Uber Can Build the Next Great Delivery Network
This is a letter for Uber brass or anyone who can get this into their hands.
I recently read an article by Douglas Macmillani at the WSJ http://www.wsj.com/articles/the-50-billion-question-can-uber-deliver-1434422042. After reading Macmilliani’s article I was intrigued by the current assets available to Uber and the method Uber would have to take to actually compete with the likes of UPS, Fedex and USPS. I believe it would be possible and Uber is one company which I perceive a large enough war chest to accomplish the task.
First, let me give you a quick background on myself. Over the last 12 years I have spent every single day focused on logistics, supply chains, and moving things. I have been lucky enough to gain experience in many different roles to the point where I am the CEO of a successful and growing logistics company. In addition, I am the founder of a SaaS based solution that provides operational help to the largest logistics companies in the world. I work at my craft, I love this industry and I think it is great to see people try and revolutionize it.
So let’s clarify, when I mean Uber can compete… I mean actually compete! Compete by building their own integrated system for door-to-door delivery. It is a shame, many companies masquerade like they are providing a new logistics solution but in the end they are just reselling a Fedex or UPS rate… Looking at you @shyp and about 50 other companies in that space.
This isn’t an exact blueprint but the main takeaways for how Uber would need to focus their energies for success.
1. Stay away from focusing on direct intra-city courier work. When you are not “in” the industry you underestimate the infrastructure a city has when it comes to couriers. Unlike the taxi industry it isn’t controlled. The courier industry in any given city can look like anything from a 500 vehicle company to 1 man on a bike. Do not get suckered into thinking because you upended the old crusty taxi industry you will automatically do the same with couriers in a city. You won’t, they aren’t crusty, they are experienced, they are aggressive and you are swimming in the deep end with sharks who are well versed in competition and undercutting prices etc. Don’t just think local, think North America.
2. You will actually need a sales team. I mean a good solid B2B sales team. Getting the consumer to decide between the puke smelling back seat of a yellow cab with a lunatic driver or the pleasant experience of a private on-demand car service is much different than getting someone to choose you over a household brand recognition incumbent that has built trust over years and is everywhere all the time. You will need to look at this as trench warfare. It will not be pretty it will be a grind but turning a tide isn’t easy and nothing new to the Uber brass.
3. Be truthful, transparent and go above and beyond. This is the separator. Building an infrastructure on the idea that each package would move as a person would allow you to service the package much different then incumbents.
4. Focus on the in-between. In the business we call it the routing portion. You have currently have a phenomenal courier network, but when you need to get a package from Boston to Los Angeles you need more than just a courier. Focus on the in between. There are many avenues you can use to accomplish this, but these in-betweens are what can make the network incredibly flexible, cost effective and useful to the likes of Dell, Cisco and Amazon.
5. Understand the difference from what you do today, with moving people compared to moving freight. While it may seem similar, the freight side presents more difficult challenges. When moving people, you can look at each person as a single unit. Each unit fits nicely in their compartment and pays based on the mileage/time the unit travels. This allows more predictive costs structures and capacity requirements. In the freight world it is much different. Freight is much different. Unlike a person who represents a single unit with predictive capacity needs, your shippers have needs varying daily and down to the very minute of pickup- Notifying you they are shipping 1 item at a specific size and when the driver arrives for pickup the actual shipment is 4 or 5 items at 2x the weight and size. This change will affect driver dispatching and routing mechanisms. Additionally, the customer doesn’t care nor should they care about your problem with this method, their current vendor is happy to oblige, so should you. PS. — This challenge can be overcome by providing a smart routing solution that would build a flex network. Turning these last minute changes in capacity needs, into a system advantage.
6. Don’t put all your eggs into one basket aka. large contracts. As a logistics company when you spend large portions of your energy focusing on just a few corporate client it creates vulnerabilities. Focus on building a solution for the bottom 70% and it will compound benefits for the top 30%. Additionally, it will empower you to make decisions that drive the industry forward.
7. Stay the course- “On the first night of continuous operation, 389 Federal Express team members and 14 Dassault Falcon jets deliver 186 packages overnight to 25 U.S. cities.” They took it on the chin for a while to build their network. Expect pain, Lots and lots of pain. You will have law makers on you about wages and employment status. You will have unions banging on your doors and threatening you. You will be fighting lawsuits from some of the largest companies in the world. Stay the course!
There are a hundred other things that need to be done, but these main ideas outline how Uber can build a solution to compete. The nuts and bolts of actually building something like this are exciting. Uber could build an incredible amount of value (to the industry and customers) in a short amount of time. They need good people in place who are willing to learn new things and not shoehorn past experiences into a solution simply because it is what they know. They need people to be bold, be unafraid and strive to claim territory others thought not possible.
The industry is ripe for this, with the threat of facing driver shortages and more stringent DOT guidelines it is wide open. I am hopeful for a new breed of integrated logistics companies. Companies not focused on the status quo or bogged down by the infrastructure that was built over the last 45 years. Companies that are not afraid of change. Companies that embrace new efficiencies and do not try to impede progress. Let’s see if Uber can pull this off or become the latest victim… I believe they can.