The Uberization of Freight Brokerage
Twenty-five years ago, we called a taxi when we needed a ride from the airport, went to the restaurant to get our takeout, and rang up a carrier or third-party logistics (3PL) provider if we had shipments to move. The mobile app industry has changed all that, playing to the consumer need for instant gratification with fast ride apps like Uber and Lyft, or food delivery apps such as Seamless and Grubhub.
Freight brokers have acted as intermediaries between shippers and carriers for decades, helping shippers to find and book available cargo space. Modern 3PL’s also broker freight as part of their broader transportation management portfolio.
It was only a matter of time before someone made an app for freight brokerage. Mobile freight brokerage will account for $26.4 billion of trucking and freight revenues by 2025, according to recent research by Frost & Sullivan. Uber Freight and Convoy are currently dominating the headlines in this space, but other competitive apps will no doubt find ways to make their mark on the logistics sector in years to come.
This blog post will discuss the advantages and disadvantages of these apps as they continue to make their mark on the industry.
Advantages of Mobile Freight Apps
An extension of the load boards commonly used to manage the spot market, mobile freight brokering apps offer a number of advantages. Some of the most notable benefits provided by these apps include:
- Access to owner-operators. Shippers are faced with a trucking capacity crisis every few years, making it more important than ever to find ways to connect with a larger pool of carriers. Digital freight brokerage been a particular boon for independent owner-operators and small carriers, who may otherwise operate under the radar and struggle to connect with new customers.
- Cutting out the middle man. When a shipment needs to move right now, an app-based freight marketplace offers a way to find a nearby empty truck to put it on. As with load boards, spot market shipment pricing will typically be lower and non-negotiable, speeding up the booking process.
- Faster interactions. Simply put, truckers usually get paid faster using digital freight brokerage apps. For example, Uber Freight guarantees payment within a week and Convoy offers payment within 30 days or faster under certain programs. This is opposed to standard shipper or intermediary payments, which carriers often have to float for 90 days or more.
Disadvantages of Mobile Freight Apps
While these apps offer the benefits above and many more, there are a number of drawbacks and challenges standing in the way of growth for this technology. Some of these include:
- Trust and relationships. As was the case with load boards, it’s difficult to foster ongoing relationships when booking on the spot market. Business dealings are often short and transactional, and shippers typically have little idea who is moving their cargo.
- Regulatory compliance. While the major apps offer location tracking and information about the truck and other relevant equipment, they don’t offer much else in the way of information. For example, there’s no way to see if the driver is compliant with Hours-of-Service. This one cuts both ways as the apps generally require carriers to provide proof of liability and cargo insurance as well as copies of any required permits or registrations.
- Liability issues. Using a mobile app to book shipments doesn’t come with the same contractual clarity as a relationship with a freight broker or 3PL. Mobile booking can be unclear as to who is responsible for late, damaged, or lost shipments. This uncertainty, combined with the potential for regulatory violations, may have a negative impact on insurance rates over time.
Transportation Management from Phoenix Logistics
Convoy, Uber Freight, and similar apps shouldn’t replace your partners and vendors. As with any new technology, mobile freight booking apps should be used carefully and implemented as a component of a larger transportation management strategy.
Phoenix Logistics offers end-to-end transportation management and logistics brokerage services. We can help you source affordable and reliable carriers for any purpose, ranging from raw material transportation to finished goods delivery. If you have questions about how the uberization of freight may impact your supply chain management strategy, feel free to contact us.