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Companies compete to be ‘Uber for trucking’

Freight matching technology is coming to the transport sector.

Dozens of companies are pursuing the opportunity to be the “Uber for trucking” - including Uber themselves, via their new Uber Freight division, launched just last month.

At least $1 billion has been committed to developing such systems – and that’s only counting the known investments. 

The premise is sound: trucks move empty because often it’s all too hard to find the right freight to keep them full. It’s a search problem – and a tempting target for software developers, particularly given the fact it enjoys that rare combination of being a problem that’s both big, and neglected.

The trucking industry accounts for about 4 percent of New Zealand’s economy, permeating and supporting all sectors. And globally, businesses spend approximately US$2 trillion on moving their stuff each year. 

It’s also a sector that’s been left to gather dust. The way cargo finds the right truck hasn’t changed since the advent of Excel and email 20 years ago. Statistics show that trucks are still averaging the same rate of empty kilometres they have since at least 1990 – marking over a quarter century of stagnation.

The easy comparison to Uber falters here. The taxi industry’s problems came down to, largely, a combination of poor customer service and high costs, further fuelled by legal protectionism.

In contrast, trucking is already deregulated, service levels are high, and choice is abundant.

What trucking struggles with most is the speed and cost of finding cargo for the return trips to bring the truck back home. Statistically, trucks leave full, but return empty – and the outbound drive is full not because of the trucking company, but because modern businesses now procure or distribute in full truck quantities, or rely on consolidating companies to group their loads.

The companies investing in this area aren’t all racing to the same finish. While everyone agrees that the trucking sector needs a new way to match cargo to vehicles, the solutions they’re proposing generally fit into one of three very different categories – differences that will have far-reaching consequences.

One possibility is that most transport in the future is coordinated by a powerful central broker, exactly as personal transport is coordinated by Uber. This massive broker would have a structure of separate and opaque pricing for the two sides, and would make its margin on their difference.

A second vision would see the incumbent logistics companies build their own technologies, and thus improve their ability to fill vehicles in their control. This would lead to a Balkanised future, with dozens of powerful logistics companies instead of only one. Many industries behave this way, where larger companies can invest in technology, create barriers to entry, and consolidate – media being one example, where consumers are matched with advertisers. Trucking may one day be dominated by a handful of larger, tech-enabled, regional monopolies, in much the same way that Google and Baidu dominate their respective regions for digital marketing. 

The last vision, one currently being trialled in New Zealand, is that of matching as a neutral infrastructure. Instead of imagining the matching technology as a magic wand commanded by a single company to increase its own profits, it might turn out to be ubiquitous and cheap, like plumbing.

Plumbing, trash collection, and electricity are centralised utilities that lift all participants in the economy. Likewise, matching freight with empty trucks might become an open service paid for via a small “success” fee rather than through a buy-sell rate difference. The rise of commodity exchanges, overtaking powerful commodity agents, is a parallel example.

Whatever happens, we can expect change. Too much is at stake to let a twenty-five-year history of stagnation repeat itself.

Jonah McIntire is one of the founders of TNX - a marketplace for transport. TNX is a New Zealand technology company with global aspirations, that's innovating the transport sector. 

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