Problems Uber Might Face
Not everything is bright and sunshine for Uber. Like any other operation, the freight business has its own fair share of obstacles. First, industry experts claim that there has been a shortage of truck drivers in the US. In fact, there aren’t enough truckers as compared to the demand. This translated into the market softening itself and a drop in pricing. So where the company will direct its resources first is a topic to wait and watch.
Secondly, international expansion isn’t going to be easy. Because there are many stakeholders involved they have their own agendas and motives. Satisfying everyone at once through a single platform doesn’t seem likely. Everyone is aware of the never-ending fallout between Uber and the governments and taxi unions. The company’s negotiations with each shareholder will be another big obstacle for Dara Khosrowshahi and its team.
Freight business is also an industry that is dependent on seasonality, and other unforeseeable circumstances. The latest Coronavirus pandemic has affected nearly every type of mobility.
Despite of all , the company said the freight division is in good health. While the revenue numbers aren’t out, Lior Ron, the head of Uber Freight division, said that they continued to see impressive growth and progress despite the market. Surly, the same was acknowledged by Dara Khosrowshahi in an earnings call with investors.
Uber is among the tech companies losing billions of dollars every quarter. But is changing the world in its way through innovation and disruption. Disturb sectors like ride-sharing, food delivery, e-wallet, etc. One of the newest sectors it is shaking is the freight sector. Globally valued at $3.8 trillion, the freight sector is ripe of inteference and Uber Freight is leading the way.
What is Uber Freight?
Uber Freight is an online platform app developed and maintained by Uber for shippers and carriers. It is a platform that connects shippers with drivers and small fleets. Using this platform, shippers can find the right loads faster and get personalized services within the app.
For dispatchers, they use this platform to manage their drivers and operators. In a nutshell, just like Uber digitized and disrupted the taxi industry, it is doing the same for the freight industry. It was launched in 2017 and is available in 48 US states. Internationally, Uber Freight is available in the Netherlands and Germany.
How It Will Change Freight Industry?
The global freight industry is estimated to be worth 3.8 trillion dollars. In the US, it generated $796 billion in 2018 alone, according to the American Trucking Association. Trucks comprise the majority of the movement followed by cargos. But the industry is quite fragmented and its operation is still ancient.
In the traditional sense, shipping companies would use a freight broker as a middleman to gain access to the trucks available and get a quotation. Uber Freight aims to remove the middle man and put power in the hands of shipping companies. Like its taxi booking business, trucks and fleet owners can register their vehicles on to the platform along with availability, estimated delivery time, and price.
Additionally, the drivers will also get to talk with shippers and get information on what they are expected to ship. They can claim their payments right after the delivery has been done by submitting a “proof of delivery”. Then the drivers can search for their new job right inside the app by setting their price, location, and route. This kind of innovation wasn’t possible a few years ago.
On the other hand, it benefits shipping companies too. Only large shipping companies make use of transport management systems. When it comes to small shipping owners, their use of technology is limited to tools like email, spreadsheets, and basic CRM. With Uber Freight, they get a chance to upgrade their operation with cutting edge technologies developed by Uber.
All of this means a more efficient system that makes use of the technological revolution. With wide global adoption, the logistics industry will not be the same again.
Turning the table around
For the company, the Freight might be one of the ways to turn the company profitable. It tried ride-sharing, autonomous vehicle, and food delivery to see profit, but has failed. But experts predict Uber Freight might be the right asset for the company which can bring in profits mainly because freighting business is a huge market and there are very few competitors. The technological expertise of Uber which it has developed for both sides of the marketplace too places it in the right place to solve the problem economically.
With new HQ in Chicago, Uber Freight gets $200 Million Investment
Towards the end of 2019, uber announced setting up a new headquarters in Chicago devoted specifically to its Uber Freight division. Outside of San Francisco, it will be the tech giant’s first engineering hub. The company took over the historic The Old Main Post Office located in downtown Chicago on a ten-year lease. Uber executives including Dara Khosrowshahi along with the mayor of Chicago, Lori Lightfoot were seen at the announcement event.
There are many reasons as to why uber chose Chicago over other cities. Chicago is seen at the forefront of tech innovation. It has a central transportation system and is at the center of the global economic system. Which would serve as an inspiration for innovation for its freight division. Chicago is also home to a world-class education institution from where the company would benefit in terms of high-tech workers and employees. There are plans for hiring over 2000 employees over the next three years.
Uber will be pumping roughly $200 million over 2 years into its Chicago headquarters. This will go towards headcount, technological development, and real estate investment. Besides this, it will also support Uber’s local operation. Its investment in Chicago is only the starting point of its bigger plans.