The Ubers of Last Mile Freight

ARC has recently published a global market study on transportation execution marketplaces & systems. The Uber-style marketplaces were contacted and analyzed for this report. Tech startups, founded with the idea of using Uber style technology to reinvent last mile freight, have raised about $120 million since the beginning of 2015. This is much less than the billion plus dollars invested since the beginning of 2015 into startups promising to deliver retail merchandise, groceries, or restaurant meals within a few hours, or even minutes. In contrast, last mile freight firms are focused on goods that would typically be delivered over night or within a few days.

Convoy received the most attention. The company raised $18.5 million since last October. Investors such as Jeff Bezos, the CEO of Amazon, Salesforce.com CEO Marc Benioff and other well-known venture capitalists and tech executives all invested in the company.

But the opportunities associated with the last mile freight market will not necessarily be captured by asset-light, Uber type startups. Existing last mile carriers and brokers are also investing in technology. One company in this camp is Progistics Distribution.

Progistics is not a startup, they’ve been around for 33 years. Progistics’ operations cover all western states, Texas, Illinois, and Canada.

And they are not just a platform, they own assets. They own some vans; they also own facilities that allow them to engage in regional distribution for retail chains and un-attended delivery of auto parts for auto repair shops. But for some service lines, they operate as an asset-light broker.

The company’s drivers are independent contractors – 700 to 800 of whom chose to work for Progistics at least part of the time. According to Joel Ritch, the CEO and founder, these contractors “own trucks that range in size from tractor-trailers to pick-up trucks to everything in between.”

eDemand is Progistics’ fourth generation mobile product that allocates business to drivers and streamlines the delivery process. Mr. Ritch said “we have been using mobile apps since before smart phones became prevalent. Earlier versions of this technology were in use before Uber was even conceived. It is only in the last few years that ‘last mile’ has gotten sexy.”

For legal reasons Progistics does not want to control their independent contractors. Their solution gives drivers the ability to choose to accept or not accept a load. Orders come into eDemand with a business’s standard operating processes (SOPs). The order and the SOP define what kind of truck is needed, and what skill sets the driver and crew need to possess. For example, a job might require a 24 foot truck, a dolly, and straps. “Orders get routed to truckers who can perform those tasks.”

A price is offered to the contractor. The trucker can accept the price or ask for more money. Once a trucker accepts a job, the app walks them through the delivery, step by step. A job might require signing a document on pickup at a warehouse, and then calling customer to let them know their goods have been picked up.  At each step, the contractor uses the application to prove that a given step was completed. Often photographic evidence is used to show the task was done properly; for example, taking a photo of a document to prove it was signed, or taking multiple photos of a pallet to prove that when it was picked up there was no damage. Progistics service representatives may be required to send an email or make a call to the customer after various process steps. Finally, the application provides GPS tracking to help ensure that a delivery is proceeding as scheduled.

Progistics has about 30,000 move requests per day. “Five to six thousand are complex enough they get routed through the eDemand platform.”

“Uber says they want to get into freight,” Mr. Ritch said. “Uber and Lyft are finding out all the SOPs go far beyond what occurs with passengers. Customization is required in the last mile game. It is not pickup and delivery. It is pickup, delivery and something else.”

Mr. Ritch added, “All our drivers have motor carrier permits. These are required for moving freight. I don’t know why Uber feels like they can break these laws, and I don’t know why regulating bodies are not holding them accountable. Our drivers have invested to get these permits, they have registered with the state, and they carry insurance.” He added that business customers mostly will not want to work with last mile companies that don’t provide insurance coverage.

Mr. Ritch does not seem too worried about the emerging competition. “Too scale you need customers, drivers, and domain expertise.” He is not seeing start-ups that possess all three. He may be right. Cargomatic, one of the startups in this space, laid off 50 to 60 workers, or about half its staff, in April.