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Dr. Michael Watson
Northwestern University


Supply Chain by Design

Dr. Michael Watson, one of the industry’s foremost experts on supply chain network design and advanced analytics, is a columnist and subject matter expert (SME) for Supply Chain Digest.

Dr. Watson, of Northwestern University, was the lead author of the just released book Supply Chain Network Design, co-authored with Sara Lewis, Peter Cacioppi, and Jay Jayaraman, all of IBM. (See Supply Chain Network Design – the Book.)

In addition to teaching at Northwestern, Watson is a founding partner at Opex Analytics. 

January 24, 2017

Why Driverless Trucks May Create the Need for More Drivers


Less Expensive Transportation may Lead to More Local Warehouses That Offer Same day Delivery and More Direct Customer Delivery

 

There has been a lot of talk about how driverless trucks may reduce the need for drivers and how will our economy replace these 2 million good blue collar jobs.

 

The same conversation is going on for the larger economy with all the buzz around artificial intelligence. 

 

Lots of smart people and deep thinkers are worrying over the issue, and I don’t have a strong opinion in the debate. 

Watson Says...

My guess is that the changing economics will lead to whole new ways to think about your distribution network. 

What do you say?

Click here to send us your comments

However, I heard an interview with someone recently (You can find the interview here at the 15:44 mark) who compared today’s fears with the fears people had when banks introduced ATMs.  At that time, there was a fear that ATMs would replace all tellers.  What ending up happening is that there are now more tellers.  ATMs changed the economies of scale.  Previously, banks had to be large enough to handle the customers.  But, with ATMs, you could build more and smaller branches.  So, for sure the tellers per location went down, but the total number of locations went up enough to increase the total number of tellers.  It should be pointed out that the tellers also had to do a slightly different job.  And, the customer experience was now much better-- it is likely you are now much closer to your bank.

 

Could all this happen with trucks? 

 

In a previous article, we talked about how driverless trucks could easily change the design of the supply chain.  With less expensive transportation, you may have many local warehouses and offer more same day delivery and more delivery directly to the customer. 

 

That is, instead of paying drivers to make the long haul from my warehouse in Chicago to my customer’s warehouse in Dallas, I let the driverless truck make that long-haul move to my new local warehouse in Dallas.  From there, I send out a driver to make the local round of deliveries and maybe even directly to my customer’s stores.

 

In this case, there will be far fewer drivers doing the multi-day long-hauls across the country.  But, I may have many more drivers making local deliveries on short notice.  Like the bank tellers, the driver’s job may change.  Instead of just getting a load from point A to point B, the driver may act more as a face to the company and participate more in sales and customer relations.

 

This assumes that the last mile is going to be hard to automate -for example if you are Coke and Pepsi, it seems like a long time before a driverless truck shows up at the local supermarket and figure out how to get product onto the right shelves in the store, while picking up competitive information. 


Final Thoughts

It should be interesting to see how all of this shakes out.  But, my guess is that the changing economics will lead to whole new ways to think about your distribution network. And, some of these changes may mean that you use more drivers. 


Any reaction to this Expert Insight column? Send below.


Your Comments/Feedback

Joseph Kirchner, CPIM

Demand Planning Manager, It Works Global
Posted on: Feb, 02 2017
While I agree that it is still too early to know exactly how the autonomous truck scenarios will play out, this article seems to reduce the cost analysis to the cost of drivers. There are many other cost factors that come into play when transporting product. Costs such as fuel, tires, general maintenance of the trucks and trailers, tolls, etc. come to mind. I don't see the removal of drivers completely changing the cost model for shipping in bulk from source to destination, followed by smaller LTL loads shipped to individual customers. Perhaps if the smaller, local warehouses you mention are actually Public Warehouses that break down bulk shipments and redistribute the products, then your projection may come closer to the future reality. However it works out, it is sure to be interesting.

Michael Watson

Partner, Opex Analytics
Posted on: Feb, 09 2017
Joseph Kirchner, Thanks for the comments.  I agree with you that driver cost is only one part of the total cost.  The costs you mention for sure won't go away.  My assumption on the costs being lower rests on two components.  The first component is the direct cost of not needing to pay a driver.    The second component, which is probably the larger of the two, is the fact that you can get much better utilization of the trucks.  You can use the truck 24x7 and don't have to worry about a driver running out of time.  For example, if a driverless truck gets delayed 4 hours at a warehouse, it is just 4 hours lost and the truck is on its way again.  With a driver, that 4 hours at the warehouse could run out the hours and then the truck loses all the rest time as well.  There is probably an indirect cost in the scheduling of drivers and appointments as people work hard to avoid those situations.  Like you, I think it will be interesting to see how this plays out and how people come up with creative new business models.
 
 
 
 
 

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