Autonomous Vehicles: The future of T&L or an unnecessary expense?
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Transportation & Logistics

Autonomous Vehicles: The future of T&L or an unnecessary expense?

March 18, 2021

5 min read

Devin Culham

Devin Culham

These days, it’s difficult to ignore the potential of autonomous vehicles as companies begin testing autonomous trucks to deliver goods. But are these viable options for the future of transportation and logistics, or are they just another new cost for companies?

Why autonomous vehicles?

Many trends play a role in the growth of autonomous vehicles in the transportation and logistics industries. Advances in autonomous technology not only give a glimpse of the future of the industry, but they also align with the general goals of improving safety, lowering environmental impact, improving customer satisfaction, and increasing efficiency. However, in the context of transportation and logistics, three main ideas are fueling the shift towards autonomy: worker shortage, the need to optimize internal operations, and reducing last-mile delivery costs.

Most segments of the transportation industry are suffering from a worker shortage. The American Trucking Association estimates that there is currently a deficit of more than 60,000 drivers in the U.S., a shortage that is expected to double in the next ten years. Meanwhile, the aviation industry anticipates the need for 800,000 new pilots over the next 20 years, while in the seas, a mariner shortage of 150,000 expected by 2025. Autonomy is a solution to many of these human resource shortages, enabling a single person to monitor multiple vehicles or operate a single vehicle for more extended periods.

Autonomous vehicles can also help with indoor logistical operations in warehouses and distribution centers, adding efficiency necessary to scale operations related to the e-commerce industry. Amazon, for example, uses robotic vehicles in warehouses, where orders can be gathered more efficiently and delivered to a handler for shipping. The autonomous nature of these vehicles enables them to solve complex cost functions for each order and plan routes to gather items in an order that minimizes time and cost to the company. Additionally, the well-defined constraints in their motion can improve the safety and efficiency of operations.

Last-mile delivery has also been a significant challenge for many companies over the years, with several companies eliminating this segment of its operations to reduce costs. The main issue with last-mile delivery is the time lost in traffic to reach customers, which increases the cost of service in terms of human resources, fuel consumption, and depreciation. Companies like Google Wing are attempting to tackle this issue by piloting a program that delivers products directly to the consumer using drone technology. Amazon is also using autonomous technology to experiment with a fleet of delivery robots that cover this segment of its operations, to reduce the delivery times.

How does this affect cost?

While a lot of R&D work has gone into developing autonomous vehicles, the longterm savings make up for the upfront costs. Today, an autonomous truck can cost anywhere between $30,000-$100,000, compared to $15,000 $175,000 for a non-autonomous truck. However, before an autonomous system can be solvent, an infrastructure to remotely monitor and track vehicles needs to be developed, which also requires costs upfront.

Automated long-haul truck potential cost savings per mile

Automated long-haul truck potential cost savings per mile Source: U.S. Energy Information Administration (EIA), 2017.

 

Potential savings of automated delivery vehicles as autonomy increases toward level 5 fully autonomous vehicles

Potential savings of automated delivery vehicles as autonomy increases toward level 5 fully autonomous vehicles Source: U.S. Energy Information Administration (EIA), 2017.

 

Overall, vehicle autonomy would mean that trucks would likely have a lower operating cost by utilizing routes that optimize delivery time and fuel loss. The net savings from autonomous trucks are expected to be between $100 and $125 billion or approximately $1.67 per mile. The most significant savings are gained from reducing human resources and fuel consumption, each making up more than 30 percent of cost reduction. In terms of distribution, experts expect a 35 percent cost reduction by shifting towards autonomous vehicles.

The four waves of autonomous trucking and their impact on cost

The four waves of autonomous trucking and their impact on cost Source: Chottani, Hastings, Murnane, & Neuhaus, 2018.

 

For drones and smaller vehicles, the price will be almost market cost, as long as autonomous versions are utilized. Autonomy will reduce the risks arising from labor disruptions to companies, which is an additional benefit for business predictability.

Of course, in the transition period from low autonomy to full autonomy, the cost reductions might be insignificant while implementing operational policies. However, the long-term efficiencies will outweigh the transitory costs. When a fully autonomous infrastructure becomes available, these vehicles will only need to be monitored rather than operated by skilled workers. Assuming that a single person can monitor four of these vehicles at a time, the cost or human labor for the same number e number of vehicles could reduce by more than 60 percent.

Long term cost reductions, along with the increased safety, predictability, and reliability of an autonomous system, are pushing the transportation and logistics industry toward an era of vehicle autonomy. In response, the industry will soon see a reallocation of human resources to create value in other parts of the supply chain.

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