Uber – The OM Blog by Heizer, Render, & Munson

OM in the News: Amazon Explores an Uber for Trucking

“With an eye toward moving deeper into the $800 billion trucking industry, Amazon is quietly building an app that matches truck drivers with shippers,” reports Business Insider (Dec. 15, 2016). The app would work the same as Uber but would be for truck drivers to find shippers that need goods moved. The advantage for Amazon is that it would eliminate the need for a third-party broker, which typically charges a commission of 15% for doing the middleman work. (This is a great article to share with your students when you discuss the Uber Technologies, Inc., case in Chapter 1).

The app will offer real-time pricing and driving directions, as well as personalized features such as truck-stop recommendations and a suggested “tour” of loads to pick up and drop off. It could also have tracking and payment options to speed up the entire shipping process.

This is part of a larger plan by Amazon to become a full-scale logistics company that controls the entire delivery cycle. Over the past year, Amazon has purchased thousands of trailer trucks and dozens of cargo planes while launching new “last mile” services like Amazon Flex that take packages straight to the end customer.

The new service would put Amazon squarely in competition with numerous companies in this space, such as Convoy, Trucker Path, C.H. Robinson, and J.B. Hunt. Unlike its competitors, Amazon has an advantage in not having to worry about demand from the shipper’s side. To make an “Uber for trucking” marketplace work, you need demand from both sides of the equation — shippers and drivers. Amazon already has a giant shipping network and a rapidly growing package volume, so theoretically it shouldn’t be hard to find a load match for the drivers on its platform.

Amazon’s Minneapolis office is expected to have more than 100 engineers by next year working on this project, which is considered confidential. The opportunity is huge. Roughly 84% of freight spending is on trucking, and truck driving is the most common job in 29 U.S. states, but it’s a market that’s been slow to adopt new technologies.

Classroom discussion questions:

Is this a core competency of Amazon?
Why is Amazon entering this market?

OM in the News: Self-Driving Truck Makes a Beer Run

The futurists of Silicon Valley may not have seen this one coming: The first commercial delivery made by a self-driving truck was 2,000 cases of Budweiser beer. This week, Otto, the Uber-owned self-driving vehicle operation, completed its first commercial delivery, having delivered its beer load from Fort Collins, Colo., to Colorado Springs, a 120-mile trip. Otto said a trained driver was in the cabin of the truck at all times to monitor the vehicle’s progress and take over if necessary. At no point was the driver required to intervene.

In recent years, Uber has predicted a future in which you can ride in a self-driving car that will take you where you want to go, no driver necessary. But the idea that commercial trucking could be done by robot is a relatively new idea — and a potentially controversial one, given the possibility that robots could one day replace human drivers. The delivery was indicative of Uber’s larger ambitions to become an enormous transportation network, one in which the company is responsible for moving anything, like people, hot meals or cases of beer, around the globe, at all hours and as efficiently as possible.

An Otto truck on the road, with the driver’s seat empty.

Annual U.S. trucking industry revenue topped $720 billion in 2015, reports The New York Times (Oct. 26, 2016). Anheuser-Busch, for example, delivers more than a million truckloads of beer domestically every year. “We view self-driving trucks as the future, and we want to be a part of that,” says a Busch executive.

Classroom discussion questions:

What are the implications for the logistics industry?

2. Why did Uber buy Otto?

OM in the News: Amazon Moves to Uber-Like Service for Deliveries

Amazon is moving to Uber-like delivery services

“Aspiring delivery drivers take note: Amazon wants you,” writes the Chicago Tribune (Oct. 11, 2015). The e-commerce company has launched Amazon Flex, which will pay $18 to $25 an hour in exchange for delivering packages for Amazon with your car and smartphone. “Be your own boss: deliver when you want, as much as you want,” says its website. The service, available in Seattle, is coming soon to Chicago, NYC, Baltimore, Miami, Dallas, Austin, Indianapolis, Atlanta and Portland. Amazon Flex is the latest player in the “gig economy,” which also includes ride-booker Uber and on-demand delivery service Postmates.

Amazon Prime Now’s 2-hour delivery is free, and 1-hour delivery is $7.99. Shoppers can track the courier using the Amazon Prime Now smartphone app. “Amazon Flex will allow us to ramp quickly to meet customer demand, which is super helpful in a business like Prime Now where we see interesting peaks in volume,” says the firm’s spokesperson. “It could also be helpful during the holiday season, or during sales like Prime Day, where we experience sharp peaks in delivery volumes.” Amazon now uses carriers like UPS and the U.S. Postal Service.

Drivers can choose any available 2-, 4- or 8-hour blocks to work the same day. In the future, Amazon Flex said it might offer opportunities to deliver on bike or on foot. Deliveries can be picked up at a nearby location. “You’ll receive items to deliver in a local radius, based on length of the delivery block you signed up for,” says Amazon. Besides providing hourly pay, Amazon Flex is offering insurance to participants during the time they are delivering. The insurance includes $1 million in commercial automobile liability coverage, and $1 million in uninsured motorist coverage.

Classroom discussion questions:

Why is Amazon revamping its logistics supply chain?
Will students be attracted to such jobs?

Guest Post: The Uberization of Trucking

Our Guest post today comes from Roseanne Stanzione, who is CEO of LaneHoney, the Marketplace for Trucks On Demand

Uber’s taxi service is cool, right? Moving dots on a map tell you the location of the nearest taxi. Hop in and off you go, without handling cash. And now venture investors have placed bets that the $60 billion truck brokerage industry of agents and phones can be disrupted with applications like Uber.

So what is the Uber magic anyway? Three things: 1) set up, 2) transact, 3) done. Uber is first and foremost a logistics application, one that eliminates transaction friction and makes better use of assets. The current truck shortage is the biggest real-time asset problem in America needing a smart, uncluttered answer. The current state of industry technology? Unfilterable bulletin boards, incomprehensible transportation management software that requires training to use, no price information and everyone drowning in paper. It is no wonder 30% of backhauls go empty.

Set-Up is about simplifiying and automating the complexity of a transaction and placing it behind the scenes so that the transaction is front and center. To do that you need great data and handling, standard processes and documents, and of course, real time location. Transact is the real Uber magic. It’s genius Uber Experience (UX) that places the complex stuff behind the scenes and makes it effortless for users to oft in and hit “go.” UX will be a brand new competency required of logistics professionals to compete going forward. Done is realtime location that means trace for mobile dispatch, time-stamped delivery and accrued detention, putting “fuel surcharges” (a catch-all for additional brokerage charges) on death notice. Better visiblilty means actionable data for enterprises, better margins, shorter miles, and the chance to be home for dinner.

Once all this Uber magic is in place, hard to do by the way, carriers get more offers, shippers get faster, cheaper shipments. That broker taking the most out of a transaction with an unknown spread fee becomes a relic.