Brendan Richards predicts an unsettled industry and unsettling future. Rob McKay interviews the noted industry adviser
How real is the threat of artificial intelligence and what impact do you see it having on the Australian transport industry?
It’s easy to get swept away by the hype surrounding artificial intelligence, and it’s fair to say that things are nowhere near as developed as many of the tech evangelists would have you believe. But it is equally fair to say that artificial intelligence and personalisation are behind several transformational trends in the world of logistics, and intelligent supply chains that use self-learning systems are likely to make an impact in under five years.
Logistics is a data-driven function. Data is at the core of all of the logistics challenges – managing inventory, tracking supply and demand, streamlining operations and customer service, adjusting pricing and figuring out the most efficient way to move something from ‘A’ to ‘B’. Artificial intelligence is already being used for all of those things. So, I see A.I. as not only real but about to surge for both domestic and international logistics.
The owner-driver has been the backbone of the transport industry in Australia. What does the future hold for them?
Being a truck driver is not the easiest of jobs and being an owner-driver is even less so. You work long hours, often with unpredictable schedules and stay away from home for long periods. But, it pays the bills, and for thousands of Australians, it’s the way they make a living. So much so, that of the more than 40,000 operators in the Australian transport sector, more than 80% have fewer than 5 trucks on the road. That presents a massive problem for the industry because there is a real chance that none of them are going to be able to make a living that way in the very near future.
The owner-driver will be sacrificed in coming years on the altar of technology – specifically, self-driving automation. It’s surprisingly mature and already in use. In the Pilbara, autonomous trucks are moving tonnes of material between the mines at Yandicoogina, Nammuldi and Hope Downs 4. In those mines, there is no truck driver. Three years ago, Daimler unveiled the ‘Future Truck 2025’ prototype and sent it down the road for a few kilometres in both Europe and the USA. It was called the ‘Future Truck 2025’ because it is expected to be in production by then.
Lane departure warning systems, advanced emergency braking systems, and adaptive cruise control are all examples of how the driver is progressively disappearing into the background. At first, the driver will still be there but they won’t be driving. It’s only a matter of time before they aren’t there at all.
What do you see as the major trends affecting transport now and into the future?
Within Australia, there are three areas that will drive change in the transport industry. The first of these is the economy. The Australian economy is predicted to enjoy strong growth and that is largely due to us being well-positioned geographically, as the Asia-Pacific region is likely to make up almost half the world’s economic output by 2050. However, annual growth in income will be less than what Australians are accustomed to and pared back funding of large infrastructure projects is likely. More pressure will be placed on private enterprise to innovate in order to remain competitive.
Secondly, population growth will be massive and most of it will be in our capital cities. This will put enormous strain on the infrastructure of those cities and make the traditional modes of transport – road, rail, sea and air – increasingly expensive and difficult to operate. As Australia’s population ages, the transport industry will also be put under additional strain with the age profile of the transport workforce easily the oldest in Australia. As that workforce retires, skill shortages become a problem that will be difficult to overcome unless the industry can somehow make itself more attractive to young people.
The key influence on the future of the transport industry, therefore, becomes technology. Technology has the potential to transform the industry, offering new modes of transport and eliminating the need for drivers as autonomous vehicles become the norm. Electric drivetrains (especially for short-range vehicles) will decrease costs. Vehicle connectivity will make transport safer and do much to decrease congestion, and new lightweight designs will improve economies and profitability.
However, with this influx of technology will come an influx of new competitors. The transport industry will need to compete with companies that previously were customers. As the Internet of Things becomes more prevalent and catering to individual demands becomes more achievable, there is a very real possibility that the technology that drives the transport industry will be less about engines and capacity and more about telematics and connectedness. In that environment, the transport companies of the future may well be the likes of Microsoft and Apple, rather than Linfox and Toll.
What happens to road, rail, air and sea then? Are they going to disappear or become less important as time goes on?
The traditional modes of transport – road, rail, sea and air – will still exist in the future but they will be dramatically changed by technology, a vastly different population, and an economy that will struggle to fund the traditional infrastructure that these modes of transport require. There will be even more pressure to drive down the costs associated with these modes of transport and they will be viewed as more of a commodity than they are today.
