How Uber and Amazon are transforming the logistics industry

How Uber and Amazon are transforming the logistics industry

The following statistics give an insight into the size and the importance of the logistics industry.

  • The global logistics industry is worth $ 8.1 trillion and is expected to double by 2023.
  • In the USA, the logistics sector represents 8 percent of annual gross domestic product (GDP)
  • The largest North-American logistics company, XPO Logistics Inc., had a net revenue of $4 billion in 2017.
  • According to the Bureau of Labor Statistics, over 5 million people are currently working in the transportation and warehousing sector. Truck drivers account for about 1 of every 5 jobs in the industry.

While the logistics sector is currently booming, to keep up with the current growth, significant changes and innovations are necessary. How else could we transport goods from A to B, coping with the challenges of today – reducing costs, pollution, and increasing efficiency?

Not only are traditional logistics service providers (i.e. UPS or FedEx) working on innovative solutions to overcome this barrier, but also two other well-known companies that are new to the industry: Amazon and Uber. They outgrew their original business model of being an online retailer and ride-hailing app and entered the competition for logistics.

Uber brings logistics into the digital era:

After mastering the innovative model for passenger transport, Uber applied the concept to shipping and developed new applications: UberRush and UberFreight. The applications make it possible to cut out intermediate transport companies or brokerage firms, thus saving the commission fee.

UberRush

UberRush is for last-mile delivery and instead of becoming a chauffeur, freelancers work as parcel carriers. This service is currently available in New York City, San Francisco, and Chicago.

UberFreight

UberFreight is a digital forwarding company connecting carriers and shippers. The platform creates a direct contact between parties as well, providing greater flexibility, cost reduction, and increased efficiency. It also provides an opportunity for the company to tap into trucking, one of the largest industries in the U.S., through which almost 14 billion tons of goods are transported each year.

Amazon’s motivation is to be independent:

Amazon seems to follow a different strategy. With Amazon Flex, Seller Flex, or the Amazon Prime Air program, the retail giant is trying to dominate the supply chain for its own services. As a result, they can reduce costs and become independent from their current logistics service providers. It looks like the company will even go a step further and offer shipping services to third parties not represented on their website; Shipping with Amazon will roll out in Los Angeles in the coming weeks.

Will Amazon actually be able to compete with DHL, FedEx, and other major logistics service providers? Well, they have already achieved many things that at first might have seemed absurd.

The ultimate goal: Automation

Aside from implementing digital and innovative solutions, many see the long-term solution as increasing efficiency in automation. Countless industry leaders, Uber and Amazon, and also Google and Tesla, have devoted themselves to develop autonomous vehicles. Why? Whoever can make the first breakthrough will have a great cost advantage by not having to pay for the driver.

In 2016, Uber bought Otto – a manufacturer of autonomous trucks – and recently the news came out that their self-driving trucks are now delivering freight in Arizona. For autonomous freight forwarding to become mainstream, not only working technologies but also suitable regulations are necessary. Regulations are still far from allowing driverless trucking nationwide but the first adjustments are currently being considered. For example, the Senate Bill 116 in Kentucky would allow truck platooning.

For other ways Uber and Amazon are shaking up logistics and how they will continue to shape the industry, you can find out more in the infographic below!

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