DC Velocity - June 2017

Uber Freight finally hits the road with
brokerage services in Texas

Uber Freight has formally launched brokerage operations in Texas as the first step in its much-publicized plan to revolutionize truck transportation by offering a load-matching service through a smartphone app.

The brokerage unit of San Francisco ride-hailing pioneer Uber Technologies Inc. began accepting loads on a pilot basis several months before it went live with its app in March. It chose to formally start in Texas because of the state’s large volume of traffic, according to Eric Berdinis, Uber Freight’s senior product manager. Berdinis joined the company after Uber bought autonomous truck developer Otto last August for $680 million.

The app has been specifically developed for owner-operators and for fleets of 10 trucks or less, said Berdinis, adding that there are no near-term plans to market it to mid-sized or large carriers. All large carriers use owner-operators along with employee drivers.

Truckers and drivers should expect to be paid twice a week for the loads they deliver, Berdinis said. The carrier and owner-operator are Uber Freight’s customers, he said in a phone interview.

Berdinis confirmed reports that Uber Freight has opened full-service brokerage offices in Chicago and San Francisco and that it has hired an undetermined number of staffers to support the digital operations. Traditional brokers have long maintained that experienced support professionals are essential to not only facilitate transactions but also to be available for assistance in the event something goes wrong in the shipment process.

MARKET SHAKEUP AHEAD?

Since Uber Freight hit the drawing board, there has been much speculation that it will underprice its traditional broker rivals, thus compressing the traditionally hefty margins generated by markups to the shipper. Berdinis did not directly address the issue, saying that “we see ourselves as the next evolution” of truck transportation and that the company is striving to inject efficiencies into the load-matching process. Whether that translates into margin compression for traditional brokers remains to be seen, he said.

It has also been speculated that Uber Freight’s long-term strategy is to build market share through low pricing and funnel freight through the Otto self-driving truck network. Berdinis would not comment on whether there would ever be operational overlap, saying only that the Uber Freight and Otto teams are functioning on separate paths at this time.

Berdinis acknowledged that Amazon.com Inc., which has designs on the freight brokerage segment as part of a broad strategy to develop a vast transport and logistics footprint, would bring immense volumes and its own network to the table. However, he added that Seattle-based Amazon is likely to focus on handling its own freight, while Uber Freight will carve out a strong niche as a neutral provider. “We see ourselves as a Switzerland” in freight brokerage, he said, a reference to that country’s long-standing policy of geopolitical neutrality.

Over the past year, a number of freight brokerage startups have come to market with similar models. What sets Uber apart is its scale—the company operates in 460 cities worldwide—and a blend of IT and operational expertise that rivals can’t match, Berdinis said.

—Mark Solomon

On-demand warehousing and fulfillment company Flexe has launched a next-day ground delivery service in a bid to challenge Amazon’s growing dominance of the U.S. warehousing, fulfillment, and delivery segment.

Seattle-based Flexe, which began an on-demand warehousing service in 2013 and added e-fulfillment last year, will rely on asset-based parcel carriers to deliver goods within a coverage area equal to 98 percent of the U.S. population, according to Karl Siebrecht, the company’s founder and CEO. Flexe does not own or operate warehouses but instead leverages its technology to match the needs of warehouse operators and potential tenants in a “spot market”-type environment.

The Flexe marketplace, which
is composed of 550 warehouses,
now has the geographic density
to make such a large delivery
network “operationally fea-
sible” for e-commerce compa-
nies, Siebrecht said in an e-mail.
It works with 200 warehouse
“partners.”
Flexe made no secret of whom
it is going after, proclaiming
that online businesses now have
a faster option than Amazon
Prime, the company’s popular
subscription delivery service,
which includes unlimited two-
day deliveries for an annual fee.

“Flexe gives them the same network scale as Amazon, allows them to ship products in their own branded box, and gets them up and running in 30 days,” Siebrecht said in a statement.