David Heller, vice president of government affairs, Truckload Carriers Association (TCA), recently sat down with CX North America to share his views on Uber Freight, freight-matching platforms and other topics pertinent to the trucking industry. TCA represents 700 companies in 48 U.S. states and Canada. Its members collectively own more than 200,000 trucks and generate a combined annual revenue exceeding $20bn.
Q: Can Uber Freight compete with established operators, many of whom have been spent decades perfecting their service offering?
Heller: Certainly, if Uber is to make the necessary inroads to take on larger third-party logistics providers, it will take time, patience and money. Take the four largest 3PLs, for example. According to Armstrong & Anderson Associates, global logistics giant DHL records annual revenues of over $29m, Kuehne + Nagel’s gross revenue tops $21m and DB Schenker, another 3PL leviathan, is not far behind at $17m. These figures illustrate the enormity of the task ahead for Uber.
Second, I think that experience counts in the freight business. Just ask any of the several thousand members of Truckload Carriers Association. Many have built multimillion-dollar businesses from nothing, and the knowledge and experience they have accrued over several decades, which has been passed from generation to generation, have proved invaluable. For that reason, Uber may, at first, struggle to make headway.
Uber’s progress also could be stymied by slow take-up, regulation and infrastructure. Fully autonomous vehicles, for example, are not likely to become commonplace for several decades. In a recent report, IHS Markit predicts that there will be 21.5 million vehicles on the road by 2035. But let’s not forget that each year carmakers produce 82.9 million conventionally powered automobiles. Perhaps most important, most of the vehicles in these statistics will be cars, not trucks. And, finally, I am not aware of any forecasts currently available for self-driving trucks.
Third, the connected V2V and V2i landscapes that autonomous vehicle technology needs to flourish are yet to be created. While the U.S. Department of Transportation is piloting three connected vehicle projects in New York, Tampa and Wyoming, it may be many years before our members are able to actually make use of these connected real-world environments.
Furthermore, Uber also will have to contend with lots of red tape. As the technology is in its infancy, there are very few standards and laws that have been passed around autonomous driving, and it may be the case that this innovative technology will have to wait for federal law to catch up before self-driving trucks can be rolled out.
But, I believe in the long term, Uber, which is worth around $70bn, will be able to overcome these hurdles and its Uber Freight business will be a success.
Q: How is regulation creating uncertainty for TCA members and 3PLs in general?
Heller: Currently, there are more questions than answers. I think it is very important that the industry and government address them through member organizations like ours before comprehensive legislation is drafted.
Collectively, we need to tackle some of the basic questions. First, how do we refer to the person in charge of the vehicle? Is he or she a driver, a pilot, an engineer or an operator? And, more important, what is the role of the persons sitting at the controls of the truck? Do they need to be sitting at the steering wheel at all times, or, when safely on the interstate, will regulation allow them to relax in the sleeping berth section of the vehicle? And, when one day we reach SAE Level 5, which is full automation, will regulation free the way for the drivers (or pilots) of tomorrow to operate several vehicles at a time from a remote location, potentially thousands of miles away from the actual truck or trucks?
Regulators are currently establishing the basics. The White House, for instance, released a set of guidelines for self-driving vehicles last autumn, but the document does not really include any truck-driver-specific guidelines, such as where the vehicle can be operated and the number of hours a driver can operate a self-driving vehicle without taking a break.
Second, there is little to no regulation in place that pinpoints when exactly a driver relinquishes and regains control of a vehicle. Would the driver be responsible for the self-driving truck in urban and metropolitan areas, for example? Would he or she then cede control of the vehicle when it enters an interstate?
Third, if a highway patrol officer decides to pull over the autonomous vehicle when the driver is sleeping, how is that done?
Fourth, as self-driving trucks will share the road with other traffic, what safety inspection measures must be in place pre- and post-trip?
Finally, while the new legislation makes an attempt to enforce regulation across the whole country, there are still some states where it is against federal law to operate an autonomous vehicle. According to the National Conference of State Legislatures, as of 2017 only 11 states had passed legislation specifically related to autonomous vehicle legislation. But the law is muddled and mired in confusion. Just because a particular state hasn’t enacted a law addressing self-driving vehicles doesn’t necessarily mean that it is illegal to operate an AV in that state. There needs to be much more clarity here.
What is clear, though, is that the technology is being developed at quite a pace and, without a doubt, autonomous vehicles — and the discussion surrounding them — is here to stay.
Q: Uber Freight’s unique selling proposition isn’t solely centered on fully autonomous fleets. Its future success also will depend on successfully negotiating the freight industry’s mosaic-like supply chains. And, these networks are more complex than the supply chains involved in Uber's ride-hailing apps. To what extent will it cope?
Heller: The supply chains that Uber will need to master and negotiate on a daily basis are indeed as multi-layered as they are circuitous. These complex networks have been built and developed by carriers, forwarders and brokers, the architects of the transportation industry.
Uber Freight may struggle at first to truly understand them. For that reason, at least in the early days, I don’t see Uber Freight’s operation impacting brokers and forwarders. But, in the long-term, it will affect carriers because Uber Freight wants to build a parallel model: the USP [unique selling position] being its autonomous vehicle offering.
