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SA logistics – Vehicle and Capacity Sharing

Workings of a Vehicle and Capacity Sharing ModelHow could Vehicle and Capacity Sharing change the SA logistics and supply chain landscape? Disruptive internet-based business models are increasingly having an impact on traditional business models by establishing linkages between previously separated parties – and using technology to enable and support business processes.

What is the future impact of Vehicle and Capacity Sharing (VaCS) on my business?

  • What are the principles of the new way of working?
  • What additional pressures and/or opportunities will this bring?
  • Who will benefit from VaCS, for example through lower costs and higher convenience?
  • What can be done to mitigate risks associated with possible disintermediation?

Looking at the market capitalisation of relatively new companies such as Uber, then one cannot help to presume that investors (at least) must be very confident in the ability of this disruptive Internet-based business model to lead to significant profits going forward.

Most people know Uber as a flexible people- transporting solution, where in effect anyone with an open seat in his car is now empowered to be a taxi operator.

While this model has faced stiff opposition, relating primarily to safety aspects and liability risks, there can be no doubt that this business model is here to stay, will expand and will be transferred into all spheres of industry where capacity, at this stage, is not fully optimised.

What is less known, is that Uber has also made advances into the logistics/courier express sector and parcel segment with an offering called Uber Rush. How does such a VaCS model work?

The concept is quite simple:

  • Somebody (Sender) wants an item/parcel sent to a specific location (Receiver);
  • The Sender uses a Vehicle and Capacity Sharing solution (like Uber) to find a transport solution for this journey;
  • The VaCS solution makes use of registered transporters/partners and facilitates the selection of a partner by the Sender to transport the item/parcel;
  • The partner collects the item/parcel from the Sender and drops it off with the Receiver;
  • Payment is received by the Sender and the Vehicle and Capacity Sharing facilitates the payment of the transporter, with the Vehicle and Capacity Sharing facilitator taking a cut for the effort of having completed the supply chain process and linking all parties together and providing transparency throughout.

What additional pressures and/or opportunities will this bring to different parties in the Supply Chain eco-system – and who benefits from VaCS?

In the pre-Vehicle and Capacity Sharing supply chain environment, the roles were quite clearly defined:

  • The Sender did not have the ability to readily source an endless array of parties (other than if he did his own transporting) to perform the transport duties;
  • This is why he called upon 4PLs, 3PLs or transport companies to execute the task on his behalf by collecting goods and dropping them off with the Receiver;
  • Depending on a variety of factors (cost, regional focus area, specialisation, capacity, and more) the intermediary parties (4PL, 3PL and transporters) worked together to get the job done as ‘frenemies’;
  • Competition occurred on the basis of different ‘constellations’ competing with each other such as 4PL with transporters versus 3PL on its own versus 3PL with transporters or transporters on their own versus Sender-own transport.

With the advent of VaCS models, this traditional way of working is changed by the Internet’s ability to bring all parties together and paving the way for new entrants to participate – who previously wouldn’t have had the ability to market their services, nor had the supporting technologies to execute and fulfill requirements such as one of arrival ‘transparency’.

This is essentially what VaCS models such as Uber address – and in the process bring about massive change for the industry. What does this mean for established players and for Senders/Receivers, for whom transport costs plays a major role for their business success?

The key areas of impact in areas where no specialised transportation equipment is required (such as courier, express and parcel) will be as follows:

  • Senders or Receivers now have an additional option to organise the shipment of goods – which in effect means more competition for the traditional way of doing things;
  • Entrance into the market of ‘part-time’ transporters with lower overhead costs and where Vehicle and Capacity Sharing – Model income is seen as an extra source of income;
  • Competition of part-time transporters against established professional transporters for transport jobs – with part-timers in all likelihood being willing to do the same job cheaper;
  • 4PL/3PL companies increasingly finding it more difficult to compete against part-time logistics – unless they are able to offer better service, higher reliability, less risk, etc;
  • The overall process leading (at least for a while) to lower costs for Senders/Receivers and the consumers – with a shake-out happening amongst 4PLs, 3PLs and professional transporters, who are unable to differentiate themselves or become more competitive in the face of low-cost competition.

Impact on Industry of Vehicle and Capacity SharingWhat can be done by affected parties to successfully ward off or embrace the impact of Vehicle and Capacity Sharing on the SA Logistics and Supply Chain Sector? There is clearly no simple answer to this.

However, referring to the last article published, the intelligent leveraging of technologies in support of all elements of the supply chain (such as contracting, execution, customer relationship management, invoicing and administration) will play a significant role in improving supply chain efficiencies and lowering costs.

The best safeguard for industry players is to achieve similar or better outcomes through their supply shains in comparison to VaCS-enabled supply chains.

After all, why would Senders/Receivers switch to anonymous plug-and-play linkages if they can achieve similar results with parties that they know and trust?

Tristan Wiggill
Special Features Editor at Business Fleet Africa