Union Pacific - E Commerce
With the Christmas season fast approaching and COVID-19, resulting in a rapid increase in online shopping popularity, it is clear the E-Commerce is here to stay. This overwhelming surge of people wanting to shop online has resulted in a shortage of intermodal containers, a large shipping container designed to move seamlessly from freight to truck.
Based on this problem that Union Pacific is facing, we decided to contact a former UP Executive, Shawntell Kroese, to get her insight into how we might develop a solution for UP to solve their intermodal container shortage issue. In order to develop the best possible solution for Union Pacific she recommended:
- Think about how they are aligned and whether UP is aligned with "winners"; are others doing better working directly with Amazon and other retailers?
- Are their intermediaries "winning" in this space? I think you will find that JB Hunt, XPO, etc are vying for this market very aggressively and you might want to see if UP has a good "counter-defense" to what they are doing.
- What needs to change to make sure that good options are in place as you look at reverse logistic options.
With stay-at-home orders in many states this holiday season, 62% will do their shopping online, putting immense pressure on the retail supply chain. This overwhelming surge of people wanting to shop online has resulted in Union Pacific having a shortage of intermodal containers, a large shipping container designed to move seamlessly from freight to truck. While the simple solution may seem to buy more containers, it is a risky investment to make, being that there is no guarantee that demand will continue to accelerate at this rate.
Our recommendation was for Union Pacific to adopt what we like to call the "Uber Model." In this model, Union Pacific would develop a logistics platform similar to Uber's that would handle the supply chain logistics or partner with one of the other companies that have adopted this platform to become their leading shippers.
This model has virtually been adopted by JB Hunt, XPO, and yes, Uber. Launched in May 2017, Uber Freight started in regional operations in Texas and has grown to the rest of the continental US and Europe, becoming a separate business unit in 2018. Uber Freight now has a network of 400,000 drivers, 1,000 shippers, and 50,000 carriers. For Union Pacific to be prosperous in the E-Commerce industry, they need the "Uber Model" and logistics algorithm integrated into their operations to properly combat the current demand.
With three very prominent platforms and countless others on the AppStore like CoyoteGO and Mothership Driver, Loup Logistics, a conglomerate of Union Pacific that provides logistics services, has no chance of being competitive if they try and develop a platform themself. With countless platforms already on the market, Union Pacific will need to find a company that has a crack in its supply chain that Union Pacific can fill.
This graph shows that the crack in each of these companies' supply chains is their carrier network. Essentially, Union Pacific can add value to any platform. Even though options are endless for Union Pacific, XPO can quickly be eliminated from the mix of potential partners due to their lack of drivers, leaving JB Hunt and Uber Freight. With a difference of 7,000 carriers separating the two companies, it is hard to determine which company could benefit Union Pacific the most.
JB Hunt started its brokerage business in 2006 as an asset-based company that transformed into a technology company with assets accumulated over the past ten years, which is why they are currently dominating the industry with 718,000 drivers. Uber, on the other hand, is a technology company with no assets. They are entirely dependent on independent contractors, which makes a partnership with Union Pacific essential.
As the future of eCommerce progresses, the shipment of returned packages will increase and put more and more stress on the supply chain. Having a strong system to handle reverse logistics will make a difference between the winners and losers in the market. Before Union Pacific can even begin to dive deeper into this rising issue, they need to develop better logistics operations or partner with one of the winners in this market like Uber Freight.
Once the supply chain is sounds, they can divulge in the reverse logistics operations. One potential solution to the reverse logistics problem is Blockchain Technology. Blockchain technology serves to validate, record, and distribute transactions in encrypted ledgers in real-time. It also increases the efficiency of the delivery process. The transparency and efficiency give consumers the accessibility to track their packages every step of the way, which is a capability that Loup logistics hasn’t provided to its customers.