I expect at first, however, that Uber Freight will find it challenging to implement its business model. And, until it truly understands and gains total visibility of the intricate supply networks, it may encounter dead mileage and empty loads.
But, in the mid to long term, this may change, if and when, Uber becomes a more established player, which I think will happen.
However, that said, the fact that it may not be able to tap into intelligence and collaboration brought about by third-party brokers and freight exchange networks may put it at a disadvantage.
Q: What will be the positive impacts for your members? Increased safety? Driver shortage and retention?
Heller: Within TCA, safety is at the heart of everything we do. It is not just at the forefront of our members’ minds, but also the number one goal of the U.S Department of Transportation. In October 2016, it announced an ambitious target to eliminate all fatalities on America’s roads by 2046.
If Uber’s vision of autonomous fleets becomes a reality, and providing the technology filters through to all the different sizes and category of vehicle, certainly that would help the U.S. Department of Transportation and its partners to realize its Vision Zero fatality objective.
However, I think it would be an exaggeration to say that Uber Freight could one day alleviate driver shortage.
According to the American Trucking Associations, 3.5 million men and women make a living driving trucks across America. But we know that the industry needs many more drivers, both now and in the future, to move the 10.5 billion tons of freight across North America. Uber Freight, even if it makes an immediate impact, cannot hope to address the shortfall of drivers.
Instead, Uber’s activities will add another layer to the debate. In 30 years’ time, there could be two classes of driver — the one who is qualified to operate a self-driving truck and the one who isn’t. So, the industry will have parallel requirements and skillsets.
But, even when we eventually reach SAE Level 5 automation, I believe there will always be a need for a skilled person in the cab because these trucks are sharing the road with cars, motorcycles, bicycles and, in some cases, pedestrians.
Q: What will be the negative impact? Surely, there is a threat to TCA members’ livelihoods if Uber’s ultimate goal is autonomous fleets?
Heller: Certainly Uber’s business model will have a major impact on the 3.5 million U.S truck drivers over the long term. Exactly what effect it will have is very difficult to forecast. I have read many reports, with each one publishing varying figures. One study by a leading U.S bank even predicts that full automation could account for two thirds of America’s driver pool.
I believe that while the emergence of Uber Freight will certainly redefine and reshape future driver requirements, it doesn’t mean it will make truckers redundant.
I have represented the TCA for 12 years, and the innovative and pioneering approach of our members has always resonated deeply with me. They are extremely agile, flexible and open to tweaking their business models when confronted with a downturn. And, whether they are large players or small, one-truck operations, they will always embrace new technologies, upskill in their highly collaborative networks and continue to prosper as a result.
There are, though, many questions that remain unanswered. How does Uber and the other 27 load-matching apps that are currently competing for market share, address the issue of security and how does it safeguard fleets from cyberterrorism?
Two years ago, for instance, two security researchers demonstrated how easy it was to infiltrate the security system of a Fiat Chrysler.
Second, and even more concerning, is that terrorists, in a spate of recent attacks in Nice, Berlin and Jerusalem, have used heavy goods vehicles as a weapon of destruction.
In short, this is a pressing issue that is simply too big for Uber to deal with alone. Instead, it is a global conundrum that will require the finest minds in OEMs, government and the software security testing community to find a solution.
Uber’s rise could be checked by cost, too. The most challenging period for Uber will be producing the first batch of these state-of-the-art autonomous trucks. Only when it has the confidence of the industry will it be able to manufacture the vehicle at scale for a much lower cost.
Finally, I believe another obstacle is that in this arms race-like environment in which OEMs are competing to produce autonomous trucks, there is a danger that some of the basic features may be forgotten. For example, can the self-driving vehicles of tomorrow really do without a human? Who, for instance, will unload the vehicle? And how will it be achieved? Is this technology being currently worked on by manufacturers, and if not, will it be retrofitted into trucks at a later stage? And, in this culture of secrecy, how damaging will a lack of collaboration between the key manufacturers be for AV uptake? Only time will tell.
Q: TCA works hard to promote collaboration in the industry. Is the notion of collaboration under threat with Uber’s model given that, so far, it hasn’t reached out to established industry players?
Heller: There is a saying that “There are no secrets in safety,” and I think this adage can be applied to all modes of transportation. Whether Uber appears to be (or to not be) working in concert with other parts of the industry is a moot point.
On one level, and if you look at the bigger picture, Uber is certainly collaborating in the sense that, like everyone else, it will need to buy into a culture of safety if it wants to survive and flourish.
Second, if you compare Uber Freight with many of the established industry players, it has not had the time to work in tandem with associations like ours.
In the future, we hope that it will contribute ideas to improving core issues such as highway safety and highway funding and, of course, share its thoughts on how the industry can work in partnership to transform truck technology.
If it doesn’t wish to participate, I think it would be missing out on a major opportunity. The TCA is, and has always been, a great test laboratory for pioneers of new truck technologies. Our members are very vocal and highly responsive. They always will offer themselves up as “guinea pigs” and, when the innovation doesn’t work, they’re certainly not afraid to let the inventor know.
