What’s Fueling The Transformation Of Transportation: CEOs From Old Dominion And Werner Weigh In
The transportation industry is experiencing nothing short of a sea change. To get a clearer picture of this transformation, consider the views of two of this sector’s top CEOs.
Demand Is Soaring
In general, transportation services are in high demand. “We see it daily—the economy is rolling,” says Greg Gantt, CEO and president of Old Dominion Freight Line. But this can become both a blessing and a curse. Indeed, “there’s heightened demand for our services.” At the same time, however, “capacity is extremely tight, so the industry doesn’t always have the trucks it needs available right where and when needed.”
Complicating this problem, the industry for some time now has been experiencing a driver shortage—an issue exacerbated by a strong U.S. economy. So overall, says Gantt, “there’s more freight and more trucks than there are drivers to drive them.”
But circumstances such as these can also represent a growth opportunity. So, as Gantt explains, “we’re working hard to improve what we offer to help our customers and gain market share amid today’s conditions.”
The “Amazon” Effect
Additional forces are having an even more fundamental impact on transportation. For example, the Amazon effect is driving change not only on warehouse location but also on the logistics, supply chain, transportation ecosystem writ large.
“Consumers—B2B and B2C—are becoming more and more accustomed to immediate fulfillment,” explains Derek Leathers, CEO of Werner Enterprises, Inc., a $2.2 billion transportation and logistics giant. So, a key theme in the transportation industry, says Leathers, “is finding ways to get things where they need to go even faster than before.”
This phenomenon is driving change throughout the economy. Needing to get goods into customer hands ever more rapidly, businesses are reconfiguring their fundamental distribution models. “Loads used to see two, three maybe four touches before the goods were in the hands of the end-consumer,” explains Leathers. But today, “it’s seven, eight or nine touches—to get the freight to a network of warehouses and forward positions all designed to get things closer and faster to the consumer.” In short, says Leathers, “that final mile is being redefined—accelerated—almost every day.”
Gantt agrees, adding that “our customers are without question placing their warehouses closer to their own customers. Everyone in the industry is looking to get closer to their own end-buyer, and as a result, the needle is definitely moving on our [average] length of haul—it’s getting shorter.”
Revolutions In Technology
At the core of today’s transportation transformation: fast-evolving technology. Indeed, says Gantt, “it’s the point and click” of the internet driving change as more and more goods are purchased online in direct-to-customer models as opposed to consolidation of purchases within retail outlets. This fragmenting of fulfillment “definitely drives demand for transportation services,” says Gantt.
But technology’s impacts run far deeper. As Leathers explains, today “we’re seeing this massive proliferation of business data—we’re able to extract even more data than ever before from telematics and Internet of Things—plus there are more ways to store and distribute data in the cloud, plus more computing power [enabling] analysis through artificial intelligence (AI) or machine learning (ML).”
A solid example of technology in action is the way Werner is incorporating AI into its everyday processes. As Leathers explains, “Our logistics groups handle a wide range of complex but repeatable tasks that require large amounts of input data in order to make the best choices.” Optimal carrier selection, for example, means combing through thousands of possible candidates, routes and schedules. “Ordinarily, that can take four to five minutes to reach a conclusion,” says Leathers. But with AI/ML tools, “within a matter of seconds, we can narrow the selections to just two or three, then allow human intuition to make the best decision.”
Overall, says Leathers, “we’re putting a lot of money into ML and AI to augment the human role in capacity optimization, mode selection, carrier selection, by region, by time of day, etc. And the reason we’re doing it: There are just so many more variables we can track and optimize moving a specific block of product from A to B to C than there used to be. And if we aren’t the best at what we’re doing, there’s always someone else willing to step in.”
The Driverless Future?
Headlines are replete with talk of a fast-arriving era of self-piloting vehicles. Indeed, says Gantt, “that future will arrive.” However, for now, “it’s a lot further off than most realize—a decade or more.” And in addition, says Gantt, even when vehicles can reach their destinations alone, they will still need people to perform a wide range of roles. In short, robots “will not eliminate” the need for talent in transportation.
Still, many related technologies are already improving safety on the roads—today. Whether long-haul, short-haul, truck or van, today’s delivery vehicles are equipped with a vast array of road safety features. As Gantt explains, “vehicles have features like lane departure warnings—so if they start to veer left or right, the driver will hear rumbling.” There’s also technology, says Gantt, “to slow the vehicle if there’s a hazard ahead.”
Other safety features can include forward-looking cameras and radar, alerts for drivers of objects in blind spots, adaptive cruise control and rollover stability. The bottom line, says Gantt, is that properly equipped, today’s trucks are far safer than anything that’s come before, “and we’re all for anything that can make us safer.”
Amid Change, Opportunity
“When you think about everything: surging demand, shifts in demographics and distribution models, AI, ML—and let’s not forget blockchain—which is a story in itself,” says Leathers, “you can’t help but come up with this sense that this is an era of unprecedented change.” In fact, says Leathers, “we’re at a point where there’s more change taking place in this instant than what I’ve seen in over 25 years on the front lines.” Still, says Leathers, “with change comes opportunity—opportunities to improve how we perform. That’s good for customers and the economy. Everyone benefits.”