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How Will Autonomous Driving Affect Supply Chain?

The mere fact that you're reading this suggests you can see far enough down the road to envision impressive changes resulting from the automation of transportation. Technology is driving massive shifts in the supply chain through the application of big data, analytics and operations streamlining. Self-driving vehicles appear poised to take businesses through the next turn in supply chain management.

From the Warehouse to the Customer's House

Projecting business trends can be as simple as following the investment capital. When it comes to autonomous driving, large automakers such as GM and Ford are partnering with technology giants such as Intel and even NASA to develop self-driving vehicles, with the ultimate objective of automating transport on major roadways. Experts expect initial successes to pave the way for a reconsideration of supply chain structures, including fulfillment center locations and sizes, as well as final-mile deliveries.

A successful collaboration between Ocado and Oxbotica in London produced a trial of unmanned delivery vehicles used to carry groceries to more than 100 residential customers. Consider how continued successful trials in the grocery industry could change that supply chain — consumers in the not-too-distant future might never see the inside of a Kroger or ShopRite again. Also in the food delivery sphere, Domino's and Ford are teaming up to design the first unmanned pizza delivery vehicles.

Then there's truck platooning. Today's truck fleets could one day be replaced by an ecosystem of driverless trucks dispersed from delivery hubs staffed by robots. Potentially dozens of vehicles could be led across the country by one manned vehicle with the others tethered. As the fleet neared various destinations, trucks would split from the convoy and loads would be redistributed at metropolitan hubs into smaller vans for manned final deliveries.

Too futuristic for you? Actually, you may have driven alongside such a platoon already. Volvo Trucks recently completed a trial with the University of California. Daimler Trucks North America and Scania (Singapore) have trials planned.

Benefits and Drawbacks

Cost Savings and Efficiency: Morgan Stanley estimates $168 billion in annual potential savings for the U.S. freight transportation industry alone, derived from a combination of reduced labor, stronger productivity and fewer accidents. Even the greater expenditure for more sophisticated vehicles would be offset by dramatically reduced labor costs, and the drivers who remain would be more highly skilled and able to manage a fleet rather than a single vehicle.

Automation of transportation will reduce logistics costs throughout the supply chain 47 percent by 2030, a whitepaper by PwC's Strategy& consulting team predicts, and 80 percent of the savings will come from personnel reductions. Delivery lead times are projected to fall by 40 percent, and truck usage could increase from 29 percent of the time to 78 percent. While most advancements in supply chain logistics are evolutionary, these statistics point to a revolutionary advancement with the clear potential to effect massive change in the business models of the companies that deploy autonomous vehicles.

Increased Freight Capacity and Reduced Traffic Congestion: Increased truck usage would boost freight capacity, with trucks operating nearly around the clock without needing to return to base. There would also be no need to wait for drivers to take mandatory breaks. Planning for these fleets would revolve heavily around traffic patterns to minimize the costs of convoys being slowed by congestion.

Fuel Consumption Savings: Truck platooning has the potential to reduce fuel consumption 20 percent as vehicles follow in each other's slipstreams, according to MIT research. Other studies suggest fuel consumption savings as high as 35 percent.

Lost Jobs and Career Investments: Automation in any industry inevitably leads to workers being displaced and seeking other lines of work. This is a serious consideration for anyone investing in a career as a truck driver today or a freight pilot tomorrow.

As for when unmanned vehicles will take over the supply chain, it may be too early to speculate. Technology companies may consolidate with auto manufacturers to accelerate the pace of change, and these heavily capitalized behemoths could wind up taking over sooner than later. And that is a prediction that can be made with confidence.

Learn more about UNCP's online MBA with a Concentration in Supply Chain Management program.


Sources:

Seeking Alpha: The Reality of Autonomous Driving Will Change Supply Chain As We Know It

PLS: Autonomous Vehicles Disrupt Supply Chain Management

Automotive Logistics: How Autonomous Vehicles Will Impact on the Supply Chain

Supply Chain 247: Digitization and Autonomous Driving to Halve Logistics Costs by 2030, Finds PwC Study

Supply Chain 247: The Era of Digitized Trucking: Charting Your Transformation to a New Business Model


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