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The sharing economy: Six disruptions on the transportation ecosystem

The Brookings Institution predicts the sharing economy will exceed $335 billion by 2025. The sharing economy is especially relevant to core transportation companies and heavy users of transportation services. (Photo: Shutterstock)

If you’re still new to the term “sharing economy,” it’s generally organized around a technology platform that facilitates the exchange of goods, assets, and services between people across a varied and dynamic collection of sectors.

In just a few short years, social media and mobile technology have contributed to disrupting multiple industries at hyperspeed. Really any industry could be disrupted by the rise of “collaborative consumption,” or the “gig economy,” as it’s also called, through the proliferation of asset-sharing models. The sharing economy is especially relevant to core transportation companies, as well as to heavy users of transportation services.

Behemoths like Airbnb’s home-sharing model, and Lyft’s and Uber’s model of turning private cars into common resources, tend to come to mind first. Such for-profit services take only a fraction of the levied fees, passing the rest on to owners.

Airbnb has exceeded 20 million guest-stays since its launch and now has more than four million properties listed. Their current valuation is over $31 billion. Meanwhile, Uber has doubling its revenue every six months for years, and it’s currently valued at $69 billion. While these leaders are setting standards and on the front lines of dealing with regulation issues, there is much more brimming just below the surface.

In 2013, estimated revenues passing through the sharing economy into people’s wallets exceeded $3.5 billion, up 25% from the previous year. The Brookings Institution predicts the sharing economy will exceed $335 billion by 2025.

Why and how seismic shifts are happening

Every great economic paradigm requires the interaction of three essential elements to enable the system to operate as a whole: new communication technologies, new sources of power, and new modes of transportation. All these collaborate to increase efficiencies in the growing economic demand.

Jeremy Rifkin, author of The Zero Marginal Cost Society: The Internet of Things, the Collaborative Commons, and the Eclipse of Capitalism, discusses the evolution as nothing less than a third Industrial Revolution. In the 19th century, steam-powered printing and the telegraph, abundant coal and locomotives on national rail systems, gave rise to the Industrial Revolution, what some now refer to as the first such confluence.

In the 20th century, centralized electricity, the telephone, radio and television, cheap oil and internal combustion vehicles on national road systems converged to create an infrastructure for another industrial revolution, what some refer to as a second confluence.

Besides these broad outlines, there is also a growing trust of digital technology for the transfer of goods and services, as well as security between networks–not the least of which is the recent emergence of blockchain technology.

Europe trending ahead of the curve

Europe, of all places, is currently closest to laying the groundwork for a third confluence. What’s emerging is a kind of “Energy Internet,” a digitalized, automated “Transportation and Logistics Internet” that’s creating a super “Internet of Things” infrastructure.

Easily implemented and widely used platforms will allow people to provide up-to-the-moment data on the managing, powering and moving of economic activity. According to Rifkin, by 2030, it is estimated there will be more than 100 trillion sensors connecting the human and natural environment in a global distributed intelligent network. For the first time in history, the entire human race can collaborate directly with one another.

The evolving Internet of Things will allow conventional businesses enterprises, as well as millions of prosumers, to make and distribute their own renewable energy, use driverless electric and fuel-cell vehicles in automated car-sharing services and manufacture an increasing array of 3-D-printed physical products and other goods at very low marginal cost in the market exchange economy, or at near zero marginal cost in the sharing economy.

Heavy users

According to Deloitte’s Ted Choe, Principal of Strategy and Operations, heavy users of transportation services could shift to shared platforms to fulfill certain types of demand, potentially freeing up cash, minimizing vendor lock-in, and keeping prices aligned. Heavy users of transportation services could become “asset right” by focusing on the core business while effectively using the excess capacity in the broader transportation system.

At present, retailers and other heavy users of transportation services typically invest in transportation assets (trucks or rail), or hire a carrier or 3PL. Actually, a company with significant transportation spend will hire a 3PL, but most likely a carrier as well. Only a portion of freight goes by 3PL, about 20%, with the balance being direct carrier. However, in the sharing economy, a retailer, or another heavy user of transportation services, could choose to own only those assets needed to fulfill core product demand. It would then leverage a shared transportation platform to handle marginal demand. This would especially help with seasonal spikes.

Six disruptions

For business and technology, innovation in the transportation sector, which accounts for over 10% of US gross domestic product (GDP), places mobility as an opportunity similar to the mobile sector. The transportation ecosystem is evolving and new collaborative opportunities are emerging. Choe also gives us a scan of the emerging marketplace.

(1) Coordination for regional parcel carriers

Regional carriers could leverage assets of others to deliver outside normal coverage areas. As coordination increases through technology-enabled capabilities, this could begin work seamlessly on a national or even global network.

(2) Real-time marketplace for long-haul trucking

A transparent real-time platform for long-haul trucking that interfaces with logistics management software could be used to leverage additional truck capacity, especially for LTL shipments. This idea is already being mobilized by start-ups such as uShip. As the technology matures, it may become a larger part of the transportation ecosystem.

(3) Multimodal technology to the crowd

The reach of the crowd could be extended by coordinating handoffs between carriers at intermediate way points. This could effectively create a multi-regional or national network using a point-to-point delivery model. Coordination of warehouse space would establish the waypoints and reduce friction in the handoff process.

(4) Crowdsourced assets in the supply chain

There’s no better way to demonstrate the rise of the sharing economy and use of crowdsourcing apps than by looking at venture capital flowing into the last mile delivery and urban logistics sectors. Retailers are increasingly turning to the crowd to fulfill deliveries from stores, but as they become more comfortable with the sharing model, they could leverage it to move goods between stores or from distribution centers to store.

By providing customers with more diverse options than ever before, startups are challenging the status quo and changing relationships between retailers, logistics providers, and carriers. One area where crowdsourcing is having a large impact is last-mile delivery. Retailers can use a service like Cargomatic to submit order details and get matched to a pre-screened driver database. As soon as a retailer is paired with a driver, the delivery can be carried out.

This includes other efficiencies. The last-mile phase of the supply chain tends to be the most expensive, sometimes 40-50 percent of a company’s logistics costs. In some cases, crowdsourcing technology can provide same-day shipping for the same price as standard shipping. It may also help level the playing field for retailers that don’t have a fleet of trucks or a network of warehouses.

(5) Warehousing

Warehousing is also being impacted by crowdsourcing technology. FLEXE allows anyone with temporary warehouse capacity to make money renting out space. Retailers can easily book space for short amounts of time on-demand, rather than having to sign up for long-term leases. By paying for only what they use and choosing from multiple options to find the best deal, retailers can lower costs.

(6) Safety

As Freightwaves previously reported, TuSimple, a Chinese autonomous truck technology startup that is backed by Nvidia with offices in San Diego, aims to improve drivers’ working conditions to reduce truck accidents on highways by up to 75%.

Carriers are also using crowdsourced data to avoid hazardous roads when weather conditions are poor. Telogis, a cloud-based fleet intelligence platform, allows drivers to submit route problems as they encounter them. In turn, that information can be communicated to drivers through the platform and through social media. The information is vetted to be consistent and trustworthy.

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