An app a day

The Uber taxi hailing app business model has got people thinking. If it works for taxis, why not for trucks? And what other sectors could be ‘disrupted’ by Uber-thinking? Should ports be concerned?

UberRUSH, offering express courier deliveries, is already in operation in New York, San Francisco and Chicago, partnering with local retailers, leading stores and fashion brands. Seattle-based Convoy, meanwhile, is offering trucking on demand in Washington – and its backers include Uber co-founder Garrett Camp, as well as Amazon chief executive Jeff Bezos.

Looking ahead to innovation and technology discussions scheduled for TOC Europe in June, UPS has tipped the ‘Uber-isation of trucking’ as one of the top three trends shaping global logistics.

So should we prepare for the Uber-port?

No doubt Uber will fit into the ports sector somewhere or somehow, says Jonathan Tyler, senior ports consultant at Royal Haskoning DHV: “If Uber for taxis can be viewed as instantly satisfying demand through connecting thousands of individual customers with thousands of individual drivers, then what does the Uber-port look like?”

He says the obvious starting point in the supply chain could be where unitised cargo is still a ‘single unit’ – i.e. when being trucked, as opposed to being on a ship. At that point, the cargo could be pictured as being thousands of individual customers (cargoes) and a large number of individual truck drivers, he says.

“If currently trucks are booked to arrive for pre-determined time slots (at a port), is there a cost built into the trucker’s price for the impact that this lack of flexibility might have on his/her own utilisation of their truck or truck fleet,” he asks. “For example, if a trucker could arrive, say, one hour later than the pre-determined slot, it may mean they could have fulfilled a previous job, thereby increasing their utilisation and lowering the cost of each transaction to the benefit of the port/consignee, etc.”

Auction slots

Taking this a step further, Mr Tyler suggests: “Could a freight forwarder or agent run a continuous ‘Uber auction’ where the jobs are continuously posted and truck drivers/hauliers could bid for jobs, with this auction creating the ideal environment of perfect information flow for an economist’s perfect market? With machine learning of such systems, would the role of the forwarder or agent reduce? Would shipping lines or 3PLs take over so that they can have further reach over the supply chain and also reduce their costs, at the expense of independent forwarders or agents?”

Another point to consider, says Mr Tyler, is how Uber-port might fit in with possible emerging technologies such as driverless trucks or virtual convoys with one driver.

Charles Hammond, chief executive of Forth Ports, says a key point is that Uber relies on really fast transport, for individual consumers. “When you are moving a piece of cargo, you don’t sign into a solution that is personal, but you sign into a system where, if you are going to ship something, you have to rely on 1,000 other people wanting to do the same at the same time – so there is always a level of cross-subsidy,” he says.

“Perhaps the bit that could be more personalised is how you get the cargo to the end destination from the port or from the place of production to the port. The problem the industry has, like so many others, is there are so many middle men – how do you work out which ones add value and which ones do not?”

Neil Davidson, senior analyst, ports and terminals, at Drewry, says: “You can certainly see it working for haulage, where trucks just queue up at the container terminal and, like a taxi rank, take whatever is the next job going when they get to the front. It could be a more efficient way to use haulage.”

However, there would be complexities to deal with – for example, how long does the truck need for loading/unloading? What about merchant versus carrier haulage? And what about the Working Time Directive – a truck driver at the front of the queue may be compelled to stop driving in two hours’ time, which would not be helpful on a time-critical delivery four hours’ drive away.

Counting the variables

At the port itself, there are so many variables to consider. “If you are a container shipper, then your charges are coming through the terminal handling charges (THC) that the line is charged by the port. You choose your shipping line, you choose your service and you get your price – and the THC is part of that.

“If you are talking about what the shipping lines pay to the port, that’s a sit-down-and-talk situation because they will negotiate a rate with the port based on bargaining power and volumes, plus service-related details such as cranes per ship and moves per hour – in other words, both price and service are involved in the negotiations.”

As for breakbulk and bulk cargoes, says Mr Davidson, most shippers would identify the ports that would best suit their needs and phone up three or four for quotes.

“How would some sort of electronic system work? Ports couldn’t load data onto it because once out of the container, a cargo is quite specific, whether it’s 1,000 tonnes of steel coil or a full load of fertiliser. You are talking about different handling methods, different values of cargo and different ship sizes. Additionally, you might want a fast discharge because you need to get the ship back to the charterer, or you might not be worried and could let the ship sit on its berth over the weekend. So again, there are service-related factors as well as price.”

Ports will naturally quote what they consider the market will bear, says Mr Davidson. But added to that, if they are running into a busy time and don’t really want to take on a shipment, then they could quote a high price; conversely, shippers may be able to secure a low price if it’s a quiet time with plenty of spare capacity.

“There are so many variables and complexities and so much more to be negotiated than price. What about stevedoring, landside handling, storage, stuffing/unstuffing and all the other services in the port. Could they be negotiated digitally? Why not just pick up the phone?”

Forwarders’ gripes

And so to the forwarder’s view. John Foord, who will take over as president of The Federation of National Associations of Ship Brokers and Agents in October, says some sort of Uber model might lead to some much-needed transparency when it comes to port charges.

