For most people, the shared economy (also known as the gig economy) is best illustrated by the Uber and AirBnB concept of crowdsourcing and convenience services based on digital platforms.
The technologies and business models supporting these platforms are also being applied to logistics and supply chain management, especially across activities such as warehousing, transportation, and shipping—with astonishing success.
Why Businesses, Large and Small, Think it’s Fair to Share
Logistics providers, both 3PL and 4PL, are driving the shared economy within the supply chain, offering shared services to customers such as higher filling rates of transport vehicles, better utilisation of warehouse space, reduced logistics costs, and/or a lower carbon footprint.
The World Economic Forum estimates that by 2025, 15 percent of trucking will be via shared transport platforms, and shared warehousing will comprise 20 percent of the market.
To get a better understanding of how the shared economy works within the supply chain, let’s take a look at some examples:
Example #1: Amazon Flex
With the growing trend towards online shopping, e-commerce giant Amazon in 2015 turned to independent contractors—basically anyone with a car—to deliver parcels to homes and businesses.
The service, known as Amazon Flex, takes care of a portion of the company’s last-mile deliveries which, with some five billion items delivered each year, is beyond the capabilities of standard delivery companies.
Since its launch in the United States, the Amazon Flex system has spread into many parts of the world, including Canada, the United Kingdom, Europe, Asia, Australia, and South America.
Like most sectors of the gig economy, drivers are paid purely for the jobs they do (in this case deliveries) and have none of the benefits enjoyed by full-time workers, such as medical and pension assistance, or paid holiday and sick leave.
The drivers use their own vehicles and receive no reimbursement for mileage, parking, or tolls.
Example #2: Airtasker
Example #2: Airtasker
Airtasker is an Australian company that provides an online and mobile platform, allowing users to outsource everyday tasks as diverse as furniture removal, photographic assignments, IT jobs, graphic design, furniture assembly, handyman jobs, and virtually anything else in between.
It works like this: A poster, for example, needs someone to assemble furniture bought from Ikea. He or she makes a post on Airtasker describing the task and indicating a budget for the job. Airtaskers bid for the job, describing their skills and efficiency, and naming their price. The poster then selects one of the bids and allocates the job.
While it costs nothing to sign up to the platform, Airtasker takes a 15-20% service fee for each task completed—which many users complain is too much.
Leaning on AI Technology
The company launched in Sydney in 2012 and has since expanded its global reach into New Zealand, the United Kingdom, and Ireland, counting a total of more than two million users—with an employee count of just 209.
Its CEO, Tim Fung, says the business can operate with such a lean structure due to its reliance on two artificial intelligence systems and a team comprising data scientists, engineers, and product managers.
One AI system, named Carl, can scan and categorise millions of tasks, while the other, named Alan, identifies which tasks are unclear and need to be reviewed by a human.
The company is growing at more than 100 percent year-on-year, confirming yet again that the shared economy can, if nuanced correctly, pay handsome dividends. According to Growjo, Airtasker’s estimated annual revenue in FY19 was $30.3 million (AUD), up from $11.4 million in FY18, and $5.4 million in FY17.
There are many other instances of the shared economy within the supply chain domain, including the following:
1) Uber Freight
Launched in 2017, Uber Freight pairs truck drivers with shippers in a similar way that the company’s ride-hailing app connects those looking for a ride with available drivers.
2) DHL Spaces
Using the DHL Spaces platform, customers can search for warehouse space on a location basis. The DHL Spaces mobile app shows users the location of the space, how many square meters are available, and provides contact information for booking the space.
Much like DHL Spaces, Flexe is a warehousing concern that connects companies needing warehousing space to those with spare capacity. It has a 50-pallet, 30-day minimum requirement, and suits retailers or seasonal businesses requiring short-term storage.
4) MakeSpace and Omni
US start-ups MakeSpace and Omni are leading the way in urban discreet warehousing. Their on-demand platforms provide for pickup, storage, and delivery of personal items and are aimed at helping urban dwellers unclutter their homes.
5) Freightos, Shipa Freight, Convoy
All three of these digital freight brokerage platforms provide sharing of truck and ship capacity, helping to reduce inefficiencies relating to unused cargo space.
