Demanding Customers, Array of Technology Driving Changes in Freight Transportation
This story appears in the Jan. 16 print edition of Transport Topics.
WASHINGTON — While freight transportation has undergone enormous change over the past quarter-century, even more is coming and very quickly, driven by demanding customers and an array of technology to satisfy shippers.
Parcel delivery with drones, 3-D printing and yet more software were among the options discussed at a Transportation Research Board panel here Jan. 10.
Last-mile delivery keeps supply chain executives up at night and worrying, said Anne Strauss- Wieder, freight planning director for the North Jersey Transportation Planning Authority, adding that tension is acute in the retail sector.
“Malls are going out of business, and retail chains are closing. Who remembers Radio Shack, and goodbye Sports Authority,” she said, adding that today’s customers are more picky about what they want and when they get it.
“We’re going from one-day delivery to same-day, and it’s not just in a city like New York. It also affects rural populations who are getting better choices,” Strauss-Wieder said. Rising from the ashes of brick is e-commerce fulfillment, which has the potential to become an enormous employer.
Online purchases can be completed to homes or package lockers at convenience stores.
UPS Inc. will keep delivering packages with trucks and planes for the foreseeable future, but company Vice President Derrick Johnson said North America’s largest trucking company is ramping up its work with 3-D printing, which could change significantly where a package is picked up — at a factory or at UPS’ 3-D location in Louisville, Kentucky. The company also has a location in Singapore.
Johnson said the 3-D printing industry generated about $7 billion in revenue last year, and it is expected to rise to $21 billion in 2020.
“About 20% of our customers dabble in 3-D currently, and 60% are curious about it,” he said.
The manufacturing process works best, Johnson said, for prototypes, industrial customers and high-value emergency parts, but not for mass-production consumer goods.
Another method of last-mile delivery will be drones, which are well-suited to delivering packages weighing up to 5 pounds.
“Drones will become ubiquitous, between 20 million and 100 million in the U.S. one day,” aviation economist Darryl Jenkins predicted.
Amazon.com, Wal-Mart Stores, Domino’s Pizza, Google’s parent Alphabet and Mercedes-Benz have expressed interest in drones, Jenkins said.
The appeal of the gadgets is that they work cheaply. Jenkins estimates it costs 61 cents an hour to operate a drone.
The purchase price of a drone runs from $1,000 to $5,000. Cost per package delivered ranges from $1 to $6, depending upon the cost of the drone and how busy the owner keeps it. For example, a $3,000 drone flying 30 hours a week costs $2.61 per package, Jenkins calculates.
Brokerage software provider Transfix is smitten with truckload carriage, calling it “an industry ripe for disruption,” said Pamela Hepworth, the company’s product marketing directors.
She said an Uber-like approach for matching loads with drivers will provide more and better information for both parties and improving efficiency.
“We can take less of a cut [than a traditional freight broker] because we’re more efficient,” Hepworth said.
The notion of some small carriers and owner-operators still using paper transactions, fax machines and telephone conversations means there is plenty of room for increasing productivity, she said.
“The technology of everyday consumer life,” she said, would be “revolutionary in trucking.”
There are more than 1 million U.S. trucking companies — for-hire and private fleets — according to American Trucking Associations statistics, and their use of technology is not at all uniform. Many carriers already have sophisticated information technology departments.
Still, Hepworth said systems such as Transfix can offer better information for tracking shipments, possible warnings of what could slow a delivery and up-to-date pricing for loads. By gathering information from pinging a cellphone each minute, she also said the systems produce a wave of data for sophisticated performance analysis.
