It is exciting to gaze forward into advances taking place in technology within the logistics industry, especially because it affects us all. These coming changes are exciting and will yield major benefits for consumers.
Before discussing the future it is worth revisiting the past. During the industrial revolution, technological advances threatened textile weaver’s jobs with the power loom. The term, ‘Luddite’ developed from their uprisings meaning “one who opposes technological advancement”. Economist and entrepreneurs often refer to the Luddites as an economic fallacy due to the Luddites idea that technology will do away with ‘jobs’. Despite the ‘killing jobs’ mantra, innovation actually results in a reduction of labor for that market sector resulting in a lower operating cost. The lower operating cost then can result in further competitive pricing and overall experience for the consumer. Without getting too technical, the lower price increases supply equilibrium, creating stability due to the dynamic forces at work which then requires an increase in labor, although this will result in different labor.
In 1942, Austrian economist Schumpeter wrote the modern buzzword ‘creative destruction’ meaning “process of industrial mutation that incessantly revolutionizes the economic structure from within, incessantly destroying the old one, incessantly creating a new one.” This means entrepreneurs largely work with engineers to create innovative ways to tackle challenges in their industry, creating opportunities to differentiate. These innovative tactics force the industry to adapt, and due to the force at work the net economic benefit is always in the consumer’s corner, or the entrepreneurs venture would simply fail. While the destructive part in this process of progress typically rocks monopolistic power players, along with individuals ‘jobs’ & even carriers, the consumer and society as a whole always benefits.
Frankly, creative destruction is when an entrepreneur creates and the creation kills the older service, process or technology. A simple example of this could be comparing vinyl progressing all the way to iPods and now it’s simply streaming. In each of the examples there are major benefits that consumers gain from each progression in technology. Even rolling out inflation, a Vinyl containing 8-15 songs in the 60’s would run you $3-5. Streaming music can largely be free sacrificing time for commercials, however for a $10 subscriptions one has access to unlimited songs and entertainment.
Autonomous vehicles will reshape the entire logistics industry for all developed countries, and radically change all of our lives. The CEO of Uber has advised they will be replacing drivers with an entire fleet of autonomous vehicles. Morgan Stanly made the case for some tangible benefits. Pointing out that 90% of accidents are due to human error, and this would save 30,000 lives annually. The taxi wait in New York would drop from 5 minutes to 30 seconds, and this drastic drop is due to driverless cars no longer needing to park.
All of this sounds radical, but Morgan Stanly makes the case that even owning a car in urban settings will be rare and traffic itself will become obsolete along with parking lots, car dealerships, and bus stations providing millions of square feet of real estate. Elon Musk along with Google both have stated that we are 5-6 years from fully autonomous driving, where one could literally nap while in transit. It is simply the regulation that will be curbing advancement the most. This is sentiment is similar to what Ford Chief Executive Mark Fields forecasted when he said that autonomous vehicles will be here by the end of the decade.
The beginning wave of autonomous vehicles, semi-autonomous, is surprisingly already here. However even more surprising may be who is the biggest player in autonomous vehicles overall, John Deere. The agricultural industry is regulated much less because the vehicles are operating on private property. The machines they manufacture are now intelligent. They relay data to farmers such as fuel levels, soil condition, and water usage along with other agricultural key performance indicators. The tractors drive themselves, and the farmers can spend their time much more effectively managing data.
Focusing more on Logistics, Daimler has the ‘Inspiration Truck’ which will bring about fuel efficiency, fewer accidents, along with alert drivers. Likewise, Mercedes has developed the ‘Future Truck 2025’ prototype similar to the Inspiration. It still requires a driver but on major highways it can steer, navigate, stop and keep drivers much better rested. These vehicles will radically change how the government is drastically and ineffectively over-regulating the industry with the FMCSA’s safety laws, EPA’s emission regulation, DOJ’s drug clearing house and back ground checks, DOL’s new pension laws, and the DHS’s 9/11 security regulations, along with the NHTSA truck safety regulations. Simply doing away with all of these regulations will radically lower the cost of shipping for consumers and companies. There will no longer be hours of service, CSA Scores, freight can travel 24/7 and arrive much more timely, the benefits will show tangible savings, while service improves.
And when it comes to cars, they are already here as well! Google’s autonomous vehicles can already be observed on the road in California, and Audi’s A7 has recently completed a two-day trip from San Francisco to Las Vegas. Apple is testing their prototype ‘project Titan’, it should be pointed out 10+ automakers, and this includes Nissan & Volvo showcased autonomous cars at the 2015 Consumer Electronics show in Las Vegas. Tesla’s 2015 model is 90% autotomized. Many economist have stated that autonomous vehicles will be common place in 2025, by 2030 it will be monopolized.
Industries are changing, and jobs and careers will be changing with them in positive ways. The farmer now doesn’t need to sit on the tractor for four hours driving in circles through a field, his time is better spent now analyzing data and forecasting and planning. Likewise the careers and needs in this new wave of vehicles will change from driving to analyzing, coding, processing information, new software, and creating efficiency gains while providing better service and reducing our carbon footprint. This could not come at a better time either with the American Trucking Association stating we are at a current 20,000 driver shortage forecasted to rise to 111,000 drivers. Because we are all consumers we all get to feel these benefits, so it is worthwhile to be skeptical when unions and lawmakers focus on Schumpeter’s aspect of destruction rather than honing in on the creative benefits for all of us consumers.