Autonomous Trucks: Your Next Wave of Savings in Road Freight

trucking Yuri Bizgaimer/Adobe Stock

Spend Matters welcomes this guest post from Maulick Dave, of GEP.

The autonomous vehicle, or driverless car, is arguably one of the most keenly watched technological developments of this decade. It has caught the attention of media, technology and car companies, as well as engineers, businesses and the government. And rightly so, as it has the potential to bring about a paradigm shift in the transportation sector, which touches the everyday lives of countless people.

Last month, Otto, a San Francisco-based startup, hauled more than 50,000 cans of Budweiser in a driverless truck on a 120-mile journey from Anheuser-Busch’s Fort Collins facility to Colorado Springs. Although there was a trained driver present in the vehicle, he took control only within the city limits, and the vehicle was self-driven on the interstate highways alongside regular traffic. Otto had retrofitted an 18-wheeled, 53-foot trailer with a $30,000 self-driving kit for this trip.

This successful trial marks a major achievement for self-driving technology. It makes us think about potential implications for the logistics industry and what it can mean to businesses that use road freight. How do they stand to benefit, and how much cost savings can they derive by deploying driverless vehicles?

Even if we assume that we would still need trained drivers to drive trucks within city limits, the deployment of driverless truck only on interstates would also bring about much change in the overall operations of the trucking business. Drivers would no longer need to be associated with a road freight company. They could enroll themselves in a third-party firm, which would provide drivers to the road freight companies on an as-needed basis. These third-party firms would also have their facilities along the city borders on the interstate highways, which would act as the pick-up and drop-off point for the drivers.

The trucks would be loaded with freight at the source, the driver would drive the truck to a driver pick-up and drop facility where s(he) would get off, and the truck would then be on self-driving mode on interstates and halt at the next pick-up and drop-off facility. There, a driver would board to take the control of the vehicle within the city limits and then get off at the next pick-up and drop-off facility. This would lead to much higher utilization of drivers (cross-company usage and less billed hours) and vehicles (no driver fatigue), which would help lower operational costs.

To better understand the cost implications of driverless trucks, consider the five major cost components of the trucking business: fuel, lease payments, driver wages and benefits, repair and maintenance, and insurance. Based on GEP’s research, fuel (40%) and driver wages (35%) form approximately 75% of the average marginal cost of running a truck business (i.e., cost incurred to run one additional mile). With driverless trucks, cost would go down on the following fronts:

  • Labor cost: According to an American Trucking Association report, the trucking industry faces a shortage of 48,000 drivers in 2016, and the number could go up to 200,000 by 2024. This supply/demand gap is causing wages to rise, along with high driver turnover as drivers shift to companies that can provide them with higher wages. With an 80:20 split between interstate and in-city driving, the contribution of driver wages and benefits to marginal cost could come down to 8 to 10% from the current 35%, a drop of 25%.
  • Fuel cost: With computer-operated self-driving trucks, it would be easier to achieve truck platooning (trucks running in a line at a constant speed), saving around 10 to 12% of the fuel cost.
  • Insurance and vehicle utilization: Driverless trucks are expected to have better safety records, as they would remove the single biggest reason of accidents: human error. In addition, with flexibility in hours of service regulation, the companies would be able to utilize their assets in a more efficient manner and bring down the total cost.

Thus, a driverless truck is expected to reduce the marginal cost of running a truck on average by 40 to 45%, which at constant margins would turn into savings for firms using road freight. There would be an additional one-time cost of installing the self-driving kit and its regular maintenance (20% of the cost of the kit), which would bring the savings down to approximately 30 to 35%.

Driverless trucks still need to go through rigorous testing and pass government regulations before companies can start using them, not to mention the technology is at least a couple years away from commercial deployment. However, if everything goes according to plan, driverless trucks can prove to be a game changer for the road freight industry and help save billions of dollars for businesses.

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Voices (2)

  1. Craig Sanders:

    Technological innovations are all but inevitable, but as we progress with technology we have to be wary of the economic implications and power shifts in the market as companies move towards efficient cost-cuts and less and less personnel.

  2. the doctor:

    Autonomous vehicles may be the future, but if this is the way things are going, I agree with LOLCat who has a very strong argument for living in the past:

    http://sourcinginnovation.com/wordpress/2016/11/19/maybe-self-driving-cars-are-inevitable/

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