An article in FleetOwner.com by Sean Kilcarr titled “Logistics outlook:last mile a major Choke Point” on June 22, 2016 describes four technology adoption scenarios outlined in the State of the Logistics report for 2016. The technologies listed include the internet of things, self-driving trucks and 3D printing. The scenarios include 1) Cruisin’ Down the Highway: In this scenario, regulators work to ease constraints technology adoption that improves efficiency for all, 2) Stop Signs and Red Lights: In this scenario, only the easily adoptable technologies are used and that too only by the strongest companies, 3) Middle of the Road: In this scenario, there is limited automation and incremental change and 4) Dead End Street: In this scenario, costs increase due to regulatory inflexibility and thus limited technology adoption. Which of these scenarios is likely to emerge as the outcome and how will will impact supply chains ? How should regulators balance the risk associated with approvals with the entrepreneurial benefit to learning by doing ? What is the opportunity cost of not being proactive with technology adoption in terms of loss of competitiveness for US supply chains ?
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A few years ago, I worked in the automotive industry in which autonomous vehicles were a prevalent topic. However, in that time, I learned that the biggest roadblock for autonomous vehicles would not be the technology itself, but the laws that would need to be put into place in order to accept autonomous vehicles. I also learned that within the manufacturing space that automated machines, although more efficient than people, were not always the answer as many unions would push back to retain their jobs. As a result, I think that Option 1, while ideal for the trucking industry for efficiency, will be difficult to implement because truck drivers have their own union protections, are likely to push back, and regulations may hold autonomous vehicles from fully functioning on the roads. Due to union protections, I think that Option 2 would also be hard. However, I believe it is possible because there is a shortage of truck drivers. This means that there is a gap and opening where technology could enhance this industry without being entirely destructive to the existing workforce.
Scenario 3, “Middle of the Road” followed by Scenario 1, “Cruisin’ Down the Highway” is hopefully the outcome for technology adoption. A good example of this would be the drone technology which has been available. Although it is a good option for deliveries, it currently faces “operational constraints” such as Part 107 Regulation by the FAA, which prohibits the operation of entirely autonomous drone flights or beyond the line of sight of human operations. With enough lobbying, coalition, and advocacies, regulations may change and we would achieve Scenario 3 rather than a “Dead End Street”.
Breakthrough in technology would be responsible for occurrence of any phenomenal change. In order to have a breakthrough, out of the box innovations should be encouraged. Regulators shall allow entrepreneurs to run pilot scale projects such as self driving cars in a limited zone. Success of the pilot project can be replicated in other zones resulting in steady implementation of technology in a large scale. Implementation of self driving trucks in coal mines is an example. Currently, coal mines in several countries have driver-less automated trucks that load and offload coal.
I believe “Cruising down the highway” would emerge as an outcome in the future. Opportunity cost for delay in implementation of better technology would be human safety (example: robots as excavators in mines), environmental damage (example: renewable energy generation and distribution) etc. For supply chain, opportunity costs would be inventory holding costs (3D printing), damage costs (automated trucks), efficiency loss (IOT) in case of delay in implementation. Hence, sooner the implementation, better for the supply chain.
The ideal, thinking in the chain as a whole, would be to be able to reach and stay in alternative 1. Especially in the last mile, automation could reduce costs by a significant amount, and also reduce delivery times and increase efficiency. However, as Christine mentioned, unions would be a barrier to get there.
When we imagine the number of employers being “penalized” and the number of current jobs being extinct, it’s definitely a concern. Companies like UPS, Fedex and USPS could vanish if the own retailers started using machines to do their deliveries. When we think about drones, it is always Amazon’s initiative that comes to mind, and it makes no sense to UPS to invest on the service and outsource to Amazon, since costs of adding another player would increase overall chain costs.
Once retailers wouldn’t need as much expertise as companies nowadays do, integrating this last step would make much more sense.
Thinking in a solution close to reality, option 3 seems to be the best, as incremental changes wouldn’t hurt as much, and we would still have people working aside machines. Regulations and unions wouldn’t be such a problem, once we are not talking about reducing jobs, but just make lives easier.
I still think we have much to do in terms of last mile, when it comes to bundling services and increasing efficiency. This is a much closer step then automation.
