Five reasons the road to self-driving vehicles will start with…

It sometimes seems that people believe self-driving vehicles are destined to happen, as if there exists some natural, inevitable, evolutionary force, always driving technology forward. I fear there is no such force. If such an inevitable evolution of technology existed, we would all be flying on Concords at super sonic speeds every time we got on a plane. The truth is, market forces have always been a key, if not the main, force pushing technology forward. We should be looking at those market forces today, if we want to get a glimpse of where the first adopters of self-driving technology will emerge.

In my mind, many of those early market forces are pointing toward the goods movement and logistics communities to become the earliest adopters. Below are five key reasons why:

  1. A sustained nationwide driver shortage - The American Trucking Association reports a current shortfall of approximately 25,000 truck drivers[1]. Sources have pegged the driver shortage to many factors, including stringent regulations, relatively low pay, and the always-on-the-road lifestyle becoming less desirable (especially for younger generations). The opportunity to break free of the limits of the driver shortage creates a compelling incentive to invest in self-driving technologies.
  2. Ever-increasing regulations - As of 2013, all drivers must comply with new Hours of Service (HOS) regulations, put into place by the Federal Motor Carrier Safety Administration (FMCSA). The HOS regulations mandate an 11-hour driving maximum after 10 consecutive hours off duty. In addition, drivers must take at least a 30-minute break after eight hours of work. And they may not drive more than 60 hours during seven consecutive days or 70 hours during eight consecutive days. Confused yet? These regulations do likely make for safer driving and better working conditions, but limiting the number of hours that a truck driver can work does exacerbate the driver shortage issues. These regulations constitute another market force that would push for an early adoption of self-driving vehicles.
  3. Unstable industry - Many long time truck drivers lost their jobs during the recession and have not come back post-recession. Fleets are finding it harder to retain employees – turnover rates for large fleets have been over 90 percent since 2012. While the pay is better than in many other jobs that do not require a college degree, the truck driver’s average annual salary has fallen significantly over the last decade when we adjust for inflation1. Some have blamed the low retention rate on the antiquated compensation schemes that generally pay drivers by mile rather than by hour.[2] Per mile wages mean drivers are not compensated for time at loading stations, inspecting the trucks, or waiting for a tow or tire replacement if there is a failure on the road. An unstable workforce in any industry equals risk, and the market always pushes toward minimizing risk. Self-driving vehicles again provide a compelling solution to these problems.
  4. Increasing demand - Amount of goods shipped is at an all-time high and is predicted to continue to grow. The graph below shows American Trucking Association’s Truck Tonnage Index from 1973 to the present. We can attribute the recent spike to strong economic growth in the last few years, with an increase in e-commerce and mobile-commerce. As online shopping continues to push purchasing from brick and mortar stores to delivered packages, the nation’s trucking industry will need more vehicles just to keep up. The American Trucking Association and research from IHS Global Insight estimate that, by 2025, U.S. freight tonnage will have risen 23.5 percent from its 2013 figure. Bloomberg Business Week quotes Wolfgang Bernhard of Daimler, Freightliner’s parent company, as saying: “This comes with a big challenge. We have to manage the growth of our industry in a way that works for the environment and the economy. And that’s exactly what autonomous trucks can do.”[3]

    Source: http://www.calculatedriskblog.com/2014/12/ata-trucking-index-increased-3....
  5. Fundamental distribution center changes: decentralization and consolidation - There are two main trends in logistics facility siting: decentralization and consolidation. With decentralization, logistics centers are moving farther from the city centers to exurban areas where large, inexpensive land parcels are readily available. With consolidation, many smaller logistics sites are being absorbed into single larger sites. The effect of these two trends on the number of vehicle miles traveled (VMT) is unclear. On the one hand decentralization means a longer average distance between the distribution center and shipment destinations. On the other, consolidation allows for more streamlined operations, more efficient deliveries, and destinations that are closer together. The percentage of VMT on the freeway likely will increase as a result of this trend, pushing the industry to find ways to wring more efficiencies from the system. Self-driving vehicles are poised to address those needs.

We can believe all we want in a future driven by the inevitability of technology. But if we want to plan strategically for the future, we need to look at the market drivers. In the case of self-driving vehicles, they all point to movement of goods.

[1]  http://www.nytimes.com/2014/08/10/upshot/the-trucking-industry-needs-mor....

[2]  http://www.truckinginfo.com/blog/on-the-road/story/2012/01/the-driver-sh....

[3]  http://www.bloomberg.com/news/articles/2015-05-14/daimler-s-freightliner....