Phone Apps Enable Faster, Networked Delivery, But...

Delivery is an economic battleground. Amazon and Google are entering it. Uber is experimenting. But a fundamental question is whether app-enabled independent drivers are the new avatars or if the enterprise-centric command and control model will prevail.

The issue is which model will offer the greatest speed and reliability. But the looming challenge may be that robotics will ultimate render fruitless attempts at efficiency optimization for any humans, however well connected, compensated and motivated. JL

Loretta Chao reports in the Wall Street Journal:

Technology startups aim to connect independent couriers and drivers with same-day delivery gigs, and address what retailers believe is a demand for faster delivery service.
Last year, Natanael do Nascimento was barely getting by as a motorcycle courier. Zipping through the streets here on orders radioed from local dispatchers, he earned less than the Brazilian real equivalent of $500 a month delivering paperwork and small packages between companies.
Today, the 24-year-old courier makes almost three times as much, thanks to a smartphone application called Loggi. When online retailers, businesses and other shippers request a pickup electronically, the software can tell if he is nearby. It pings him if he has enough space in his standard-size trunk, based on the other packages it knows he is carrying. The delivery cost and route are calculated automatically. All he needs to do is accept the job and fetch the package.
Loggi, which started in 2013 here, is one of the earliest of a crop of technology startups that aim to connect independent couriers and drivers with same-day delivery gigs, and address what retailers believe is a demand for faster delivery service.
In the U.S., companies such as Silicon Valley startup Deliv are starting to be used for same-day deliveries for retailers, including Macy’s Inc. San Francisco-based odd-job platform TaskRabbit says same-day deliveries ordered through its platform in several U.S. cities have more than doubled over the past year. Uber Technologies Inc. offers same-day cargo service in Hong Kong.
If the shipper and customer are in the same metropolitan area, these companies offer the option to have packages taken directly from a retailer’s warehouse to the customer in less than a day—rather than to the hub of a carrier such as UPS, FedEx, or in Brazil, SEDEX, where a package would be sorted and routed to its destination.

Venture-capital funds are taking interest in the fledgling industry. Loggi raised 10 million reais ($3.3 million) in its latest funding round last year, including from Qualcomm Inc.’s investment arm, Qualcomm Ventures. Loggi CEO and co-founder Fabien Mendez says the company had $3.3 million in revenue operating only in São Paulo in 2014 and expects to earn seven times as much this year. The company isn't yet profitable.

Because users can opt to hire Loggi couriers through an app, the company is sometimes referred to as the “Uber” of deliveries in Brazil, after the popular ride-sharing application.
But Mr. Mendez says his company must operate differently from ride-sharing or taxi-hailing apps. Delivering goods is more complex than linking passengers with drivers, he says, because routes can include many stops and multiple shippers.
Loggi has to track couriers on their routes and arrange for payment. The firm works with retailers to integrate its services into their websites.
There are benefits to being in this part of the delivery industry: cargo apps face less government resistance in Brazil than passenger apps because they aren’t seen as a threat to drivers’ jobs. They do, however, threaten traditional small dispatch agencies that pay a smaller share of delivery fees, Mr. Mendez says.
By providing faster shipping at a lower price and higher compensation for couriers, Loggi and its peers are “creating a level of efficiency for both customers and the couriers,” says John Manners-Bell, CEO of U.K.-based logistics research firm Transport Intelligence Ltd. Many companies have come under fire in traditional markets because of the very low rates they pay subcontractors, he says. “There could well be an enormous market for these companies.”
Similar services have emerged around the world, including another in Brazil called Rapiddo. Uber itself is testing a cargo service in Hong Kong. Larger logistics companies may integrate such technology solutions into their own businesses, too. More competition and, perhaps, some consolidation are likely in future.
Here in São Paulo, the heart of business in Brazil, couriers are part of a thriving and largely informal industry that came about in response to the city’s heavy traffic and a specifically local phenomenon: the high volumes of paperwork required by notoriously complex bureaucracy. Some 20,000 delivery vans and 200,000 motorcycle couriers, often called “motoboys,” are an integral part of the cityscape, according transport and union officials. They are also increasingly using smartphones.
Requesting a courier typically took about two hours through a dispatcher, which would radio motoboys and arrange to have a package picked up. Now, motoboys connected to Loggi on their phones arrive for pickup in an average of seven minutes, according to the company. This is despite having only about 1,000 couriers registered for its application so far. The company started with motorcycles and plans to incorporate delivery vans into its network this year. It eventually wants to offer its services to independent truck drivers.
Loggi takes 20% of the shipping cost from couriers compared with 55% claimed by traditional dispatchers.
All Loggi couriers must be licensed, with specialized insurance and motorcycles that meet local government standards. Upgrades can costs hundreds of dollars, but Mr. Nascimento says the expense is worth it.
The couriers’ routes, including additional stops along the way, are mapped using the GPS on their smartphones, providing transparency to waiting customers. If they deviate from that route or take too long to get to their destination, Loggi staff are notified.
Some are skeptical of the model. “It’s amazing that these private equity firms…are writing checks thinking they’re going to disrupt the e-commerce delivery mechanism,” says Satish Jindel, president of SJ Consulting Group Inc., who helped establish small-package carrier Roadway Package System, or RPS, which was acquired in 1998 by FedEx Corp.
But in São Paulo, Loggi’s couriers like the extra work, delivering everything from documents to fresh flowers without having to return to dispatch bases and wait in long lines.
“I’ve been doing this for 15 years,” says Vanderlei Lino Teodoro, a 38-year-old motorcycle courier who doesn’t miss the tedious queues. With a bigger cut of the delivery revenue, he is earning more than twice what he pulled in before starting to use the app. “We should have had a system like this a long, long time ago.”