With the current state of autonomous technologies, scenario 3 will be the most likely outcome and it will be extremely difficult to jump to scenarios 1 and 2. Level 3 autonomy is just now becoming commercially available and we already are seeing the impact it is having on regulations regarding autonomy. Legal precedent is just beginning to be established for cases involving these vehicles, specifically Tesla vehicles. This is a slow process and the difficulties just increase as the industry moves toward level 4 and eventually level 5 autonomy. This will limit the immediate impact on supply chains because a driver will still be required in trucks for years to come. The technology will need to produce cost efficiencies other than eliminating the driver. This will be the only method for the technology to be worth integrating and work its way into supply chains. The release of the Tesla Semi will provide more insight into how the industry will react to this addition. Although scenario 1 is an optimal outcome for utilizing the emerging technology, there are a lot of milestones that need to be reached before this can happen.
Cruisin’ Down the Highway.
I have been working with an automotive company who pioneered in autonomous vehicles, and noticed that of all, cruising on highways is one of if not the easiest scenario, due to readily identifiable lane lines and predictable traffic. However, drivers are still forbidden to leave their hands off the steering wheel, since even the most innovative technology at the moment cannot guarantee to stop the car successfully under emergencies. You may argue that human drivers cannot guarantee as such either! Unfortunately, unlike the currently implemented drone delivery (at least in pilot studies), regulatory issue looms over the commercialization of self-driving vehicles constantly, since the anticipatable consequence of failures can be unbearable, which is the reason that I believe cruising highways is most likely to emerge. To compensate for the risk, truck drivers still need to be at the driver seats and holding the wheels, and thus the labor cost will not be saved in the short run. Even if said situation fails to happen in the US, commercial firms will still experiment in more advantageous environment before bringing it back.
Scenario 3 will be the most likely outcome in my opinion. Over the past year, Scania has developed and deployed autonomous vehicles that are used in Europe for transportation of materials to and from mines (https://www.scania.com/group/en/section/pressroom/backgrounders/autonomous-transport-systems-2016/). Similarly, the Colorado Department of Transportation just started using self driving trucks as “crash trucks” to protect road crews (http://money.cnn.com/2017/08/18/technology/future/colorado-self-driving-truck/index.html). Additionally, Tesla announced its entry into the truck industry by developing an all-electric semi-truck (https://electrek.co/guides/tesla-semi/).
I do not see Scenarios 2 and 4 occurring since Uber has begun using self driving cars to transport passengers in a city, so self-transporting trucks will come into the market, but it will be a while until this occurs. Government regulations are strict on truck-manufacturers and long distance transportation.
Big disruptions in logistics industry would take more time because of constraints and regulations in the industry. So, Scenario 3 – “Middle of the Road” is likely to emerge in the next five years. Experts in the field of product development points out the advantage of creating the Minimum Viable Product in order to succeed in new product introduction. In the similar manner, scenario 3 (similar to MVP approach in my view) has greater chances to emerge. While sticking to the limited technology adoption, logistics industry can learn more about implementation lessons and plan their future directions for taking the ‘Cruising down the Road’ approach . This learning includes benefits, challenges, best practices and negative impacts in technology adoption. Obviously, the efficiency of supply chain improves and results in transportation cost saving with the use of new digital technology applications.
The regulators should facilitate the advancements in logistics industry. Since there are lot of risks associated with any advancements, the regulators should focus mainly on the safety and welfare of public. If any new experiments in these adoptions pose risks to public safety, those should be either stopped or carried out with additional precautions, so that the public safety is not compromised. The role of regulators is important in executing this approach during adoption.
The logistics company should be proactive and open to these changes. The technology adoptions will create a competitive advantage in the market and hence customers will be willing to extend the partnership with logistics companies that offers improved transportation service. The worst case scenario of not being proactive is the company will be obsolete in the service they offer and lose their customers to competitors those who are proactive in adaptive to the changes.
The scenario 3: Middle of the Road could be the most likely outcome, and yet gradually realizes in next a few years.
Disruptive innovation is hard to emerge from environment which involves lots of regulation such as transportation. Although Tesla and Alphabet Inc. have proven efficiency of self-driving cars, regulators and public have not been convinced by unmanned vehicle technologies, and licensed driver are still mandated on board to bear legal responsibility. Hence, from financial perspective, implementing the fledgling technology is rather incurring investment and expense than saving costs and looks unattractive in short term.
