Title: Uber Disrupts Supply Chain
Industry: Transportation Networks; Technology
The Company was contacted; however no response was received at time of publication
Web References: Supply Chain; Disruptive Innovation; Uber; Transportation Network Company; Uber Valuation; Smartphone; Uber Differences; Supply Chain Extinction; Youtube; Dispatch Algorithms; Uber Carpool
Disrupting Supply Chain Management
Let’s start from the beginning! The supply chain is as old as capitalism. People need stuff. Someone decides to make stuff. Eventually the person making the stuff can’t make enough to meet the demand. So this person then needs to taps others to help with making the stuff in order to meet demand. Once new people are brought into the mix to help with demand, a supply chain is created. Traditionally, the supply chain is organised and managed by the person who came up with the idea and couldn’t meet the demand. This individual functions as the product owner. Basically, when I need stuff, I have to go to the dude selling the stuff: the product owner. Traditionally, I don’t know the dudes making the stuff. I only have access to the dude selling the stuff. So there you have it – a very basic supply chain. Of course, as things get more complicated and technical, the supply chain increases with the number of individuals or moving parts involved. Every so often someone comes along with a disruptive innovation that changes the whole game. In the case of supply chain and supply chain management, the disruptive force has been Uber!
Uber Technologies Inc. created in 2009, is a transportation network company that has disrupted the entire taxi industry. Uber is only six years old and is valued in the billions of dollars. I would provide a number; however, there seem to be disputes regarding its true valuation. Not to mention, they recently completed a round of raising capital. So what exactly is Uber? And how is it using social media to disrupt the supply chain? It is a ride hailing app that allows people to people interaction. Historically, if I need to get somewhere here are my options:
- Walk or cycle (if it is close enough)
- Drive my own car (if I have one)
- Take public transit (if it will get me to where I need to go and in a timely fashion)
- Hail a taxi (if there is one available)
- Come up with some other creative option like borrowing a friend’s car; hitchhiking
- Or don’t go!
Uber provides another option if the above items aren’t an option – it allows me to hail a private car using the technology in my pocket: the smartphone. Also, it allows me to pay for this ride using this technology. It is a completely paperless transaction which is great given that so much of our world is going paperless.
The taxi industry works very differently. I call or hail a cab. This cab is driven by someone who rents this vehicle and needs to have a special license to operate the car. The owner of the vehicle is usually some larger company who runs the entire business from fielding calls and dispatching them out to drivers to owning the vehicles. The owner of the company makes the lion’s share of money.
You’re probably wondering what’s the big deal. Uber made an app and is now providing rides for people. Well, the issue is that Uber has rendered the taxi company useless. Rather than relying on the telephone or standing on a street and hailing; people simply go into their pocket, pop open their Uber app, press a few buttons and a car appears. No need for a dispatcher. No need for a taxi company. The rider and the driver are in touch with each other
without a middle man without an obvious middle man. Uber is the middle man because it provides the technology for the person to person interaction. The handy dandy smartphone in your pocket is revolutionizing everything. All you need to do is download the app. Create a profile. Set up your payment details and then you’re set to hail a ride whenever you need. Folks can also split fares when riding with other Uber users. You just go into the app and select the users splitting the fare. Also, Uber provides you with options around the type of car you can request. There is UberX; UberBlack; UberSUV and UberTaxi. All can be accessed through the app. There are significant price differentials between each grade of vehicle. Here is a link that details the difference.
Before Uber, folks had to engage with the massive taxi industry that had a giant supply chain filled with lots of employees. With Uber, the interaction is between you and the driver. Again, I reiterate all through your handy dandy smartphone app.
So what exactly are the disruptions that Uber is causing to the supply chain? Well, we need to examine Uber as more than just a ride hailing app. We need to apply the lens of logistics company in order to understand the depth of disruption. This is probably why Uber’s valuation is skyrocketing. The traditional supply chain is going to be extinct by 2025 according to this article. Extinction will occur at the hands of 10 disruptors:
- E-commerce and omni-channel distribution
- Mobile and wearable technology
- Robotics and automation
- Sensors and the Internet of Things
- Big Data
- Total Supply Chain Visibility
Of these 10 disruptors, Uber is actively using nine!
Uber uses e-commerce. It isn’t quite yet in the omni-channel realm of things; however, it will likely reach there based on how the company’s vision is expanding. Uber exists in urban markets around the world. Not just any markets but the business, government, and financial hubs of the world – NYC; Washington DC; Singapore; Lagos; Capetown; Johannesburg; Toronto; London; Paris; Nairobi; and Copenhagen to name a few. If any company understands urbanization and the impact it has on supply chain, it is Uber. The company deals almost exclusively in the realm of mobile technology. There are offices in select cities to help with troubleshooting; however most of the work is done through the app. Uber doesn’t currently use robotics and automation; however the clear intention is there. In the video below Stephen Colbert interviews Travis Kalanick who discusses the future plans for robotics.
Sensors and the Internet of Things are used with the real time arrival of the car you hailed. In Toronto, Uber has already expanded into UberEats and is moving food around the city. Customers can already see when their food will arrive.
Big data! Big bad data – Uber is using this in all kinds of way – surge pricing; dispatch algorithms. The Colbert interview talks about surge pricing very loosely. Essentially, all the information that users share through their profiles along with all the choices they make through the app get logged and input into a massive algorithm that determines the market price of the ride. The people who write these algorithms are the true genius’ behind all the disruption that is taking place in the business world.
Uber’s workforce is composed all kinds of people. Essentially if you have a car, you can use it to be an Uber driver. With regards to sustainability issues, Uber launched a carpool option to mitigate some of the environmental impact of its ride hailing app. There is total supply chain visibility because users can see when the car is arriving and where it is through GPS. Collaboration is occurring through the sharing of gathered data. Uber is sharing the information with cities to assist with traffic congestion planning.
Really the only one that isn’t happening is robotics and automation. Though, it is in the cards!
So with all these disruptors under its belt, Uber is demolishing the old logistics supply chain model and all through the use of social media and associated technologies. In fact, all of the disruptions are happening through Uber’s app!
Lessons for Others:
So many lessons for others! Where to begin! Seriously, the biggest takeaway is do not be afraid to try and disrupt things. Try to solve a problem that the consumer doesn’t even realize is a problem. From there, take a gander at the list of disruptors above and see where you can add them to your business model. Sure it will take some capital to be able to data mine; however, many companies are making their algorithms open source. Also, E-commerce is important. If your business isn’t there yet, get on it! From there, chip away at the other suggestions and make sure you do it while utilizing social media. Either 3rd party apps or ones that you’ve created yourself. All it takes is a willingness to try!
Submitted by: Saara Siddiqi, SMBP Student, University of Waterloo
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