Amazon Brokerage and Uber Freight: Why 3PLs and Brokers Need to Evolve and Innovate Transcription
Hello everyone, and welcome to Talking Logistics, where we have conversations with thought leaders and newsmakers in the supply chain logistics industry. It’s my great pleasure to welcome back JP Wiggins, co-founder and vice president of logistics at 3G TMS. Today, we’re going to talk about Amazon Brokerage and Uber Freight, and how 3PLs and brokers need to evolve and innovate.
Over the past few years, there’s been a lot of discussion about whether Amazon is turning into a 3PL, and about Uber’s role in freight. Today, there’s no doubt that Amazon is a 3PL as they continue to add planes, trucks, and freight services to their portfolio of logistics capabilities. Uber Freight, according to the company’s S-1 filing, is now working with over 1,000 shippers and 36,000 carriers.
So, what does this mean for other 3PLs and brokers in the market? How can they differentiate themselves in this ever-changing competitive landscape? And how can technology help? These are the main questions we’ll focus on in today’s episode. It’s great to welcome JP back to the program to share his perspective, insights, and advice on this topic. JP, welcome.
JP: Thanks for having me back. This is an interesting topic. There’s been a lot of discussion about it, and everyone has their own opinions. A lot of it is speculative, as we’re looking into the future, but it’s good to talk about it.
Host: That’s true about so many things in supply chain logistics. It’s interesting how many predictions people make today that end up being wrong, and how many things that actually happen weren’t even on anyone’s radar. But talking about it is important, and both Amazon and Uber Freight have made big news in 2019, especially with implications for the 3PL industry. Could you summarize what’s been happening and share your take on what each company is doing?
JP: Sure. Let’s start with Amazon Brokerage. They announced this in April, and if you go to their brokerage website, you can get real-time quotes for freight in the Northeast. But what’s more significant is that they’re locking up truckload capacity. They’re working with mid-sized fleets, not small mom-and-pop carriers, and they’re locking up a substantial amount of capacity exclusively for their distribution network. They’re doing this because they recognize that one of the biggest threats to their growth in North America is carrier capacity. By locking it up and offering dedicated loads, they’re securing their future.
With the excess capacity they’ve created, they’ve started Amazon Brokerage, which acts more like a carrier or 3PL to shippers. Shippers or 3PLs can hire Amazon Brokerage to move their loads. They’re offering both spot quotes and contract rates, and reports suggest they’re operating with very thin margins. So, Amazon is securing capacity and offering it to the market at competitive rates.
Now, let’s talk about Uber Freight. Uber is taking a different approach. They don’t have a distribution network like Amazon, but they’re locking up small, mom-and-pop carriers, those with 10 or fewer trucks. According to their S-1 filing, they’re working with over 36,000 carriers, and what’s interesting is that Uber offers immediate payment to these small carriers, typically within five days, which eliminates the need for factoring.
So, both Amazon and Uber are securing capacity in different ways, and that’s going to impact the rest of the industry. The big question is: What does this mean for the rest of us?
Host: You’ve brought up a great point. When I think about Amazon, their focus on customer experience has driven much of what they do. Several years ago, they got burned by capacity issues, so they started building out their own logistics capabilities, including trucking capacity. Uber Freight, on the other hand, is addressing the challenges faced by small owner-operators and providing visibility and fast payments, which are huge benefits. How do you think these moves by Amazon and Uber will affect the broader industry?
JP: Both companies are waking up the 3PL and brokerage industries. Some large players have already been investing in technology, but generally, Amazon and Uber are making everyone realize that technology is going to play a bigger role moving forward. 3PLs and brokers need to innovate and find ways to be more efficient, productive, and competitive.
If you’re a 3PL or broker, you should view these developments as a real threat to the status quo. You can’t afford to be complacent. Technology is going to be critical, and you need to look at your tech stack and see how it can help you compete. If your technology isn’t up to par, you’ll be left behind.
Host: So, if I’m a 3PL or broker, should I be worried, or is this just hype? Do you think there’s a real risk to the status quo?
JP: I think there’s a real risk. You risk becoming the taxi cab of the logistics world. Amazon and Uber have been moving quietly, but they’re making progress. Brokerage is a tough business, and it’s taken them some time to understand the nuances, but they’re moving forward now. If you’re a 3PL or broker, you need to look at Amazon Brokerage as a potential partner to add capacity. Competing directly against Amazon, though—that’s a tough battle. You need to differentiate yourself by offering a unique service or technology.
Host: That’s a great point. I think it’s a mistake to dismiss Amazon or Uber, as they’ve shown time and again they can disrupt industries. So, what capabilities do you think 3PLs and brokers need to focus on to differentiate themselves in this changing landscape?
JP: It’s all about providing a seamless, hands-off experience. In today’s world, shippers want everything to be as easy as possible. They want zero touchpoints and expect a high level of service. They want to know where their freight is, but they don’t want to be alerted for every minor issue—only the significant ones. Cost will always play a role, but it’s no longer the main factor. You need to focus on customer experience and technology.
If you’re a 3PL, ask yourself why your customers would want to stay with you. What can you do to keep them? If you’re relying solely on cost, you’re going to lose.
Host: Absolutely. I’ve seen similar trends in the industry, where cost used to be the dominant driver of innovation, but now it’s all about improving the customer experience. How can technology help 3PLs and brokers meet these new expectations?
JP: Technology is a huge enabler. It makes everything easier—communication, visibility, and providing insights through data. I’ve always said that 3PLs and brokers are in the technology and analytics business just as much as they’re in the freight-moving business.
Good technology allows you to provide better service to your customers. For example, you can offer scorecarding and performance metrics for carriers, which can lead to cost savings. With better data, you can improve your operations, and that’s what customers are looking for.
Host: That’s a great point. We recently did a survey of supply chain executives, and many shippers said they would welcome more feedback from their carriers and 3PLs, as it would help drive continuous improvement. The need for better data is clear.
JP: Exactly. Better data improves everything, from reducing detention times to improving facility performance. If drivers can get in and out of facilities faster, they can charge lower rates. Uber Freight is even publishing driver ratings for facilities now, and that’s going to be a big deal.
Host: That’s where technology like a TMS comes in, as it centralizes so much valuable data. What advice would you give to 3PLs and brokers today?
JP: The biggest mistake 3PLs and brokers can make is ignoring what’s happening. Over the next 18 months, things are going to change dramatically. You need to assess your technology now, see where the gaps are, and make sure you’re prepared. If you don’t, you’ll be left behind.
Host: I think you’re right. Change is coming, and the next two years will be crucial. Thank you, JP, for sharing your insights and perspective on this important topic.
JP: Glad to be here. Thanks for having me.
Host: Thank you to everyone who joined us. If you’re watching this episode on demand on the 3G TMS website or Talking Logistics, and you have a question or comment for JP, feel free to post it, and I’m sure he’ll be happy to respond. Thanks again for joining us, and we look forward to seeing you on a future episode of Talking Logistics. Have a great day!
