McLeod Software, a provider of transportation management systems for the trucking industry, had their 2015 user conference last week in Birmingham, Alabama. There were roughly 1,000 attendees; a number much bigger than I expected.
One of the keynote speakers asked some simple yet provocative questions about how transportation will change. Those questions were:
What will ship?
From where?
To where?
How will it ship?
Everyone that closely studies logistics would have their own answers. These are mine.
First of all, what will ship? Despite all the hype around 3D Printing, I think pretty much the same things will ship in ten years that are shipping today. In other words, I don’t see consumers or businesses downloading CAD files and producing masses of finished goods and components on site. Logistics won’t shift from shipping physical objects to electrons (the CAD files) and raw material stock.
The ARC Advisory Group produced a strategic report a few years ago titled Trends in Additive Manufacturing. Additive manufacturing is the more accurate description of a “compendium of technologies … that make things by building up materials rather than cutting them away.” The report went on to identify niches where additive manufacturing makes sense, but after reading this report it is hard to see this technology as initiating a new wave of on-site production. Transportation volumes will be little impacted by 3D Printing.
Where will goods ship from and where will they ship to? Here we are in the midst of large changes driven by e-commerce and omni-channel retail. These trends are accelerating. According to last year’s ARC Omni-channel research, “the lion’s share of revenue is still driven by the store. Brick and mortar locations accounted for approximately 67% of all revenue for our survey respondents. However, when looking at revenue growth, our research tells us a different story. Over the last five years, survey respondents indicated revenue growth of 6% from the brick and mortar channel compared to 47% for e-commerce. Looking ahead, respondents forecasted flat growth for their brick and mortar channel compared to 40% growth for e-commerce.”
This is shifting origins closer to the consumer and providing a variety of customer choices on destinations. In support of ship from retail distribution centers, retailers are building more warehouses closer to metropolitan areas. We are also seeing more drop-shipping, ship from store, and store to store shipments. As for destinations, they are not just shop at a store or home delivery, but pick up at store and pick up at storage locker.
The final question is “how will it ship?” This is the most interesting question.
E-commerce is driving smaller shipments, more parcel, fewer cases and pallets. We are seeing more competition on speed, from delivery within the next few days, to same day, and even same hour deliveries. We are also seeing more time definite shipments, not just sometime between 8 and 5, but within a defined two hour window.
In terms of those very expensive last mile deliveries, without a doubt the most interesting new development are crowd sourcing courier delivery services. What you might think of as Uber for last mile freight. ARC again did its omni-channel survey this year. 27.7% of our omnichannel retail or 3PL respondents have indicated plans to include this type of delivery methodology in the future. Now that Amazon has announced its own Uber style delivery service, I think future surveys will show even more interest in these types of services.
In terms of “how will it ship”, ecommerce is not the only thing driving change. Technology is a key driver. In trucking, we still depend on large numbers of small trucking firms that are not technologically sophisticated. It is unrealistic to think Moms and Pops will be able to provide EDI or telematics based visibility to shippers. However, brokers are now asking their carriers to download an app on their cell phone, or even call an 800 number and hit pound. Then, based on cellular triangulation, customers can gain real time tracking visibility of their shipments. At the McLeod conference, Steve Syfan of Syfan Logistics – a truck brokerage firm – mentioned that even though they deal primarily with small truckers, they have visibility on 98% of their shipment by getting their carriers to us the MacroPoint solution.
But by far the biggest change in “how” goods will ship in the next ten years is based on the continuing development of autonomous trucks. “Autonomous” is a better term than “driverless” because the functionality that moves us to a fully “driverless” truck exists on a continuum. At the “simpler” end of the spectrum are features that are already widespread like being able to set your speed limit automatically or collision protection cameras that prevent an automatic guided vehicle from bumping into a human. In the middle of the continuum we might see trucks that can center themselves in their lane and follow traffic without getting too close, but require driver intervention when lane changes are required. More complex will be truck convoys that have a driver in the first truck, but other trucks in the convoy not requiring a driver. Finally, someday, a fully autonomous truck will be possible.
Many pundits see the primary hurdle for autonomous vehicles being regulatory. But if you view “autonomousness” as features on a continuum, we are unlikely to see not all or nothing regulation. Rather, I think, one autonomous feature will be approved, and then the next, and the next, until we have fully robotic deliveries.
Yoggi Berra recently passed. A quote often attributed to him applies to this column: “It’s tough to make predictions, especially about the future.” Please take everything you read here with a grain of salt.