However, IoT has demonstrated a promising solution to harness profit from daily routine operation including warehouse automation and management. Moreover, logistics industry is largely hedged from downside of IoT initiative, since majority of project is based on revenue sharing contract. The only hurdle is the premature IoT ecosystem which is not standardized and lack economies of scale.
For supply chain infrastructure, issue is more about financial condition than technology. Aspects beyond logistics, such as government expenditure, private sector investment, interest rate and macroeconomic performance shall be evaluated if we take topic into account.
The average age of truck driver in US tricking industry is 49 and more and more drivers are retiring each day availability of skilled drivers has become a major issue in the trucking industry, specially in long haul trucks where the turnover is close to 90% (which means most of the drivers quit in their first year), availability of drivers has become a grave concern, on top this high wage rates to the skilled drivers (Mean of annual earning of $ 43,410) is also affecting the trucking industry badly, I believe regulators and Unions have realized that, if no actions are taken now the trucking industry would slowing drifting in to Scenario 4 and , there would be no coming back so, there more debates on adoption of autonomous and assisted driving technologies more than ever.
Scenario 1 seems to be highly efficient and productive solution to today’s trucking problem, but the chances adoption it are remote in near future, most of the work today is being put in scenario 2 & 3, technologies like ADAS, intelligent/ Autonomous trailers, virtual linking of tractors, truck platooning are picking up gravity and are more likely to be adopted by my most of the trick manufacturers over next 5 years, Europe’s trucking industry has been early adopter of these technologies and efforts are put in by US to adopt them.
Below mentioned articles give a good insight on changes that could come in the trucking industry.
As the technology developed and a lot e-commerce take more of the market. The scenario 3: Middle of the Road is likely to emerge as the outcome in next few years. With the high advance technology, such as Tesla Vehicles, have the self-driving car under certain regulation. The automation will significantly reduce the man cost in logistic no matter from the beginning picking up to the end shipping deliver process. However, the risk management need to be done carefully since the self-driving car is still not fully reliable, regulation is needed to protect general public’s safety and property. How the make the business more adopted into the automation logistic system and how to mitigate the potential risk from using the self-driving truck is the key point in developing an advanced supply chain system. The opportunity cost associated with all scenarios also high especially from financial perspective. But as long as more entrepreneurial adopt and benefit from advanced technology, the gap will be filled up in the near future.
Self-driving truck cruising down the highway scenario seem very likely despite high scrutiny and hesitation, since autonomous driving is evolving at a very fast pace. However, this technology and scenario will have to go through regulations hoops and many restrictions before this becomes economically feasible.
Additionally, I believe that this will have to start with baby steps, shorter hauls in or around major cities with designated routes for beginning, after all, it’s a new thing and people as well as government have to get used seeing self-driving trucks.
The impact of such development on the trucking industry specifically and logistics in general will be hard to measure, but one thing for sure, it will hurt truck drivers.
In the next 15-20 years, I feel that the Stop signs and red lights scenario is most likely. In the United States, regulation is inevitable. This regulation will drive up the cost to implement and operate new technologies. However, larger companies will still be able to implement the technologies thanks to their larger budgets and ability to take risks. The effect on the supply chain will be a big companies getting bigger and distancing themselves even further from competition. Minimal regulation would help reduce costs to smaller competitors, making their supply chain just as competitive.
Regulators should create a panel of industry experts, scholars, and company executives to help adopt fair but balanced regulation. Too much regulation in the early stages of new technologies can hinder development.
The lost opportunity cost will be tied to cheaper costs for US supply chains. It can also be tied to lost technology adoption. The US is a leader in technology development and implementation. By not being at the front of this opportunity, other countries will step up and take the place of the US.
I think that Option 3- Middle of the Road implementation of technology is the most likely. Legislators have been largely resistant to changing regulations around trucking, although there has been recent traction on legislation changes by the EPA to reclassify trailers as they relate to GHG regulations. But because of this resistance to change, the regulatory environment will likely not change, and therefore is not conducive to significant technological breakthroughs for the trucking industry. Rather, it is more likely that incremental changes in technology that operate within the current regulatory environment will occur. Such changes could include the implementation of electric power trucks (such as those recently introduced by Cummins), which would be a cost reduction measure for carriers. Another technology could be the use of the Internet of Things to perform advanced analytics on trucks and trailers, which would improve tracking and increase operational efficiencies throughout the supply chain. Because these improvements would be occurring within the current regulatory environment, there would be very little to risk between learning by doing. As companies that have to ship products continue to feel the squeeze of consumer demand for faster, cheaper (or free) delivery, they will constantly pressure carriers to lower their rates. Therefore, failure to implement cost reducing and efficiency increasing measures by carriers will make it increasingly difficult to maintain margins as their customers keep applying price pressure.
