Driverless vehicles will change the nature of the freight industry. The challenges in finding qualified drivers, the hours of service regulations and the fact that drivers can represent one third of the cost of moving a truck will make the economics for moving freight in driverless vehicles very compelling.
February 11, 2017
by Dan Goodwill
Over the past couple of weeks, I have had the privilege of sitting in on a discussion and reading some papers on the Future of Freight Transportation. I specifically would like to acknowledge the work of Steve Sashihara at Princeton Consultants and a recent Supply Chain Digest report that helped shape my ideas for this blog. While I previously had some sense of what was going on (i.e. ecommerce, Amazon) in this sector, I was surprised by the range and profound nature of the changes that are taking place. I would like to share some of the major changes with you.
Manufacturing in the Future
The big drivers of change are automation, digital technology, and robotics. Manufacturing is increasingly being performed by robots; automated systems are sorting the products and then loading them on trucks. Sensors are becoming ubiquitous and are now on products, pallets, SKUs, drivers, facilities, tractors and trailers. Conveyor systems move the right product to the right piece of trucking equipment at the right time. Loading software tells you how and where to load the product on the truck or trailer to maximize cube utilization and avoid load imbalances.
With the advent of 3D printing and artificial intelligence, companies can manufacture their products in the locations closest to their customers and/or distribution facilities. What this tells you is that the jobs of assemblers, sorters, fork lift drivers and loaders will increasingly be replaced by machines. While some manufacturing may come back to the United States or Canada, many of the traditional jobs will not.
Distribution in the Future
Data engineering will be at the forefront of everything that goes on in supply chains. Data engineering, according to Dr. Michael Watson of Northwestern University, is “the art and science of blending data from multiple (and different) sources, automatically cleaning and filtering the data, and transforming the data to be useful for analysis.”
The Internet of Things (IoT), linked to sensors on just about everything, and data analytics, will produce impressive results. This will be especially true in DC’s and in Fulfillment Centers (FC’s) as supply chain network design modelers will have excellent analytical tools to ensure they have the right products at the right location.
Retailing in the Future
“Omnichannel as a strategy is dead,” says Jim Barnes, CEO of enVista. “The term served a purpose to get traditional (brick-and-mortar) retailers to start thinking about how to break down organizational silos. The reality is that omnichannel is an inward-facing focus versus a customer-centric approach, which is where retailers actually want and need to focus.
Customers do not care about, nor speak in terms of, channels.” The internet of things (IOT) has created a consumer expectation that one can have what they want, when they want it, which is almost always immediately.
Barnes argues that “What matters the most in retail commerce is the ability to source inventory closest to the demand point, regardless of order capture form factor, and the ability to delight the customer.” He adds that “Traditional ecommerce will die over time and will be replaced with only a handful of marketplaces, such as Amazon, Ebay, Jet (Walmart), Groupon, Wayfair, Etsy, etc. Brands will have a hard time competing with marketplaces that have an integrated, enabling, unified commerce technology platform and fulfillment distribution networks to deliver in hours versus days, and this includes physical stores.”
So how do other retailers compete with these marketplace giants? Barnes says the answer is merging digital and brick-and-mortar, saying for example that “Sales associates can and should be leveraged as taste makers, empowered to create unique webstores for their in-store clients within minutes.” He also says that “Retail winners are going to be those that focus on inventory flow and compressing cycle times
Freight Transportation in the Future
There are several developments shaping the world of freight transportation. Technology in the form of ELDs are injecting more discipline into the management of truck fleets. Dispatching and routing software, coupled with onboard computers, also help with fleet utilization. The move to a consumer-centric culture will force carriers to improve speed to market (i.e. from days to hours). This will likely put pressure on trucking companies to better integrate their small parcel and LTL operations so the right products arrive, together, at the right place at the right time. Drones will perform the delivery of very small shipments.
The uber model is beginning to gain traction in freight transportation. Sophisticated software–based freight matching services link available capacity with demand and find the right truck to move goods to the customer. For shippers who lack expertise or freight density, they can increasingly turn to logistics service providers (to manage their logistics operations) or dedicated fleets (if they wish to outsource their private fleet operations to a more cost effective option).
Driverless vehicles will change the nature of the freight industry. The challenges in finding qualified drivers, the hours of service regulations and the fact that drivers can represent one third of the cost of moving a truck will make the economics for moving freight in driverless vehicles very compelling. Watch out for platoons of driverless vehicles to perform long haul trucking; live drivers will be required in last mile delivery fleets (i.e. augmented cartage and drayage fleets) to perform the local deliveries and assist shippers in unloading freight and obtaining signatures, when required. These last mile delivery fleets will work for the large marketplaces or for the independent retailers that need to get their goods to market. The big news here is that with 3D manufacturing and more regional distribution networks, fewer long haul drivers will be required in the future.
Self-driving trucks will reduce the costs of freight transportation; high quality services and apps will take these efficiencies to another level. One of the potential by-products of self-driving trucks is that they will allow fleets to better compete with intermodal transportation. This could result in rail operating ratios moving closer to those of trucking companies.
Is all this science fiction or are these developments likely to happen? Robotics, 3D printing and conveyor systems have been around for years. They continue to evolve over time. Amazon has been building its network of distribution centres and logistics capabilities for several years. Other companies are moving into this space.
Freightliner is testing its self-driving 18-wheel “Inspiration Truck.” A new company, Ottomotto, is developing technology to retrofit existing 18 wheel trucks to self-driving vehicles. The DJI Phantom II drone is available for less than $1200 US. The FAA issued its first set of drone delivery rules last June. A segment of the logistics industry (i.e. Cargomatic, Convoy, Dashhaul, Flexport, Shipster, Tugfix) is already muscling into the uber in freight management space. Hey, this is going to happen sooner than you think.
These are my views and those of a few industry experts. What do you see in your crystal ball? Please share your thoughts with me and the folks who follow this blog.
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Dan Goodwill, President, Dan Goodwill & Associates Inc. has over 30 years of experience in the logistics and transportation industries in both Canada and the United States. Dan has held executive level positions in the industry including President of Yellow Transportation’s Canada division, President of Clarke Logistics (Canada’s largest Intermodal Marketing Company), General Manager of the Railfast division of TNT and Vice President, Sales & Marketing, TNT Overland Express.
Goodwill is currently a consultant to manufacturers and distributors, helping them improve their transportation processes and save millions of dollars in freight spend. Mr. Goodwill also provides consulting services to investors, vendors to the trucking industry, transportation and logistics organizations. All posts by Dan Goodwill