The Uberisation of supply chain

Disruptive technologies work mainly by altering the underlying economics of business. This is true for mobile devices, which have blown up landline telephony; digitised content, which has gutted traditional publishing businesses; and even containerisation, which forever changed the rules of global shipping. Against this benchmark, how could something as seemingly trivial as “sharing economy” apps like Airbnb and Uber be called disruptive?

Our data from this year’s Chief Supply Chain Officer Survey found that supply chain professionals pretty much dismiss sharing economy technologies, with less than 1:10 calling them “disruptive and important”. Hoteliers and cabbies might disagree, but from a supply chain strategy standpoint Uber doesn’t appear to mean much.

Sharing economy and asset utilisation: a match made in heaven

Not so fast! This week I saw an article headlined “The Uberization of trucking” written by the CEO of LaneHoney, which promises – albeit with minimal proof – carriers and shippers a break from the price-masking practices of traditional brokers. The rallying cry behind this start-up and its progenitors at Uber (ridesharing) and Airbnb (roomsharing) surrounds the egalitarian mission of removing middlemen and democratising the business.

LaneHoney certainly aims to cut transaction costs by removing a labour-intensive supply-demand matching system based on people (truck brokers) who find carriers for shippers’ loads. Much like the travel agency business, this brokering system is apparently still tethered to an obsolete market-making system based on telephone calls and pegboard scheduling.

Such wasted effort certainly cannot survive the competition of an automated electronic marketplace. Just as Travelocity beats your local travel agent, so LaneHoney proposes to unseat truck brokers.

This is not, however, the only example of a meaningful sharing economy application to supply chain as we know it today. Instacart, a start-up based in San Francisco, offers a matching service between consumers too busy to get to the grocery store and personal shoppers with vehicles who are otherwise idle.

The genius of Instacart is not home delivery of online grocery purchases, but instead a system that not only utilises idle labour and assets but does so without attacking the business of incumbent grocery retailers.

Instacart shoppers use their own cars, take orders on their own mobile phones and then shop right off the shelf at a selection of pre-cleared grocers. The retailer doesn’t need to add special staff, extra inventory or incremental store space to accommodate Instacart, and yet a sale that may have been otherwise lost is made. The key is a matching marketplace that aligns demand with supply without requiring special handling.

Compared to the circus of activity attached to retro-fitted omnichannel strategies in traditional store-based retail, Instacart is a paragon of efficiency. Naturally it has had its share of teething problems, but Instacart is now entering Boston after succeeding in Atlanta, Chicago and Austin, Texas.

Training and preparing the shoppers is non-trivial and no doubt consumers won’t suffer more than two failed delivery experiences before bailing. And yet the business continues to grow. For LaneHoney the process could be easier still. Truckers are licensed differently from ordinary drivers, with substantially higher standards for safety training. They also generally own their trucks, which unlike passenger cars are viewed as business assets and managed for productivity. And customers truly need truck transport, unlike a shopping service which is more of a nice-to-have.

Scaling these two admittedly minuscule examples up to something meaningful won’t be easy. In both cases, however, the core concept is hugely appealing. Idle assets can be put into service quickly and efficiently with an online marketplace that presumably learns by iteration and expands with demand.

Sharing prosperity

Why can’t something like this work for production assets, refrigerated storage, field repairs or any other supply chain task currently managed either in-house with lots of working capital or outsourced with high transaction expenses?

Regulatory concerns are a genuine problem and no doubt incumbent middlemen will resist change, but in the end brokers of any kind who can’t add some value through expertise cannot expect to survive.

Supply chain strategists might as well think about how the sharing economy fits into their long-term plans.