Over the past few years there’s been a lot of discussion about whether Amazon was turning into a third-party logistics provider (3PL) and about the “Uberization” of freight. There’s no doubt today that Amazon is a 3PL, as the company continues to add planes, trucks, and brokerage services to its portfolio of logistics capabilities. And Uber Freight is now working with 1,000 shippers and 36,000 carriers according to its S-1 filing. What does this all mean for other 3PLs and brokers in the market? How can 3PLs and brokers differentiate themselves in this changing competitive landscape? Does technology play a role? Those are the key questions I discussed with J.P. Wiggins, Co-Founder & Vice President of Logistics at 3Gtms, during a recent episode of Talking Logistics.
Amazon and Uber: Locking Up Capacity
So far in 2019 Amazon and Uber have made several moves that will impact shippers, 3PLs and brokerage firms going forward. Hence, I began our discussion by asking JP to provide his insights on what’s happening.
JP notes that in April Amazon announced Amazon Brokerage services. You can now go to their website and get real-time quotes on shipments originating and finalizing in the Northeast. “Aside from that, what they’re doing is locking up truckload capacity, mainly from mid-size carriers, for the Amazon logistics network” says JP. “And it’s a sizeable portion of available capacity.
“The reason behind this is that Amazon is putting billions of dollars into its distribution network and they know carrier capacity is a limiting factor in their growth,” continues JP. “Their way around this is to lock up capacity by giving carriers dedicated loads and they are offering any excess capacity to shippers through Amazon Brokerage at both spot quotes and contract rates.
“Uber is a little different model. They are locking up the smaller ‘mom and pop’ carriers,” says JP. “They are being successful because mom and pop carriers and minority carriers know Uber. They are very friendly to work with, and they pay in five days, so they are serving groups that others may have forgotten about.
“As a result of these two moves, a significant portion of truckload capacity is getting locked up.”
Technology as the Differentiator
What Amazon and Uber are doing is bringing technology solutions to the mid-size and smaller carriers who previously may have been left on the sidelines. JP notes that while larger carriers can provide near real-time load tracking information to shippers due to the ELD mandate, these smaller carriers cannot. Now the Uber app allows them to provide the same visibility.
“If you want to compete with Amazon and Uber, you’ll need to provide the same level of customer service they offer. This requires a technology stack that can provide visibility and easy integrations. It’s providing the ‘Amazon experience’ or e-commerce experience, which means the ability to interact electronically, not manually, and offer a seamless, ‘no-touch’ environment.”
Improving Operations with Better Data
In the past, 3PLs and brokers competed on cost reductions and their tech stack reflects that model. But recent studies show that the real differentiator is the customer experience. “You have to ask yourself why customers will want to stay with you because you can’t rely on cost any more. You’re going to lose that battle,” JP points out. “But you don’t have to go wild on analytics. What 90% of customers want is scorecarding so they can analyze carrier performance by lane. That will lead to cost reductions as well as improved customer experiences. It’s about improving operations with better data.”
Next Steps
JP had lots of other suggestions on how 3PLs and brokers can use scorecarding and analytics to differentiate themselves in the market. He also shared what companies should do over the next 18 months to compete in this new environment Amazon and Uber are creating, as well as what the biggest mistake would be. (Hint: ignoring these trends isn’t an option.) I encourage you to watch the full video for all of JP’s insights and advice on this topic. Then post a comment and share your own thoughts on the impact Amazon and Uber will have on the industry.
