Will Autonomous Vehicles Become the Norm in Supply Chains?
Health care retail giant, CVS Pharmacy, recently tested the delivery of medicines to customers in Texas using autonomous vehicles. At present, the program is in its nascent stage and services will be expanded to other states in the coming months. However, this is not the first occasion where we saw the adoption of autonomous vehicles for freight deliveries. Earlier this year, third-party logistics providers such as UPS invested in autonomous vehicles for short-distance distribution while its rival, FedEx, has been vigorously testing them for a one-day delivery program. Investments in such advanced technologies are becoming more relevant, especially during the current pandemic, as it could ease the stress on existing delivery services, especially for essential goods such as medical suppliers and food, while reducing the risk of exposure for customers.
How Do Autonomous Vehicles Impact Shippers?
At present, the trucking industry is facing a shortage of qualified drivers, with a deficit of around 50,000 drivers in the U.S. alone. Another inefficiency is created by necessary regulations that restrict driver working hours. Autonomous vehicles promise to reduce this gap, especially when there is a growing demand for road freight deliveries due to rising e-commerce purchases on the back of the COVID crisis. Driver wages contribute to almost 40% of road freight service costs for shippers and the adoption of semi or fully autonomous vehicles would not only help in saving labor costs but to also bring in better fuel efficiency.
Constraints for Further Growth
Although it promises to bring down operational expenses, it should be noted that leasing and vehicle maintenance would incur high costs for shippers due to additional software and hardware costs. Furthermore, the above-mentioned cost benefits are highly realized when it is adopted for long haul transportation, which faces certain regulations concerning speed and distance between two trucks. Besides these setbacks, there is also less clarity over accidental liabilities, safety-related risks and the unavailability of suitable infrastructure in most of countries.
Current Suitability for Its Adoption
Current driverless vehicle programs run at level 4 automation, which means that there will be a human presence to take over in case of emergencies. Once logistics service providers commercialize this offering, shippers should utilize such technologies for short-haul distribution services or last-mile logistics that require smaller trucks and comparatively fewer instances of human intervention for door-to-door deliveries until such technologies find an increase in use for long hauls.
Even though the trucking industry is yet to see larger adoption of self-driving vehicles, there are several shippers such as CVS, Walmart and Amazon who are seeking cost-saving opportunities by entering into contracts to have their freight delivered during such pilot programs. Only with proper regulations and infrastructure in place will more and more suppliers adopt such technologies to realize cost-saving opportunities.
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Barnali has over 20 years of experience in consulting, product management and leading teams in the development of market driven software solutions.
At GEP, Barnali is responsible for ensuring customer needs are met in an impactful way with our supply chain and procurement technology using the latest advances in next generation technology and new user experience.LET'S TALK