From Freight 2025: "Trucking Industry’s Transformation: Future is Green, Safe, Connected…Smart"

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This commentary is an excerpt from Freight 2025. To download the free ebook, click here.

Sandeep Kar is Chief Strategy Officer of Fleet Complete.

After decades of incremental advancements in technologies spanning powertrain, chassis, safety, telematics, and other areas that enabled truck makers to differentiate their products from their competitors, global commercial vehicle industry is finally changing focus from products to services. Last 50 years saw OEMs and system suppliers use advanced technologies in offering superior products to fleets and owner-operators. An OEM would claim that their trucks feature the most advanced powertrain technology, while another would claim that its trucks feature the most advanced safety systems, and yet another would claim that its trucks offer most comfort and convenience. This battle for product superiority lasted for several decades till the industry reached a point where degrees of separation between products of competing OEMs shrunk dramatically with commoditization of the building block technologies that constitute a truck. Well, that was the past.

The period between 2014-2017 was a special era in trucking. Many years from now when students of freight mobility will study global trucking industry, they will look at these 3 years as the period when the industry changed focus from products to services. This transition is nothing new in the industrial world. If you take a look at many industries from consumer electronics to air travel, and from health care to manufacturing such transitions can be seen at various stages and levels of their transformation. Trucking industry is now firmly in the cusp of this transformation. This is important, as it has now taken the focus from products to what matters more: the fundamental interactions that govern freight mobility. This was long overdue.

If one takes a panoramic view of the technology landscape of trucking today, three technology trends can be seen as foal points for the industry: electric mobility, autonomous mobility, and connected mobility. The lowest common denominator that ties these three trends is: digitization. Digitization is changing the very foundation of trucking. It is creating the most tectonic changes in the way stakeholders derive and deliver value in this industry.

As a simple example, digitization is changing the way shippers and carriers interact thereby creating a new business model where on-demand freight mobility is now enabled by digital freight brokering (some like to call this business model: Uber for trucks). This interaction between shipper and carrier is the most important upstream interaction that sets into motion several downstream implications such as equipment choice, driver choice, service and maintenance activities, freight and fuel efficiency improvements, etc. By some estimates this market will reach revenues of nearly $60 Billion by 2025. As global consumers increasingly migrate towards online shopping, the rise of bricks-and-clicks business models will reshape logistics business models requiring newer types of commercial vehicles.

City trucks used for urban pick-up and delivery will gain significant demand surge not only in developed markets but also in developing markets. The rise of global urban middle class is a trend that transcends boundaries and in next 10-20 years global economic growth will be driven by countries where vast majority of population resides in urban areas. In this era of predictable shipping and guaranteed deliveries, connected truck technologies will no longer be an option but a reality. The proliferation of ELD devices in North American long-haul trucks is setting the stage for massive digital transformation in trucing, innovative companies are taking advantage of the rising penetration of telematics in trucks in offering new and previously impossible insights into freight mobility.

Now through ELD devices innovative companies such as Fleet Complete are not only enabling regulation compliance but also enabling drivers and fleets in generating income opportunities by plugging HOS compliance data to digital freight brokerage platforms thereby creating capacity (both HOS and trailer volume capacity) utilization analytics based value propositions. This indicates a new reality where connected vehicle technologies are not only helping fleets and owner operators save money (through higher fuel efficiency, greater safety, more effective regulation compliance, and higher mobile resource efficiency) but also make money.

The rising momentum in electric powertrain adoption in trucking looks like yet another product-technology enhancement trend, but what does not meet the eye is the cascading impact it will have on all corners of the commercial vehicle industry. Not only will these systems reduce carbon footprint and operating cost but also create the foundation for integration of several more distributed electronics systems in trucks that will enable trucks to run safer, cleaner, and more connected with the world outside. Trucks built on hybrid/electric powertrain systems will also reduce service and maintenance costs and other lifecycle costs for truckers.

These trucks will also emerge as the harbingers for autonomous mobility in trucking. OEMs such a Daimler, Volvo, Scania, Tesla etc. have linked their autonomous mobility solutions with their electric mobility business models. Talking about autonomous mobility, let us assess the state of affairs. The technologies that define autonomous trucking are here already, regulations are coming soon as well. However, for this business model to succeed societal acceptance of such trucks by fleet managers and drivers is most important. Fleets may (and justifiably so) ask: If I am paying a CDL driver full salary to drive a truck then why would I invest an additional $30-50K for an autonomous truck?

This is where things get interesting and the “service vs. product” business model’s centrality becomes evident. Think of a future where autonomous trucking enables a driver to look for additional freight to carry as his/her truck travels from Point A to B. In other words, autonomous mobility enables a fleet/owner operator/driver generate income/revenue opportunities. With this opportunity the driver/owner-operator/fleet invests in autonomous trucks as these trucks are not only safer and offer better fuel economy but also reduce driver fatigue and stress (and may be in future more hours of service per day since it is not driven by a driver at all times).

So far this discussion has centered largely on the truck. But as mentioned above, product focused innovations involving the truck is yielding prominence to service based innovations. In this transition, a major portion of the freight mobility equation is ignored: Trailer. For several decades trailers have been ignored by the industry as less important than trucks. Those days are behind us now. With focus on freight tracking, better capacity/asset utilization, digital freight brokerage, and end-to-end visibility of freight hauling equipment for diagnostics, prognostics, safety and other considerations trailers are becoming the key focal point for innovations in the industry. As the industry evaluates and understands the massive transformation blockchain may impart on freight mobility, trailer tracking and tracking of freight inside the trailer is becoming crucial for development and sustainability of several new business models.

While all these transitions and transformations catalyze trucking industry’s transformation from products to services, let us not forget something spectacular that is also happening concurrently. It involves the human element in trucking: Drivers.

After several years being considered as the second most important contributor to fleet TCO, driver cost is going to overtake fuel cost as the single largest contributor to TCO. This change is being further accelerated by a raging driver shortage that is being felt in many parts of the developed world. The fact is that many older drivers are retiring and not enough drivers are joining this profession. Many say that the advent of autonomous trucking will solve this problem. I tend to disagree.

While autonomous trucks will undoubtedly reduce driver fatigue, it will not be able to take ownership of several other crucial tasks that a driver fulfills such as refueling (or charging if the truck is an EV), ad-hoc service and maintenance, signing of paperwork, shipper-carrier interactions, etc. One can argue that with rising contribution of driver cost in fleet TCO the next wave of innovations will be centered on the driver. Anything that makes truck driving easier, facilitates greater income generation opportunities, increases driver safety and security, improves driver health, wellness and wellbeing will gain traction.

The golden era of trucking is here. From now till 2025 and beyond the rising prominence of product as a service business model will help driver grater effectiveness and efficiencies across the board. This industry offers so many areas of improvement and such high promise of efficiency and productivity gains that the coolest kids in tech such as Tesla, Amazon, Google, Uber etc. are getting increasingly active in this space. Their entrance and activities in this market will challenge the incumbents to accelerate their efforts in embracing this new reality. This new reality will bring the spotlight back into the fundamentals of trucking such as the human interactions that govern trucking, trucking’s role in economic growth, its interactions with other vehicles on the road, etc.

This is expected to lead the OEMs and suppliers and other stake holding groups change focus from owing products to owing relationships. As the industry goes through this transition from products to services another transition will start making its presence felt, one that takes the focus from services to solutions. That is when focus will shift from owning relationships to owning interactions. One thing is sure: This industry that evolved constantly and considerably over past 50-100 years in now at an inflexion point. Many years from now when we look back and look at 2017-2018 we will see these years as the period when an industry experience rebirth.

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