Transportation markets often tighten with little warning, leaving shippers unprepared and forced to scramble for short-term solutions. Such was the case as US trucking capacity tightened significantly in recent months.
“Trucks are harder to find and more expensive than ever before,” Jeff Tucker, CEO of the 3PL Tucker Company Worldwide, said in September. Capacity is just as difficult to find now as the year winds down.
On the demand side, the surge is real, driven by US economic strength, illustrated by heightened inventory levels and continuing growth in consumption and factory output. The American Trucking Associations’ advanced seasonally adjusted For-Hire Truck Tonnage Index, reflecting the change in tonnage actually hauled by the fleets before seasonal adjustments, was 10 percent higher in October versus a year earlier, reflecting “a much stronger freight market,” ATA Chief Economist Bob Costello said.
But the trucking capacity crunch isn’t simply a story of existing capacity unable to cope with demand. Nor is it just related to the looming ELD mandate that could eliminate 2 to 5 percent of truck capacity or more, depending on who you talk to. Instead, it’s revealing the extent to which available capacity is out of reach for many shippers who need it.
Most large shippers responsible for millions of shipments annually rely overwhelmingly on relatively few large trucking companies as their main suppliers. Only infrequently do they reach into the ranks of smaller truckers in search of capacity. Some large companies have successfully built networks of small companies, but they’re the exception. And although larger shppers don’t normally tap into small fleet capacity, the ranks of the smallest truckers continue to grow. At the JOC Inland Distribution Conference last month, Tucker called their growth “astronomical.”
“In the last four years, we’ve seen 93 percent growth in companies with one to six trucks,” said Tucker, who is also CEO of risk management company QualifiedCarriers.com. “How many big carriers would like to get their hands on those drivers?” Technology is giving owner-operators the ability to not just get a backhaul, “but the next haul and the next haul after that,” he said. “Drivers are more knowledgeable and with better tools than at any time in history.”
This is precisely why the arrival of Uber into the trucking market this year seems well-timed and possibly transformative. Its strategy, unveiled in May, is focused on bringing small and independent truckers into its ecosystem by making it as easy for a trucker to find a load as it is for a passenger to hail a rideshare using the Uber app. Unlike the ride-hailing app, where the buy side is consumers tapping on smartphones and finding a ride, the buy side is shippers sourcing capacity the way they normally do today, i.e., through tools such as TMS systems.
The vision isn’t the logistics director booking loads while on vacation with the kids. Instead, the focus of the famous Uber user experience is on the driver, allowing him or her to quickly find and confirm a load and get paid. As the company describes it, “We take the guesswork out of finding and booking freight, which is often the most stressful part of a driver’s day. What used to take several hours and multiple phone calls can now be achieved with the touch of a button.”
The idea would seem to have potential. Many one- to six-truck fleets aren’t connected to freight brokers, JOC senior editor Bill Cassidy says, which is why, despite the rapid growth of truck freight brokerage firms such as Echo Global Logistics and Coyote Logistics into multibillion-dollar enterprises over the past decade, there is still an opening for additional companies to unlock small fleet capacity for large shippers.
“In many cases, the only technology the small truckers have is a smartphone,” Cassidy said. “I expect other brokers and logistics companies to up their game in response, providing more tech support to smaller and smaller carriers.”
Stories are coming to light of large shippers tapping Uber to access small fleet capacity. After Hurricane Harvey hit the Houston area in late August, Niagara Bottling, a shipper of 700,000 truckloads annually, turned to Uber. Late in the day on Friday, Sept. 1, two days after the hurricane struck the Houston area and a time of the day and week when capacity typically dries up, Niagara was able to book and dispatch 127 truckloads of bottled water into areas devastated by the storm. The average time it took Niagara to book a load that Friday, from the time it appeared on the Uber Freight app until it was accepted by a driver, was 34 minutes, Cassidy reported.
And Niagara isn’t just using Uber for exception loads like those emergency bottled water shipments. The company said Uber is bidding on its freight in all lanes and all types of situations.
Although there are differences in how Uber’s ride hailing and trucking businesses function, one aspect is identical: changing perceptions about finding transportation. Before Uber, who would have thought of flagging down an independent, part-time driver using an app? But for millions of customers, it’s completely normal.
Similarly for larger shippers, Uber Freight is challenging long-held assumptions about finding capacity. At a time when capacity is harder to come by, that is potentially revolutionary in the US and beyond, given Uber’s well-known global ambitions.