For developed countries like the US the first option(Cruising down the highway) will emerge as the winner because developed countries are called developed because they are at the forefront of adopting new things for the greater good of the nation.
Providing approvals to run something new always has associated risk for human life and public property but that should not stop countries from implementing a new technology and thereby hindering progress.To mitigate risk regulators should see to it that proper insurances are in place and the new technology firms share a part of the cost in case of eventualities.
In this highly competitive world particularly with the rise of countries like India and China delayed adoption of technology means these countries will surely find a cost effective way of implementing this technology and commoditize it to some extent and thereby ruining the competitve advantage of the countries like US who came up with the idea in the first place.
I believe the Stop Signs and Red Lights scenario will emerge in the short term, seeing as companies like Dominoes Pizza are already implementing technological advances in the form of self-driving vehicles to optimize their delivery systems. As these systems are tested further and proven robust, autonomous transportation will expand to smaller, less powerful companies and the consumer market. In this way, the second scenario will transform into the Cruisin’ Down the Highway Scenario. The expansion will be driven not only by transportation efficiencies, but by competitive necessity as well. Should the US hinder itself with cumbersome regulation prohibiting the full utilization of new transportation technology, it will fall behind economies more willing to embrace the technological change.
As I consider, the “Middle of the Road” would be likely to emerge as the outcome of these technologies. As David Page mentioned, Domino’s Pizza implemented self-driving vehicles. I believe that more and more deliveries will be used self-driving technology. Right now, Uber has already used self-driving vehicles in some cities. This will reduce the labor cost. Also, FedEx and UPS can consider implementing this technology to improve their performances. They could use self-driving vehicles between a central warehouse and self-pick up location. However, the technology should be improved and must be followed some regulations.
‘The middle of road’ is likely to emerge as the outcome. Compared to UAV logistics, car unmanned technology in the logistics industry, the application is more promising, if unmanned technology application is mature, the entire logistics industry will have significant changes.
First, the use of unmanned technology combined with the network, allowing transport vehicles to become the core of the entire logistics network data. Connect all goods and goods related to the goods: drivers, dispatchers, car service providers, production workshops, manufacturers, insurance companies or administrative agencies. Through the network in a timely manner to obtain vehicle information, road traffic and weather conditions, highway service station parking, rest area and more information. Reduce the time of loading and unloading of goods and related documents to ease traffic congestion, so that let equipment has a rest automatically, reduce vehicle maintenance time. Thereby greatly enhance the efficiency of logistics and transport.
Second, as unmanned vehicles do not need people to drive the car, even if people need to carry out a very small amount of operation, so unmanned vehicles used in logistics and transport, is a direct solution to the “people” problem. In the traditional logistics and freight forwarding companies, logistics and freight carriers carry most of the logistics industry, the freight drivers are huge, the cost is very high, and major logistics and traffic accidents happened due to driver fatigue and improper operation. The application of unmanned technology can greatly reduce the frequency of road traffic accidents, as much as possible to reduce losses.
I would have said number 3 – “Middle of the road – there is limited automation and incremental change” but looking at the recent legislation “the SELF drive act, H.R. 3388” that passed the house of representatives with bipartisan support on September 6, 2017, I am inclined to say the scenario 1 “Cruisin’ down the highway – regulators work to ease constraints on technology adoption that improves efficiency for all” is the likely outcome. We see that regulators view this technology as a means to reduce risk rather than increase risk and hence agree that learning by doing is the best approach to not only have safer roads and efficient supply chain but also to speed up the process of innovation.This would ensure the safe and innovative development, testing, and deployment of self-driving cars. Please see the legislation below:
Not immediately but this will have a big impact on the supply chains. With the increasing efficiency and productivity, each mile of travel will be less expensive, which will in turn leave consumers with more surplus income to spend on other goods and services. This also will drastically reduce the number of accidents and thereby reducing further delays in supply chain and hence improving efficiency.
Infrastructures will also likely change along with business models. We have talked about reducing the interstate/highway lane width to accommodate more traffic, thereby putting more capacity on a single lane(long haul trucks with trailers) and improve productivity of the supply chain.