“What I don’t like about the present system that has evolved in British ports, for example, is that they have inherited Victorian tariff structures and never actually changed them – and some of the excuses they have to keeping them in place are quite feeble,” he says. “In some ports they charge different rates for ‘home trade’, i.e. British coastal, ‘European trade’ and ‘foreign trade’, that is deepsea. The coastal charges may be exceptionally low, while the ‘foreign’ charges are much higher; historically the argument was that you are attracting much higher freight use, but that would be because the journey is ten times the distance!”

Frequently, says Mr Foord, charges quoted by a port don’t appear to bear any relation to the cargo being handled. He has examples of quoted rates being miraculously cut by as much as 60% when questioned.

In once recent case, he was quoted £20,000 charges, including berthing and stevedoring, for discharging 600 tonnes of steel; when pressed, the port concerned came back with a charge of £8,000. “If you can make a reduction of 60% almost at the drop of a hat, why have the tariffs in the first place?” he says.

“As a forwarder, you have to go online and do your research and the battle first is finding where these dues are published. They should be available publicly, but either you have to be Sherlock Holmes to find them, or you have to download a 60-page PDF with columns and columns of figures to wade through to find which is appropriate for the vessel.”

Mr Foord says it is often unclear how charges are broken down, for example, in terms of ship’s dues/conservancy, berthing charges, pilotage and stevedoring.

“And very often the port charges don’t reflect the commercial value of the cargo; recently, for the shipment of 8,000 tonnes of urea, which isn’t a valuable product, I was quoted overall £60,000 port charges, of which £58,000 were berthing dues, so totally disproportionate.”

While the Uber model may be difficult to apply, Mr Foord says the whole structure of port charging in the UK is ‘nonsense’ and needs radical review. Charges should be relative to the volume and value of cargo being handled, because that is what pays the bill, he says, rather than based on gross tonnage or length of ship.

“I just want it to be more transparent; at present you have to go through so many hoops to find out what charges are being levied. If you have to negotiate for the berths, why set the rates in that way in the first place?”

HINTERLAND HURDLES TO UBER-PORTS

The natural reaction to the idea of Uber-ports in the container trades is that it would never work because how can you compare ports, says Dean Davison, principal consultant at Ocean Shipping Consultants. “If you compare port with port, it’s probably not going to work because you haven’t got the supporting infrastructure in place,” he says. “The more you stretch the hinterland, the more difficult it would become. Specific support networks, including agents, are often locally based – generally it’s local hauliers for local ports. And also, some of it is familiarity and return loads being available.

“Turn that on its head, though, and what about two terminals in the same port? If you are serving the same hinterland from the same part of the industry, perhaps it could work.”

He believes that non-containerised cargo might be a better Uber fit. “If it was a matter of pushing the button to say you have 200 tonnes of heavy machinery to ship and what are your costs going to be, in a market where the ports are serving the same hinterland, in theory I can’t see why it wouldn’t work.

“It wouldn’t work for grain going through a silo on a set trade or for cargo requiring a chill store, but for ad hoc project, general or breakbulk cargo it could fit. In some ways ports are probably already doing this; they have different costs and charges but they could certainly be rolled up into one overall price.”

However, Mr Davison says the transparency might actually frighten people off, “because no one wants anyone else to know how much they charge”. “Would it be confidential or public information? There is this ingrained perception of confidentiality in the ports industry. One of the biggest hurdles would be that people don’t want their commercial sensitive information becoming open to all.”

Ports competing for discretionary cargo are looking to differentiate themselves to get that extra business so perhaps they would consider an Uber model, says Mr Davison. “Once the first goes for it, others would follow.”

ALLSEAS MATRIX EASES DOOR-TO-DOOR QUOTING

Allseas Global Logistics’ resources manager Wayne Booth says he was inspired by Uber in the company’s drive to use intelligence and data analytics to develop a ‘matrix’ system providing instant door-to-door quotes for customers.

The system enables staff to provide ‘best value’ quotes for full container load (FCL) exports from the UK. The company first provided quotes using the lines’ basic quay-to-quay rates, based on information collected by the team on a daily basis, but then the matrix was expanded to include haulage, recognising that the cheapest sea freight doesn’t always add up to the cheapest solution. “Take a journey from Manchester to Sydney. One line might charge £800 sea freight and £500 haulage and another might charge £1,000 sea freight but only £200 haulage,” says Mr Booth.

The matrix system isn’t available to the general public but has been given to a selective few clients, “who hopefully when they have the quote will make the booking through us”, he says. Allseas will quote for freight from any of 42,000 collection points in the UK to over 200 destinations. The system has required a huge amount of work and fine-tuning. There is often no logic in some of the rates offered by shipping lines, says Mr Booth. Sometimes two towns are just a mile apart but the price differential can be more than 100%.

The system suits containers, of course, but it is also partly applicable to breakbulk: “We can do any out-of-gauge (OOG) as long as it can be containerised in a fashion, i.e. open top or flat rack. If it is a large piece which would fit on a flatrack but is over-wide, we can still generate a rate instantly; carriers would generally charge for the two ‘lost’ slots either side.”

This mainly standardised approach fits for exports from the UK because container lines generally update on a monthly basis, says Mr Booth. “But we don’t do it for imports because the rates fluctuate on a weekly basis, or even every three days. It wouldn’t be workable for imports.”