systems engineering
Ride-sharing apps go beyond transportation
Y
You probably have heard of or been one
of the 8 million people who have used
ride-sharing apps like Uber, Lyft or
Swift. These apps are transforming the
way people get around in more than 300
cities around the world. By providing
convenient ways for more than 1 mil-
lion riders per day to request on-demand
service for a rate that is usually less ex-
pensive than a taxi, ride-sharing apps
have undercut the taxi industry in
terms of cost and quality of service.
In New York City, the number of
Uber drivers recently surpassed the
number of taxi drivers (approxi-
mately 14,000).
On a recent three-day trip to
Pittsburgh, I decided not to rent a car
and instead rely exclusively on Uber
to get around. Uber drivers are now
allowed to pick up passengers at the
Pittsburgh airport, a service previously
restricted to taxis. I compared the trans-
portation costs with a three-day trip I
had taken to Pittsburgh two years ago.
The costs in 2013 totaled $302: $270
for the rental car and insurance for three
days, $12 for gas and $20 for parking.
The approximate transportation costs
for the trip in 2015 added up to $251,
which included $65 from the airport to
the hotel, six $6 trips between the hotel
to the offce, two $40 trips to and from
a restaurant, and another $70 from the
offce to the airport.
Aside from the obvious cost benefts
of using ride-sharing apps, there are two
other systems that are experiencing the
consequences of this market disruptor.
24 Industrial Engineer | www.iienet.org/IEmagazine
By Ricardo Valerdi
The frst is the legal system in every
country where ride-sharing apps are be-
ing introduced. In the U.S., for exam-
ple, no laws were in place to address the
legality of such services in light of the
heavily regulated taxi industry. In cities
like Boston and New York, the num-
ber of taxis is limited by the number of
licenses, which are issued by the Taxi
Commission. These licenses are called
We have only seen the
beginning of this movement.
medallions and can cost as much as $1
million because of the tremendous de-
mand for a fxed supply.
Since most taxi drivers are unable to
pay such a large amount up front, they
rent taxi medallions from their owners.
The introduction of ride-sharing apps
has surfaced an entirely new set of is-
sues that have received resistance from
taxi owners and brought about numer-
ous horror stories of both passenger and
driver ineptitude.
The second system being affected is
the human interaction between driver
and passenger. I have noticed an im-
provement in customer service from
taxi drivers. They are aware that there
is competition and have a vested inter-
est in keeping their jobs, although some
of them have switched to Uber or Lyft
because of the fexibility and earning
potential.
Ride-sharing apps require passengers
to rate their experience with the driver
on a fve-star scale. This is nonexistent
in the traditional taxi experience. Ride-
sharing drivers are evaluated by their
customer service ratings and are at risk
of suspension if their average ratings fall
below a certain level.
In addition, ride-sharing drivers also
rate customers on the same fve-star
scale. This introduces a dual incen-
tive to be reliable, courteous and
clean. If a customers average rating
falls below a certain level, they also
are at risk of being banned from the
service.
We live in an exciting time for
ride-sharing apps; we have only seen
the beginning of this movement. Ride-
sharing companies have been investing
in the development of driverless cars
and will soon enter the package delivery
market in competition with UPS and
FedEx.
In the same way Google and Xerox
are common verbs, Im sure that ride-
sharing companies will become ubiq-
uitous as we begin using phrases like
Ubering to work.
Ricardo Valerdi is a ssociate professor at the
U iversity of Arizo a i the Departme t of
Systems a d I dustrial E gi eeri g. He is
the former co-editor-i -chief of the Journal
of Enterprise Transformation, a collab-
orative ve ture betwee IE a d INCOSE.
Reach him at rvalerdi@arizo a.edu.
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