Above the Fold: Supply Chain Logistics News (July 17, 2020)

By Adrian Gonzalez

We had a family celebration planned for this coming January. More than 100 people, kids, adults, and seniors, indoors, hotel ballroom, music, dancing, eating…

Not going to happen.

How far out should we plan to have such a celebration? My wife and I wrestled with that question and we settled on June 2022. A pushout of 18 months.

By then we hope to celebrate not only the original occasion, but also the return of hugs and kisses and high-fives and dancing, all of us crowded together, smiling for the cameras,

Again.

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Until then, here’s the supply chain and logistics news that caught my attention this week:

The Future of Uber Freight

For Q1 2020, Uber Freight reported $198 million in gross bookings, a 55% increase from Q1 2019. However, Uber Freight’s EBITDA was negative $64 million in the quarter, a 121% increase from Q1 2019. Losses growing at more than twice the rate of bookings. How sustainable is this model?

Back in May, the Wall Street Journal reported that Uber was “re-evaluating cash-burning businesses such as freight and autonomous driving.” This set off a lot of speculation about the future of Uber Freight. Will Uber continue to invest in this division? Will it sell it or wind it down?

Now here we are in mid July, and as reported by Bloomberg, Uber is “in talks with investors interested in taking a stake in its Uber Freight division, according to people with knowledge of the matter.” Here are some excerpts from the article:

[Uber] held discussions to raise $500 million in a funding round that would give its freight business a standalone valuation of about $4 billion after the deal, said one person, who requested anonymity because the talks are private. No transaction has been finalized, and the terms could change.

Meanwhile, Uber Freight continues to strike partnerships with transportation management system (TMS) vendors, such as the announcement last week with Blue Yonder. According to the press release:

Uber Freight will integrate directly within the Blue Yonder LuminateTM Platform to power the dynamic pricing discovery solution to provide instant quoting of real-time market-based prices and instant booking capabilities up to two weeks in advance of loads.
Using an API, the dynamic pricing discovery solution will enable businesses who use the Blue Yonder transportation management solution to tap into automated execution, dynamic routing guides, and Uber Freight’s capacity network of over 50,000 freight carriers in the U.S. and Europe.

What is the future of Uber Freight? I have no idea.

But as I wrote last year in “What Digital Freight Isn’t,” it doesn’t matter if you’re a startup or an established provider, the formula for success in the freight industry remains the same and it depends on three things: (1) you have to build a critical mass of shippers and carriers and drivers; (2) you have to remember that transportation is not a commodity and that relationships matter (and take this reality into consideration in your operating model); and (3) you have to measure and control the quality of the end-customer delivery experience.

It also depends on one more thing: being profitable, preferably sooner rather than later.

Food Charities Reset Logistics for Covid-19 Era

“Food charities are coping with shortages of some consumer goods, a crush of donations of others and soaring demand as they reset logistics for the Covid-19 pandemic era,” writes Jennifer Smith in the Wall Street Journal.

The article highlights some of the challenges that Blake Thompson, Chief Supply Chain Officer at Feeding America, discussed on Talking Logistics a few weeks ago. “Our food banks have reported increases of more than 60% in their food needs,” Blake said. “Because of the pandemic, our food banks [200 across the country] have had to be creative in terms of overcoming distribution challenges due to agencies shutting down, the need to put in place low-touch or no-touch distribution methodologies, and a decline in volunteers.”

I encourage you to watch the full episode for more insights on this topic; you can also read this post for some highlights.

If addressing food insecurity is an important cause for you, and you’re a supply chain practitioner, there’s an easy way you can help: join our Indago research community. Feeding America is one of the charities that we support. It’s a win-win value proposition: you receive valuable market research that helps you make smarter business decisions, while our charity partners receive valuable donations that help them make an extraordinary difference in lives every day.

E2open: The Evolution of Software Pricing Models

A few weeks ago, E2open announced that it was offering in-transit visibility to all clients as part of their current subscription. This week the company went a step further by announcing that it’s providing clients with “unlimited users for all newly subscribed applications, instant access for all ecosystem partners and no ongoing connection or data transmission costs.” As Michael Farlekas, president and chief executive officer of E2open, explains in the press release:

“The removal of these barriers allows all internal and external users across a client’s extended enterprise to benefit from E2open’s intelligent applications. This makes it easier for clients to use the full range of external data from all their partners to make better business decisions. While neither data nor applications provide much benefit on their own, together they generate immense value for our clients. This change accelerates the wider use of applications with a broad range of data to create more value faster to clients.”

What we’re seeing here is the ongoing evolution of software business models. First we went from on-premise deployments with license and implementation fees to cloud deployments with subscription fees. Today, particularly with network-based solutions, part of the objective is to increase the number of participants on the network, especially from the long tail of supply chain trading partners. The more participants and data on the network, the greater the network effects possible.

Advancements in technology, such as APIs, RPAs, and “smart email” apps, are removing some of the technical barriers to network connectivity. E2open is now looking to remove some of the financial barriers by changing its pricing model. How effective will this change be? Will others follow and change their pricing model too? Time will tell.

And with that, have a happy weekend!

Song of the Week: “The Flow” by The Fixx