Szymon Knychalski, Editor-in-Chief of Trans.INFO: Your speech at the recent HyperLOG conference in Łódź received wide publicity in the industry. It sounded like a challenge thrown at digital freight forwarders, especially Uber Freight, which just a few moments earlier – at the same conference – announced its entry into Poland.
Bogdan Kosturek, Vice President of Technology, Trans.eu Platform: It’s more like a glove thrown down at the market conquest model that Uber Freight represents. In a nutshell, it is the use of temporary tempting freight rates and fast payments. Uber has huge resources for this because it is financed by funds from Silicon Valley. Morgan Stanley has recently demonstrated this very clearly in its analysis, although Uber obviously did not comment on this report. In the long run, this will eliminate competition – mainly traditional freight forwarding – which will simply not be able to compete for carriers with such a non-market margin. Once the market has been cleared in this way, several players can become actual monopolists. They will make carriers and shippers dependent on them and will be able to dictate their rates to them.
But Uber Freight denies such a strategy. In his presentation at HyperLOG, Daniel Buczkowski, the head of Uber’s expansion into Europe, reassured that transport is not a market where the winner takes everything.
Of course, he was reassuring us what this tactic is all about. Amazon could also say that online shops are not a market where the winner takes everything and that there is room for everyone. And yet, it is difficult for anyone in the world to compete with Amazon. It has 40% of the ( let me repeat this) global e-commerce market. The company of Jeff Bezos, who was the richest man in the world in 2018, now has so much cash that it can basically dictate conditions. By the way, I would like to add that it is also entering the logistics market more and more boldly. Anyway, please remember the slide from Mr Buczkowski’s presentation, in which he presented the market structure and showed only shippers and carriers. There weren’t any forwarders. They’re not even trying to hide it.
You are not suggesting that digital shipping will take over the market completely, are you? After all, there are many players on it, even richer than Uber and its investors.
No, not really. The emergence of Uber, or generally large digital freight forwarders, will not wipe out the entire freight forwarding sector. Only small and medium-size forwarding companies, which will not be able to compete in terms of technology and finances, are at risk. They will fall, be taken over or, at best, hide in a special cargo niche that is not attractive to Uber. Large and rich logistics operators will stay. In any case, each of them is already developing its own solutions, such as internal freight exchanges, which tempt carriers.
To some extent, the TMS systems, which these traditional shippers currently use, are endangered. Not only because they will lose their customers, but also because digital forwarding has embedded a large part of the operations performed via TMS. The freight exchanges are at risk. Not so long ago, we ourselves were such a freight exchange before we became a logistics platform. And last but not least, all carriers and shippers are in danger of losing their freedom of choice, which is so important for the open market.
So there will be an ordinary consolidation, a normal thing in a free market. Maybe nothing terrible is going on after all.
Decreasing the number of market players is only one side of the coin. More importantly, the industry will not be able to develop as dynamically as it could under the conditions of the technology boom we are currently witnessing.
This will create isolated islands of carriers and shippers, closed around digital freight forwarders or operators, and even TMS solutions (because they also try their hand here). Each of them wants to have carriers only for themselves, in their applications. New technologies in this form will not solve the urgent problems of the industry. Please note that the demand for transport is steadily increasing and the availability of cargo space is either constant or decreasing. We lack drivers, environmental standards and common sense mean that we cannot infinitely multiply our fleet either. Therefore, we must make the best possible use of the resources that we already have, squeeze out as much as possible from each route and semi-trailer. This is what technology promised us. When all these resources are isolated from each other on isolated islands, this will not be possible. There will be no cooperation, no sharing of cargo space. This is not a real optimisation.
Not to mention that each shipper and carrier will be forced to use several separate ecosystems to run their business effectively. And how many such applications can the dispatcher use efficiently? Three? Five? Ten?
So what would be the optimal solution for you?
Platformisation. Connecting all these even small shipping islands to each other on logistics platforms and creating a broad community of carriers. The second necessity is to make available to traditional forwarders the technology, thanks to which each of them can become a digital forwarder. We at Trans.eu have created exactly such a tool and it is this glove thrown down at Uber Freight and any company that wants to constrain the open transport market. Therefore, I would not even call it a glove, but rather a lifebelt for a sustainable market. We want to be the ones who connect all these islands, who allow sharing of information about free vehicles and available cargo. This is of great importance not only for the performance of the entire industry but also for the environment. That’s why we developed our new product.
It sounds rather like you are disgusted with technology and want to stop its development.
It’s exactly the opposite! We approach technology rationally, know its limitations and know where it can cause problems. We want to get the best out of it and relieve people from simple routine decisions that can be made for them by algorithms. They will then be able to do what they do best and what the machines will never be able to do so well. We believe that traditional freight forwarders with their expertise, relationships, conflict resolution skills and unusual cases must remain.
Do you think that digital freight forwarders do not have such high-class specialists? Uber Freight doesn’t have them?
I’m sure it does. And if it doesn’t, it will get them out of traditional freight forwarding on every market it conquers. They can afford it. Either way, people, traditional forwarders, even the best of them, cannot do many things manually – e.g. estimate future rates with the same accuracy as digital forwarding. For the shippers this is a very important argument, they even expect it. Such possibilities, thanks to algorithms and machine learning, are provided by our new Trans.eu platform. We give them weapons in the form of the latest technology because if this market is to be fair and secure, we cannot fully entrust our cargo to the hands of anonymous applications and anonymous carriers…
My next question was about security…
Because this is another very serious problem. You know, I live on the outskirts of the city and when Uber came to Wrocław I was delighted. Suddenly I started to pay 30% less for travels, I checked the app to see when the car was close, I conveniently paid with my card. Now… after a few unpleasant situations I had with suspicious drivers, after a few rides in cars in terrible condition… I return to traditional taxis.
The same model is now being transferred to freight. We, as Trans.eu, are often blamed for the fact that sometimes there is an incident, a theft, someone does not pay. Sure – we break down each case into factors and are pissed off that we didn’t catch it before. But we have a whole floor of security specialists working on it, and as many automatic prediction algorithms as possible. And once again the same verification work is done by ‘human’ forwarders with their own means. We are not an “install and get cargo” type of application.
I suppose so, but you must admit that freight forwarders do not have a very good press.
Yes, I admit it. This is a serious problem that Uber Freight also benefits from. Freight forwarders have developed this market and for many carriers and shippers, they are a guarantee of seamless freight handling. But! Among thousands of honest professional freight forwarders, there will surely be a few dozen fraudsters and parasites. These can be found in every market. Social media also twist this image, because no one on Facebook will boast of thousands of smooth transactions. Rather, they will exaggerate any delay in payment to an impossible size…
No wonder – this is another, very serious problem for the industry. Maybe even most serious.
I would openly call this pathology that carriers (and freight forwarders too) sometimes have to wait for payment for 90 or even 120 days. We are going to change this and next year we will launch Quick Pay service, thanks to which each carrier will be able to get their money within 48 hours. Automatically. Any freight forwarder will be able to afford it. Please note that, in reality, it is not only about money but also about trust. When partners pay each other quickly, even automatically, trust is built between them. We want to be the guarantor of that trust.
In 48 hours? Next year? Forgive my scepticism, but no one has been able to solve this problem for years…
This is our dream. Or rather our challenge. Very big challenge. If the industry, the whole industry, is to arrange the market on its own terms, and not be arranged by a handful of well-off companies, it must have alternatives, it must have support, it must in itself be solidary and aware that what may seem very beneficial in the short term may prove toxic in the long term. Only then will the industry become not only technologically smart but also fair and sustainable. These two words have long been on the walls of our company office.