchers provide market prices and agree to the terms, and within minutes, they can make a match. 

Uber is not the only service of this type, though it’s so well known that it’s frequently substituted for the generic term “ride-sharing service.” Just the same, Uber Freight is not the only digital freight brokerage service. Along with the Uber Freight app, digital freight brokerage companies with smartphone-enabled apps include Transfix, Loadsmart and Cargo.

 

How Digital Freight Brokerage Works

 

The technology platforms like the Uber Freight app allow shippers and truck drivers to match needs and services, to ultimately deliver the freight where it needs to go on a one-time basis. Shippers input information on the pick-up spot, the weight and number of pallets, the destination, the timing, and other pertinent details. Truckers are happy because they receive fast payments, within several days to a week.

Once the freight is picked up, shippers can monitor their shipments online in real time. And on delivery, Uber Freight provides a proof of delivery photo along with a photo of the signed bill of lading, stored on the shipper platform. This simplifies the paperwork and requires no faxing.

Digital brokerage services remove the human middle man – the broker – though the companies have customer service available and rely on that good service to stay in business. Instead of brokers on the phone playing matchmaker, the technology platforms act as the broker. Of course, the companies have freight brokerage licenses. They vet a trucking company like a traditional broker would do. 

Uber Freight’s vetting, for example, makes sure that the trucking company has the proper inspection and safety history, as well as the equipment needed for the Uber Freight requirements. As part of the Transfix onboarding process, carriers and drivers need to provide all compliance information. Once in the system, the trucking company can bid on any proposals that meet the criteria.

 

Who Needs Digital Brokerage? 

 

The rise in digital freight brokerage comes on the heels of a growing truck driver shortage. That’s caused the trucking company prices to rise and it’s delayed some shipments in the supply chain. Shippers with smaller or less regular hauling needs are at a disadvantage, in that they need to rely more on spot market prices. Without long-term contracts locking in a price and guaranteeing capacity, these shippers are at risk of big pricing fluctuations and shipping uncertainty. 

Fortunately, in 2019, the capacity demands eased up somewhat from the previous few years. DAT Solutions tracks demand and capacity in their load-to-truck ratio, the ratio being the number of loads posted on their DAT Load Boards to the number of trucks posted. In June 2019, 3.13 loads were posted for every truck, down from 6.29 in the same month in 2018 and 4.4 in June 2017. That is good news for shippers, but the data is an average across the country, and some markets, lanes and directions have more difficulty than others.

The Uber Freight platform focuses on small and medium size shippers in the supply chain. Shippers in these markets may not have their own transportation management systems to help manage their freight. Some rely on paper, email, Excel spreadsheets, and fax service instead. The digital shipper platform can improve the company’s business practices and help bring their transportation needs into the modern age.

While the focus is on small and middle size markets (owner operators and small fleets), digital freight brokerage companies are used by some large shippers as well, who supplement their needs with additional capacity. Land O’Lakes, for example, was an early adopter with the Uber Freight platform. Anheuser-Busch works with almost all the digital freight brokerages.

The smaller start-ups are forging a new path with shipments online, citing the large traditional brokerage firms as their competition, rather than seeing each other as the main competition. Large brokers, some of whom are also carriers, are investing in the technology and jumping into the field as well. J.B. Hunt now offers a transportation management system that allows shippers and truck drivers or dispatchers to make a digital match. Even Amazon is getting into the digital freight brokerage business in the supply chain.

 

Pros and Cons of Digital Freight Brokerage

 

For shippers currently using a manual process, the digital freight brokerage service can easily streamline the booking process, saving time and effort. Some of the services, like Uber Freight and Amazon, are cutting their prices to gain a market advantage, which is good for the shippers in the short run.  

Rather than relying on a human broker, who may not be available during some less traditional business hours, the digital services offer 24/7 access for both carriers and shippers, allowing matchmaking at a time convenient to the user. Some services offer rating services as well, making it easier for both sides to see how the other is rated by peers. 

Automation can increase efficiency, eliminating the manual and clerical process that has not been traditionally efficient. Typically, the brokerage process involves phone calls, waiting, more phone calls, faxing and other paperwork. The digital matching process reduces costs for shippers, as it decreases the labor costs on both sides to find and book a carrier.

Algorithms like Convoy’s use artificial intelligence to learn a truck driver’s behaviors and preferences, so it can recommend more appropriate loads to take on. Plus, pricing is transparent for shipments online and easy to understand, without requiring a third party to fax over information or channel it. 

The downside for now is that these brokerages offer full truck load capacity only. They offer dry van, reefer or flatbed options, but may not have the specialty services required by a shipper. It’s also harder to establish a relationship with a carrier using a one-off service.

 

The Future of Digital Freight Brokerage

 

One advantage for everyone is that truck drivers can be more efficient, letting them book loads on return, so they’re not driving empty miles. The American Transportation Research Institute estimates that more than 20% of miles driven by trucks are “empty miles.” These are miles that could potentially be used to haul freight, but it’s often tough for carriers and drivers to coordinate the return loads.

Convoy announced a new feature this year called Automatic Reloads, which uses an algorithm to coordinate and book loads in multiple segments, with convenient locations. This can be done when one load is booked. Truck drivers can accrue more billable miles and minimize the time between their hauls.

This digital freight brokerage industry is in its infancy. In Uber Technology’s recent IPO filing, they cited the American Trucking Association’s statistics that the 2017 U.S. trucking market was $700 billion, of which the brokerage portion was $72 billion. Uber Freight estimated that their 2018 bookings were $359 million, only 0.1% of the total trucking market. And they expanded into Europe in 2019.

The interest is already there. Even while focusing on small to medium size businesses, 1,000 shippers signed on with them, including giants like Colgate-Palmolive, in addition to the previously mentioned Land O’Lakes and Anheuser-Busch. More than 36,000 carriers contracted with Uber Freight, representing 400,000 drivers. Transfix boasts of clients like Target and Unilever.

In a sign of acceptance of this newer booking system, SAP Logistics Business Network integrated the Uber Freight platform into their system, which is used by carriers and shippers, as well as freight forwarders and other types of logistics partners. They use it to share insights, data and to manage freight.

Digital freight brokerage is part of the transportation as a service (TaaS) industry. Frost & Sullivan predicts that TaaS will rise to $79.42 billion by 2025, with digital freight brokerage encompassing $54.2 billion of that. TaaS involves telematics used to capture and transmit driver and vehicle performance data, which can be used for monitoring driver or truck safety, and truck efficiency. Currently the TaaS market is $11.2 billion. 

 

Shipments Online and Shipware

 

Sometimes a shipper needs a full truck load delivered and sometimes they just need to send a handful of packages. Automation has many ways to save shippers money, streamline the process of choosing a carrier and service, and allow for management of the shipments online. 

Some companies help shippers choose the best shipping service based on variables like location, weight, package size, contents, shipping speed or delivery date. The right service for the right package can have a big impact on the bottom line. So can negotiating the right contracts. A shipper doesn’t need to have exclusive contracts, but they should be wise about what factors can be negotiated with each carrier. 

Shipware can help. After analyzing a shipper’s data and contract details, our experts can provide negotiation tips and coaching. While many companies have skilled negotiators, the executives might not have the experience or benchmarking information to understand what variables are open to negotiation, and by how much.

Shipware staff members have more than 200 years of combined experience as carrier executives, with an insider perspective. Contract negotiation fees are self-funded from the savings, so companies are not spending their hard-earned capital. Shipware wouldn’t provide its services via this model if it weren’t a win-win.

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