Uber Enters the Freight Trucking Market With an On-Demand Service

Uber has entered the full-load freight trucking market with Uber Freight, an on-demand service designed to streamline the way drivers connect to companies and businesses that need shipping.

The program ran in testing and development on routes between Dallas, Houston, San Antonio and Austin for van and refrigerated deliveries before a nationwide rollout.

The service, run through a cloud-based app, functions similarly to the ride-hailing service that made Uber a household name. Truckers create an account and provide basic information about their rigs and desired routes, at which point they are added to a driver database. Shippers add the specifications of the jobs they need fulfilled, and qualified drivers can accept assignments at their convenience with the click of a button. Prices are listed upfront in either contract or spot rates, and payment is guaranteed within seven days, as opposed to the industry standard of 30.

Businesses ranging from small independent outfits to Fortune 500 companies have partnered with Uber Freight. Uber hopes that combining upfront pricing and digital technology to connect drivers to shippers will make it a more attractive brokerage vehicle than the current system, which some feel is antiquated.

The operations manager for Pacific Northwest Motor Freight Lines Inc., Carleton Morrow, noted that brokers still rely primarily on paper logs and bills of lading for recordkeeping, and phone negotiation is common to determine pricing.

"Some even rely on load boards that are literally boards on walls in truck stops."

Part of Uber's global success has been its ability to easily transform the consumer into the contractor.

"Uber's disruptive impact has been almost entirely in its easy connection of underutilized assets with demand. That's the start and finish of why it has swept across the transportation landscape," said Michael Ramsey, an analyst at Gartner Inc. "An Uber for hauling stuff is sensible and really builds on what trucking companies have tried to do in their own ecosystem to ensure that trucks are full as often as possible."

Criticism and competition

Uber's move into freight has not been without criticism from industry insiders.

"We do not think that applying the Uber matching technology, used to displace the taxi industry, works well in the freight world," John Larkin, a logistics analyst at Stifel Financial Corp., said to Trucks.com. "Underutilized capacity isn't just sitting around as it is in the automobile world, and each load of freight is a little different than every other load. There are somewhere between 40 and 70 different factors that need to be considered in most truckload brokerage transactions."

Larkin is also concerned that Uber Freight could affect profit margins across the industry.

"Their stated claim that they would be happy with margins at one-third that of competitors is the point of concern. Those skinny margins would eventually expand due to their potential access to the inexpensive capacity."

Even amid concerns of potential market-disrupting effects, there is room in the $700 billion freight market for on-demand trucking services, as they account for only 5 percent of the total market share, according to Wallace Lau, a commercial vehicle industry analyst at Frost & Sullivan.

A growing field of on-demand and digital freight-matching companies — Flexport, Transfix, Loadsmart, Convoy, Doft, Cargo Chief, Parade, Ship Lync and others — continues to push real-time load tracking and faster payments to recruit drivers to their platforms. Uber Freight launched without those incentives, but offered features like digital document uploads and guard-station instructions, according to Eric Berdinis, an Uber senior product manager.

The takeaway for owner-operators and carriers is clear: the days of negotiating every load by phone are giving way to apps that show the rate upfront and pay you fast.