It’s an exciting time for technology in transportation. The problem is that sometimes many of the most interesting ideas aren’t necessarily the ones that drive immediate change.
This is not to argue that new logistics technology in any form is not a great thing – it is. The point is to have more realistic expectations about how some of the popular shipping or trucking innovations talked about in transportation will truly impact both shippers and logistics service providers.
Here are four oft-sighted disruptors for the logistics industry, put under closer inspection.
The Next Uber of Freight
It’s easy to find articles talking about the ‘Uber-ization’ of freight. Hundreds of tech companies are launching with billions of venture dollars behind them. Uber itself launched Uber Freight in 2016.
These companies are working to automate quoting, booking, and shipping processes, potentially removing the need for a broker and even drivers.
Yet, research from Armstrong & Associates, Inc. reveals that “while the startups offer a high degree of innovation, they fall short of actually being able to solve many of the real-world challenges that the industry faces day in and day out.”
This is not to say parts of the shipping process cannot be improved, but the overall user experience for a shipper looking to schedule a pickup and trucks looking to find freight works well.
The disruption Uber brought to the taxi industry was about capacity and a better method of coordinating pick-ups, with a little cost savings thrown in. In comparison, these are problems that are largely non-existent in logistics from the shipper’s perspective. There is no shortage of 3PLs and brokers ready to cover any load, anywhere, anytime. And, market pricing is very efficient.
The point? The market conditions that allowed Uber to disrupt the taxi business are not analogous to the freight business. And Uber Freight isn’t something monumentally disruptive or new – it operates just like a traditional broker.
Even so, creation and adoption of new efficiencies for the shipping will continue to flourish. But the possibility of Uber knocking out the need for human interaction is little to none. Shipping complexities will remain – modes, weight, regulations, breakdowns, etc. – and problem-solving and relationships will always be required.
While vehicle automation certainly has a role in the future of transportation, it will not wipe out fleets and owner operators anytime soon. Technology is undoubtedly making driving safer, but wide-spread adoption of these solutions will lag. Some experts say 10 years, but major regulatory change is needed before driverless cars hit the pavement and are available to the masses.
Additionally, few individuals will be able to afford the price tag of an electronic truck, let alone a driverless one. Right now, 90 percent of the trucking industry is made up of small businesses with ten or fewer trucks. Widespread use of autonomous semis would require these SMBs to upgrade – which isn’t feasible in the near future. This creates a marketplace ripe for potential monopolization, which the deregulated trucking industry has deliberately avoided.
Reading some articles, it’ would seem like delivery drones are six months away from putting FedEx, UPS, and USPS out of business. We’d argue drone technology has many great applications for logistics but is not a legitimate threat to any of those operations.
The practicality of delivering items one at a time cost effectively is questionable at best. Logistics is a business of volume and gaining economies of scale. That’s what’s happening when a UPS truck full of packages enters a neighborhood. One-off deliveries of tiny packages are far less efficient and far costlier. If we know anything about consumer expectations it’s that they want cheaper, not more expensive delivery options.
Yes, delivering medication to remote locations is one great application for drones. However, it’s unrealistic to think of drones as a distribution model that can replace a fraction of the value offered by established small parcel carriers. This is not even to mention the as yet to be addressed issues to be worked out with the FAA, weather, and limits on shipment weights.
The more probable use of robots or drones includes over-the-road delivery of local food, groceries, and convenience items. In San Francisco, there are already bots traveling short distances, typically within one mile, from a restaurant to a customer’s door. Adoption of this technology is quicker and safer than air-borne alternatives. It eliminates the inefficient process of driver delivery and keeps more vehicles off the road, all without requiring major regulatory or traffic changes.
APIs and the Death of EDI
It’s become a common refrain: Application Programming Interfaces (APIs) provide huge advantages over Electronic Data Interchanges (EDIs) that will make it obsolete. But, the death of EDI is greatly exaggerated.
Yes, there is room for APIs in the industry. But, considering most shippers and carriers who see the value of data exchange are already successfully using EDI there may not be much, right now. The truth is it will take a very strong value proposition to push EDI out and make room for the overwhelming adoption of APIs. Right now, the business case is not compelling enough for most.
Many companies use EDI up and down their supply chain as well – not just within the shipping function. Augmenting EDI with API will impact more areas of the company than just transportation, a detail often overlooked during this debate.
It is likely APIs will see an increase in adoption with the logistics function and supply chain, but primarily with companies lacking any existing electronic data sharing capabilities right now.
Realistic Timelines for New Logistics Technology
Effective logistics management is really about two things – improving service performance and managing costs. Each of the above innovations and ideas – Uber, driverless vehicles, drones, and APIs – have aspirations in line with these objectives. The challenge to their success is if any provide enough benefits over how things operate today and if they can overcome regulatory or cost hurdles.
There are a lot of great things happening with logistics technology related to how data is used and various types of automation. Our hope is more attention is placed developing incremental advancements that can be implemented in stride and less on ideas whose times may never quite come.