Q: There are some flaws in Uber Freight around contingency and whether or not it will be able to guarantee loads. To what extent are U.S carriers worried by this perceived lack of preparedness?
Heller: If Uber wishes to draw 20 percent of its future profits from trucking, as some are forecasting, it will need to quickly adopt and act upon the well-known trucking dictum: “What can go wrong will go wrong.”
It will have to create and develop industry-leading emergency preparedness plans — a highly effective and all-seeing blueprint that will tackle the “known unknowns” as Donald Rumsfeld would say. And, its strategy will need to be able to deliver more than just the basics, for example, sending a replacement trailer to a broken-down vehicle.
In short, Uber will need to be able to guarantee loads for its clients anytime, anywhere and in any weather. That is how reputations are won and lost in the industry.
If it fails to implement a contingency plan that protects its drivers, customers and loads, it will quickly lose market share and may struggle to regain the trust of customers, whose cargo is precious, hazmat and/or time-sensitive.
That said, there are several market segments where Uber could make inroads. Take the general freight market, for example. Uber could potentially corner this market in the long run because customers won’t necessarily require track-and-trace visibility or more forensic time proof-of-delivery options. If Uber can offer the customer real-time pricing, which undercuts the traditional freight broker, in an industry where margins are so tight, it may well gain customers quickly.
However, there is still some uncertainty around the Uber pricing model, specifically as to whether it can really cut out the middleman. We are in unchartered waters, and the industry will have to wait to see whether or not customers will be receptive to Uber Freight’s offering.
Q: Is Uber Freight proposing anything new? The freight industry has already developed advanced load-matching software, which many fleets are using to good effect. In this respect, what more can Uber offer carriers?
Heller: In the last decade or so, the global transportation sector has embraced technology. With margins so thin, haulers and logistics operators are looking to utilize leading-edge and next-generation technology that will give them that all-important edge over a rival. So you could say that Uber, the archetypal disruptor, is entering into a market where the key industry players have become highly agile and lithe in coping with the increasing pace of change. For example, a recent report by Armstrong & Associates, a leading 3PL market researcher, states that there are 27 digital freight matching companies in the United States.
So, it is true that that Uber has not invented the wheel, but just the way it is being spun or not, as the case may be.
Q: While real-time technology apps and digital freight-matching boards are becoming more and more important to carriers, to what extent is collaboration — cooperation, information sharing — the real key to carriers achieving greater logistical efficiency?
Heller: I believe that real-time freight platforms, like CX North America, which provide carriers, brokers and customers with real-time location updates, meaning they never lose sight of the freight they are carrying, are highly beneficial. In a short time, they have become a vitally important part of the freight landscape.
But, to answer your question, I think one of the chief reasons for the increased take-up of these ground-breaking systems, is that it they don’t pit technology against collaboration. Instead, they combine the two.
For example, freight-tracking management services like these have not just helped members to boost revenue by minimizing empty loads and reducing dead-end mileage, the fact that they are collaborative, interconnected platforms has meant that members have cut back on carbon dioxide and nitrogen oxide emissions without even realizing it.
The other clever aspect of these freight platforms is that they create a level playing field on which smaller operators can compete with larger players.
But reasoning aside, the real litmus test is whether or not our members are using these networks to good effect. Some have. Some haven’t. But many of those who have integrated their fleet with the exchanges have reported an uptick in revenue.
Q: What’s the feedback from TCA members on freight-tracking management services?
Heller: Many members who operate smaller fleets — say one to 10 trucks for instance — use these freight-matching boards to good effect to avoid dead-end miles.
But, from talking to members on a daily basis, what really captures the essence and effectiveness of these services is a quote by one driver. He said to me, “It is not the load that you are carrying right now, but the one that directly follows that you are worried about.”
I have never forgotten that statement. And to a great extent, the enhanced visibility and clarity that these platforms provide help eliminate the stress that is often brought about by being overly concerned about the next consignment of goods.
In this sense, these load-matching boards keep freight running by optimizing efficiency on the highway so carriers looking for their next cargo don’t suffer from dead mileage and are making the best use of their equipment. That is very powerful and liberating technology indeed.
Q: The Transport Exchange Group, our parent company, recently conducted research revealing that the virtual fleet of 40,000 vehicles owned by its members achieved a net reduction of carbon dioxide emissions of 9,000 tons, while nitrogen oxide emissions fell by 102,150 kg (for the 12 months ending January 8, 2016). To what extent do you think that would encourage members in California, whose fleets must conform to strict air quality standards, to make better use of them?
Heller: Certainly, this relatively cheap, but highly effective, technology should be used in California, where the California Air Resources Board has proposed stringent low-nitrogen-oxide engine standards by 2023. The long-term goal, of course, will be the total decarbonization of freight, but in the short term I am sure that these platforms will help existing vehicles achieve a greater degree of low-emission mobility.
However, zero-emission mobility for the freight industry is a vision not just for California, but also a dream that we all should be actively pursuing and championing. And if these apps help us along that road, then so much the better for us and them.
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