Freightos boasts a SaaS component that provides logistics companies with freight rate management and instant freight quoting, Shipa Freight offers a digital platform that facilitates less-than-container-load (LCL) and full-container-load (FCL) shipping, while Convoy connects local truck drivers to area shippers to fulfil LTL and FTL requests.
6) Shipa Delivery, Postmates, and Instacart
These platforms offer crowdsourced last-mile delivery services, using private local couriers to get packages to customers’ doors, usually the same day, and sometimes in less than an hour.
Connects people who need a large item shipped—anything from a piano to a boat or even livestock—to a network of carriers who compete for the shipment.
The Imagination’s the Limit for the Shared Economy
The future of the gig economy is on a steady growth trajectory, with PricewaterhouseCoopers estimating that the following five key sharing sectors have the potential to increase global revenues by $335 billion USD by 2025:
- Car sharing
- Music and video streaming.
The business consulting company estimates that between 2013 and 2025, shared economy revenue will increase by a whopping 2,133 percent. In the same period, traditional companies will see revenue growth of only 39.6 percent.
This exponential growth is being driven by technological advances that make it possible for transactions to take place on demand, to be measured precisely, and for demand and supply to be matched immediately—all via digital online platforms.
It’s likely that the sector’s growth will be limited only by the limits of human imagination.
As far as the shared economy within the supply chain is concerned, the following developments have already been predicted:
Logistics asset sharing: Companies will increasingly see the value in renting assets such as vans, forklifts, and pallet trucks to retailers when they are not being used.
Logistics data sharing: Data that logistic companies own can be pooled to help make cities more efficient and environmentally friendly.
Heavy trucking: Deloitte expects that commerce based on wholly-owned fleets of human-driven, fossil-fuel-powered vehicles will be significantly disrupted. It urges core transportation providers and heavy users to explore ways to use shared platforms so they do not fall behind.
Partnerships: PwC cautions that the sharing economy model is significantly disrupting the business status quo and predicts that more and more partnerships will be struck between traditional companies and sharing economy enterprises.
Road freight: DHL predicts that digital freight brokerage platforms will transform the road freight industry in a way that will drastically reduce inefficiencies related to unused truck capacity.
How COVID-19 has Disrupted the Shared Economy
While the pandemic has battered some parts of the gig economy, it has boosted other sectors, particularly companies involved in last-mile delivery, such as Uber Eats and DoorDash, which offer kerbside and contactless deliveries, and for grocery delivery service Instacart.
Swings and Roundabouts for Uber
The changes wrought by the pandemic are well illustrated by the second quarter 2020 financial results of Uber Technologies. On the one hand, the company’s Mobility Gross Bookings (its ride-hail service) declined 73 percent year-over-year in the quarter, while its Delivery Gross Bookings service (Uber Eats) grew 113 percent year-over year.
Overall, Uber’s revenue declined 29 percent year-over-year in the quarter, with Mobility revenue declining 67 percent, and Delivery revenue growing 103 percent year-over-year.
These figures are driven by the fact that as people stayed home during lockdowns, they ordered more from Uber Eats than ever before.
Instant Benefit for Instacart
With the demand for grocery delivery exploding in reaction to the virus and lockdowns, Instacart is reported to have made a net profit for the first time—$10 million (USD) in April—against a reported loss of $300 million in 2019.
The report says consumers purchased $700 million worth of goods through the San Francisco-based startup in each of the first two weeks of April 2020—up 450 percent from December.
The company has also hired thousands of extra contractors to help it meet the increased demand for orders.
Confident that the massive shift to online grocery ordering will continue even after the pandemic subsides, Instacart has raised a total of $325 million USD in funding since June, raising its valuation to $13.8 billion USD.
The Future of the Shared Economy in Supply Chain
Few experts doubt that the shared economy is the way of the future, even though its advantages and disadvantages have been thrown into sharp focus by the COVID-19 pandemic.
And while the broader gig economy may take some time to recover due to the current aversion to travel, the shared economy within supply chain is charging ahead.
This is precisely because new solutions are needed for long-standing inefficiencies, such as the vast numbers of trucking half-loads, and the enormous amount of unused capacity in warehousing and shipping.
Editor’s Note: This post was originally published on September 22, 2020, under the title “Boom Time for the Shared Economy within Supply Chain” on Logistics Bureau’s website.