Is Uber About to Upend Logistics?

January 12, 2016

uber logistics

Last-Mile delivery has long been considered one of the most difficult parts of Logistics. Companies such as Amazon – and other eCommerce leaders – have built massive sophisticated distribution networks offering consumers efficient, affordable delivery options for a staggering variety of products. But same-day delivery has proven to be a difficult, but hugely lucrative, goal. One emerging trend is that of tech companies and startups looking to push past this frontier in eCommerce, offering same-day delivery using the so-called “sharing economy” – the use of the market’s excess labour and vehicles as a way of using more nimble and sophisticated delivery than complex, top-down logistics and distribution operations. 

So we weren’t surprised to see that burgeoning global transportation giant Uber is getting into this arena, offering not only same-day delivery of retail goods through its UberRUSH service, but now also a logistics backend for other companies and services beginning with a new partnership with Operator, a fast-growing local same-day delivery startup.

In Canada, where Argentus is based, the continued rise of Uber was one of the biggest news stories throughout 2015. Whether it was Toronto taxi drivers lobbying city hall (sometimes disruptively) to increase regulation of the service, or the recent controversy over the service’s surge pricing that had New Year’s Eve revelers paying huge prices out of pocket for high-demand rides, the rise of the “sharing economy” has been one of the major disruptions – or innovations, depending on your perspective – in the marketplace over the last several years. And anyone following market trends is aware that Uber and services like it are promising to disrupt industries far beyond the taxi industry, including public transportation, healthcare, and now – through offering a last-mile delivery backend – logistics. 

In October, Uber launched UberRUSH in San Francisco, New York, and Chicago as pilot cities. The new offering is a delivery service that works through popular eCommerce merchant tools to deliver everything from food to gifts to electronics much quicker than conventional ordering services. The aim? To offer lower prices, convenience and efficiency by marshalling sophisticated algorithms and using Uber’s sophisticated driver network as couriers. Users of the service, which, depending on its success in the pilot cities will surely be heading to Canada soon, are able to select UberRUSH as a delivery option when using existing eCommercs platforms.  

Now, the company is partnering with Operator to act as the service’s delivery backend, a development that might disrupt things even further. With Operator, consumers just send a text asking for a product, without specific guidelines. Operator’s customer service agents find possible products, advise the customer, and order the products the customer wants – and now, those products will be delivered through Uber. It’s a development that threatens to bypass traditional logistics and eCommerce completely.

The argument goes that these services are as rapidly scalable as Uber’s taxi service, which has successfully expanded into a number of global markets. It might be able to successfully offer coveted one-hour delivery of all kinds of products, including goods from local mom-and-pop retailers, at greater efficiency than top-down Logistics organizations. On the other end, will this disruption end up with consumers having to contend with “surge pricing” for delivery fees just as they had to pay large premiums for rides this New Year’s eve? Uber relies on independent contractors for delivery – surplus labour and vehicles – and this aspect opens pricing up more directly to Supply and Demand, making it possibly more unpredictable than existing services. It remains to be seen.

In any case, it’s worth it for the Supply Chain field to take notice: there’s the possibility of major disruption to the last-mile Logistics industry. While we’ve been speaking about Uber, which is probably the highest-profile new player in this space, this emerging trend is bigger than one company. There are already other startups moving in to try and disrupt last-mile delivery, and you can expect them to proliferate in the coming months.   

So we put it to our network: if last-mile Logistics is the next industry in line for tech disruption, what does that mean for the Supply Chain more generally? It’s a great question for the leading lights in Supply Chain who read the Argentus blog: can these kinds of services compete with Amazon and more top-down eCommerce and Logistics organizations? Sound off in the comments! favicon

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