Our population will have doubled and become accustomed to instant gratification. Today’s value-add services such as same day delivery will be the norm. Larger cities will make traditional modes of transport within those cities impractical. The resultant pressure on infrastructure coupled with the decreased tax take of state and federal governments will force governments to embrace the new modes of transport offered by technology and, where necessary, facilitate any legislative changes. These developments make the new modes of transport – drone, digital, replication, network and hub – inevitable.
Explain these new modes of transport for us – what are they and what will they do?
The traditional modes of transport – road, rail, air and sea – won’t offer the solutions required by the future. They are neither environmentally friendly nor practical given their reliance on infrastructure investment. Instead, these traditional modes of transport will start being supplanted by new modes.
Drone technology will be supported by new regulation. While not likely to offer a total urban transport solution, drones will be heavily used in rural areas.
Network technology, typified by the Internet of Things, will dramatically reduce costs. It will take advantage of crowd-sourced transport solutions as embedded sensors collect and transmit data between connected machines and devices. The shared economy will continue to grow and automated vehicle technologies will become the norm. This will be supported by the Internet of Value as block chain technologies allow data and physical goods to be exchanged across the internet without the need for a trusted third party. The new platform will enable a reconciliation of digital records regarding just about everything in real time, and all documentation will be transported digitally.
As our populations and our cities grow we can expect to see very sophisticated logistics hubs that receive all the goods coming into the city and allow for their ‘final mile’ distribution by a variety of transport services. These will be supplemented by huge networks of delivery kiosks located in areas such as schools, train stations and supermarkets. You will literally be able to order something online at work and pick it up from a kiosk on your way home.
Finally, replication technologies such as 3D printing will transform retail negating the need for stock on hand as customers purchase a digital code that can be turned into the real product, either at a local commercial 3D printer, or even at home using their own personal 3D printing device. The next industrial revolution will open up manufacturing to the entire world and the freight task will be dramatically reduced as a result.
How would you characterise the transport industry of the future then?
Transport in in the future will need to be a multimodal industry with the entire supply chain open to analysis and scrutiny, communicating within and without itself, and increasingly designed around same or next day delivery.
So, what should transport operators of today be doing to prepare for that future?
Existing operators with heavy investment in physical assets and capital expenditure commitments need to think about future property and fleet acquisition programs and whether they are needed in a rapidly changing world. Given that fleet decisions are typically locked in over a five-year period and property decisions over a twenty-year period, transport operators should be thinking about the implications of the future now. It’s hard to change a business model where commitments of this length are made and working forward from today may leave them trapped in an uncompetitive model.
The fact is true disruption is more likely to come in property than fleets. Australian transport operators already have tens of millions of dollars invested in underutilised warehouses. Digital platforms and new modes of transport will combine to provide solutions for this underutilisation, and that means that new property investments in distribution centres and warehouses may not yield a return for many years. In light of this, transport operators should be planning with that future in mind and working backwards to understand what their true requirements may be.
Similarly, there is a growing and ever-present need for the transport industry to adopt a logistics mindset and move away from the ‘race to the bottom’ on rates that too many operators are currently involved. The future demands that they seek to become end-to-end logisticians for their clients. The challenge for transport operators is to help their clients build a responsive supply chain that uses data like Point of Sale and social media to identify trends and demand changes much earlier, and allow the supply chain to respond faster to increase sales, improve service levels and reposition inventory.
Much of this can be done now, but will almost certainly be the norm by 2050. Australian transport operators need to accept that their role is not simply to move goods from A to B, but to show their clients that a logistics mindset can improve every aspect of their business. The future may even herald a time where transport operators don’t get paid for that transactional movement anymore but, rather, the bulk of their revenue comes from taking a slice of the cost savings they are able to provide and manage. Either way, the imperative is to make the transport operator a profit centre instead of a cost centre, and that requires a much deeper and more meaningful business partnership.
Those transport operators that don’t already have the skills required, need to get them and those considering investing in a new fleet or facility, need to ask themselves if that really is an investment in the future or if they need to make another kind of investment altogether.