The Future of Transport: Transport Sharing
Posted by Kevin De Meu on 14/02/2019
In our series of blogs about e-commerce, we have already discussed the impact and benefits of competitor cooperation. Today, resource sharing among competitors is a well-known phenomenon in many industries. For the highly competitive transport sector, optimized cooperation would be a market disruption that brings immense efficiency gains. We want to help the industry in reaching that potential.
The sharing phenomenon is creating benefits in many industries. It creates opportunities for both the providers and the users. Two well-known examples are:
- B2B asset sharing
B2B asset sharing is heavily used in heavy industry. Heavy industries make use of expensive assets which are not needed for every operation. This causes standing assets that aren't used for several weeks/months. For companies in heavy industry, this was a sign to share their assets among each other.
- Shared mobility
Uber created a technology to match people who are planning to do more or less the same trip. They want to combine those people into the same car instead of riding separately. Giants in the automobile industry have the idea to sell shared cars. Instead of selling cars to private owners, they want to sell them to multiple owners.
Sharing in transport industry
As you can see in previous industries, the sharing economy is not an unknown definition. Our opinion is that the transport industry can also benefit from sharing. These benefits are in favor of the transport companies as well as their customers and the environment.
As we see today, transport is already shared between companies. Tools exist to support this sharing economy. Freight brokerage platforms help shippers and carriers maximizing their truckload utilization, decreasing empty miles and making their shipping times smaller by combining the orders of multiple companies into one shipment.
These are the biggest benefits from transport sharing:
- Less empty kilometers
Multiple companies outsource their transport to one transportation company or companies have a mutual agreement of sharing their transport. Shipping goods of different companies in one route, can eliminate the large amount of empty kilometers on the road. For example, Company A needs to deliver goods at Company C and Company B needs to pick up goods at that same Company C. Without sharing their transport, the trucks will ride unloaded for 50% of their total kilometers driven. In an ideal situation, these companies would share their transport. Doing this, the only empty mileage will be the distance from Company B to Company C.
- Less traffic on the road
When companies work together, they can combine their goods on the same truck. For example, a shipment of Company A does only fill their truck for 50%. Company B and C have both a small delivery which uses only 25% of their truck's fill rate. All 3 companies operate in the same region. When we combine those 3 deliveries into one shipment, there will only be one truck on the road instead of 3. Imagine what the effect would be should we do this for all companies. Traffic will be significantly decreased!
- Shared costs resulting in a higher profit margin
Today, we see a profit margin of 1% in the transport sector. Which means that things must take place to decrease costs or to increase the revenues. Even here, transport sharing can help. When companies make use of transport sharing, they also share the transport costs. In this way, costs per company decrease and the profit margin will benefit.
The role of transport optimization tools in transport sharing
Transport sharing can happen between companies who are making use of transport optimization tools. These tools can be used in two ways to make transport sharing possible:
- In the tool, outsourcing costs can be assigned to the orders. The optimization tool will determine which orders should be outsourced and which ones not;
- The plannings of multiple companies can be combined into one optimization tool. In this way the tool will allocate the orders to the most optimal company.
The last bullet is what we see as a standard in the future. If algorithms exist that can handle thousands of trucks, driver, trailers and orders, the above mentioned benefits could be achieved with only one simple click on the button. Besides this, the algorithm must be built in a way that all the preferences of each instance within the transport chain will still be respected.
Transport sharing can help companies to increase their profit margin. Freight brokerage platforms are built to make this possible. Our view on this topic is that transport optimization tools can increase the benefits even more. Algorithms are being built that make it possible to run plannings of multiple companies in one run. So transport sharing can take place in the most optimal way. Maybe, in the future, even warehouse sharing can be included in the entire optimization chain.