As this issue of TBB goes to press, I’ve just returned from the annual FTR Transportation Conference in Indianapolis where three intense days of presentations on the economy, the evolving supply chain, and equipment forecasts have left my head spinning.
The punchline from economist Noël Perry’s outlook: “Let me put this in as sharp a set of terms as I can think of,” he began. “The changes we are looking at over the next 15 years are coming faster than anybody thinks. When the market changes, 90% of the incumbent customers, suppliers, carriers, brokers—and economists—will leave because we are not capable of dealing with that kind of change.”
And his 15-year timeline might be conservative.
Because September is reserved for our Snow and Ice Control issue (and because the publication window is so tight) our detailed FTR reporting runs in the October magazine—but some of the themes this year are so compelling that I can’t resist discussing them here.
While it’s certainly a metaphorical stretch to wedge e-commerce and automation and electrification into this month’s snow and ice content, an allusion to Game of Thrones is, I think, fitting.
For those unfamiliar with the books or the HBO series, a number of medieval kingdoms south of an ancient ice wall are constantly competing for power, even though the semi-mythical threat of an approaching “long winter” occupies some princes more than others—and that’s largely a function of proximity to the wall, because the wall is where the legends become real. While the southern kingdoms continue to scheme against each other, an army of the icy undead is indeed on the march.
This is not to equate the visionaries at Amazon or Uber or Apple with an arctic-eyed zombie horde, but Perry would squarely put those of us currently working in freight transportation on the sunny side of the wall. But it’s about to get cold.
“If you want to be part of that 10% [who survive], it’s time to start thinking real hard about how you become part of the solution rather than part of the old problem,” Perry continued.
By the “old problem” he means the production and transportation inefficiencies we in the industry discount as just the cost of doing business, or the usual cycles. But those inefficiencies are fresh meat to the “disruptors” invading from Silicon Valley.
“The world is not going to stay the way it always has been,” Perry said, as he detailed the economic fundamentals that are changing in ways that mean less freight, and fewer vehicles needed to move it. As an example, he points to improving vehicle fuel economy, combined with alternative fuels and a reduction in vehicle miles due to automation. The result, by 2030: “Two-thirds of the tanker business is out the window. That’s great news for the economy; not so great for the people that have tankers.”
Steve Sashihara, CEO of Princeton Consultants, made a similar case. Indeed, his presentation included a refutation of the freight community’s reasoning for why the Uber model would not “disintermediate” the supply chain the same way it has the taxi business. We’ll get into the details in our coverage next month, but the gist is that electric, autonomous vehicles—and the public’s acceptance on the passenger car side—will provide the impetus for disruption in trucking. And the objection that freight moves are too complex for an app simply won’t hold up: Coming technologies will be that good, and all those load managers working the freight matching screens today will be gone.
Sashihara does offer a strategy for survival, however. If you’re a small player, “pick a niche.” That is, specialize in a service that requires hands-on expertise. For a company that’s big today, it’s time to get with the program and automate “every aspect” of your core business. For businesses in the middle, you’re going to have to scale up or scale down, but “don’t be the worst of both.”
And he concludes with a quote from Microsoft founder Bill Gates: “We always overestimate the change that will occur in the next two years and underestimate the change that will occur in the next ten. Don’t let yourself be lulled into inaction.”
The good news, for the survivors, is that when transportation services become “twice as fast for half the cost,” then people will find new ways to use it—the economic principle of “elasticity,” Perry concluded. And while the next couple of years “look pretty good” for transportation providers, the long-term environment is “full of profound risk—and profound opportunities.”
“We know from history that those of us who figure out how to take part, how to align ourselves with the people who see the answers, those of us who do that will become rich and famous,” he said.
So, where do you and your business fit in? Will you make it to the coming hi-tech spring? (The outlook is actually somewhat brighter for trailer and body builders, whose evolving—digitally connected—equipment will become more essential as power units become, well, just unmanned power units.)
Again, more to come.