Why Every Logistics CEO Should Fear Uber
I was recently at an invitation-only conference with the CEOs of most of the important logistics providers in the United States. Several wider themes emerged: the good (not great) economy, the emergence of last mile delivery, et cetera. But the most surprising theme for me was the near-universal assertion that Uber will be entering into delivery but is not a competitive threat. Truckload, LTL, small package, and supply chain technology providers all were dismissive. Each had reasons why Uber could not compete in their portion of the supply chain. It’s true that some of these companies are very well protected; for example, international customs brokerages and dedicated chemical carriers are pretty far from the fray. But many will be impacted directly, and all will be in ways they may not expect.
The most straightforward challenge is that Uber’s customer service strategies are raising the bar for everyone in logistics in much the same way that Amazon’s raised the bar for all retailers. As a consumer, when you take an Uber ride, you can: see a picture of the driver, view the route, get a prediction of arrival and drop-off times, rate the quality of the ride, and communicate directly with the driver. Put simply, this is a great customer experience. Not coincidentally, it also keeps costs down for Uber by pushing customer support onto the driver, and it drives quality, as drivers are managed based on customer feedback (we call this the driver’s reputation capital).
As more and more folks use Uber, Lyft, and other providers with this new level of visibility, it will start to become a customer expectation for every type of delivery, whether passenger or package. First for consumers, then for business buyers. How do FedEx, UPS, and all the other logistics providers stack up? Not well. Many of them have little technology, and most do not allow any communication between recipient and driver; some are even prevented from doing so by union rules! How much longer will it be OK to order a $20,000 living room set from Restoration Hardware without this new level of visibility? Not long. How long until 3pl customers begin asking for this level of visibility? It’s already starting to happen.
As Uber enters delivery, they may not be a direct competitor for every logistics provider, but they are raising the bar for all. Providers that can rise to the higher-visibility challenge will be at a competitive advantage against those that can’t. Logistics will have an altered competitive landscape dependent on investment in technology and a focus on the end recipient.
Uber as a more direct logistics competitor is also emerging. Through their Uber Everything brand, Uber is beginning to offer delivery via their pool of two million drivers. I’ll cover how Uber is entering the logistics space in another post. In the meantime, if you’re a logistics CEO, CTO, or CIO, you’d better start looking for solutions to match the Uber level of visibility, as that expectation is coming to your market. And for some, Uber itself is coming as well.