The opportunity cost of not being proactive with technology adoption would be a big loss for US supply chain, as other economies would race ahead with innovation and capitalize on a more efficient system reducing their costs and providing better service to become market leaders.
Another risk to be noted could be the push back from unions or the number of jobs being extinct but then again I agree with what Subhash has shared and there is a shortage of truck drivers in the US trucking industry and the industry would require an estimated 900,000 more new drivers over the next decade, according to a Deloitte report. Please find the link here:
In fact, the development of autonomous trucks and cars might bring more skillful jobs in developing and building these types of vehicles. It just might be the right time to push for innovation to facilitate one of the major transitions in trucking industry.
I feel like that 3) Middle of the Road: In this scenario, there is limited automation and incremental change is most likely to happen in recent 20 years. Indeed, a lot of large automobile companies are in the process of developing self-driving technologies. Once this scenario becomes true, the cost of logistic will be significantly reduce, as in developed countries, labor cost is a major cost in all the perspectives. What I’m concerned about the supply chain risk is how to standardize and streamline the whole supply chain process and all the related social problems it will bring, such as higher unemployment rate.
With the advent of automation in the US trucking industry (http://money.cnn.com/2016/10/25/technology/otto-budweiser-self-driving-truck/index.html) the day would not be far off when concepts of complete automation (like the self driving cars) would be a reality. That being said, the actual scenario would be a combination of the above mentioned situations where in the rate at which technology evolves would be at a far higher rate than at which the associated laws could keep apace. This in contrast to common thinking could be a boon as well. Without suitable and extensive testing including practical applicability, the technology itself might choke onto itself which could result in a major logistics crisis at the end of the day. By enforcing better and feasible regulations with the testing and validation of these technologies, the law itself can help bolster the effective implementation without actually harming the expanding market of the trucking industry.
As new technologies evolve much faster than the technology related laws and regulations created by the government, the middle of the road scenario is most likely to happen. In spite of significant progress in autonomous driving technologies, safety concerns outweigh the discussion of productivity vs employment. The number of possible edge cases are too many to achieve a level-4 Autonomous driving level. ATLS and other industrial automation technologies are designed for specific loads and capacities and, achieving optimal utilization will pose a challenge when operated at a larger scale. I think drivers won’t become obsolete but their duties may change as the industry works out man-machine partnerships. Companies willing to implement these technologies will have to incur additional costs in training the personnel to achieve even these incremental capabilities.
I believe that scenario 1 & 3 would impact the whole supply chain. For scenario 2 and 4, the biggest hinder is the regulations. Automatic drive and robotics are highly restricted by the government for ethnic concerns. This status would not change a lot in a short term. For scenario 1, end-to-end service based on information technology has dramatically improved the efficiency and reduced the cost. In the future, new technology such as data mining and forecasting would have profound implications in this area. For scenario 3, operation areas are not strictly constrained and new technologies, such as the Internet of Things would largely improve the automotive level of regular warehouse operations. As the technology becomes mature, the cost of the installment is reduced. As consumer expectations change quickly, they would want to choose faster and cheaper service. Also due to the economy of scale in logistics system, new technologies can’t be ignored in building up the competitiveness.
As much as I would like to believe that the logistics industry take the ‘Cruising down the highway approach’, I cannot not consider the realistic operational constraints present within this industry. The technological advancements happen faster than the related regulations, but that doesn’t hinder the adoption of the new technologies by the industry players. The companies are already testing and trying the new technologies to offer their services to gauge the improvements such technologies can bring. One such example is use of Enterprise Drones by companies like Amazon, DHL, Dominos for their last mile deliveries.
In the article, the constraints mentioned are devastating driver shortage, infrastructure bottlenecks, high fuel prices, and regulatory barriers to new technologies, increase in shipper demand for visibility and control into all transportation management activities and assets, while the new ‘disruptive’ advancements are Internet of Things (IoT), robotics such as self-driving trucks and 3D printing. So, I see a fill in the blanks here, where one of the constraints can be tackled using with some of the technologies mentioned.
So, I believe the industry will more or less take a growth trajectory somewhere between option 2 and 3, i.e. ‘Stop Signs and Red Lights’ and ‘Middle of the Road’. The pace of the adoption of these new technologies might be slow, but that is only way i see which can help the logistics industry to deal with the constraints and bottlenecks crippling its productivity and efficiency.