July 4, 2031:
“I think our microwave is broken.” John tapped a few buttons, then turned to his wife, Karen, who put on her most patient smile. “Did you turn it off and on again?” “Yeah, yeah, very funny,” John retorted. Damn, just in time to ruin lunch. He’d have to fend for himself in the meantime, but maybe he could replace it before their friends came over for fireworks? “Alexa, order us a new GE microwave.”
Instantly, Amazon’s warehouse receives the order and launches into a flurry of motion. Autonomous robots query the warehouse database and set off for the section and aisle where John and Karen’s new microwave sat waiting. The unit, already packaged, is picked up by a Kiva robot and routed to a staging area. A single Amazon employee oversees the transfer of goods from the warehouse to a van — driverless, of course. It navigates to John and Karen’s neighborhood and parks at a central location, whereupon a dozen autonomous delivery drones begin delivering all the packages local residents ordered that morning.
The system pings John’s account, notifying him that his delivery is waiting outside. Not even three hours after placing the order, John and Karen get their microwave, just as guests begin to arrive.
Autonomous vehicles are often thought of in terms of their application for individuals, but they will have just as much impact on commercial driving in the logistics industry. For centuries, logistics companies have made profits on increasingly narrow profit margins. Now businesses like Amazon are using autonomy — inside and outside the warehouse — to their benefit.
McKinsey published a report on the impact of autonomous vehicles and operations on the logistics industry, in particular as they relate to “the last mile” — the final stage of delivery to a residential home, which is usually the most expensive part of the delivery. The report offers three central takeaways: that a growing minority of consumers want faster home delivery, that autonomous vehicles are poised to be responsible for the vast majority of delivered consumer goods, and that this shift will occur within the next ten years.
A Desire for Faster Yet Affordable Home Delivery
According to the report, “Almost 25 percent of consumers are willing to pay significant premiums for the privilege of same-day or instant delivery.” But the vast majority still opt for the least-expensive option for home delivery. The extent to which autonomy can deliver savings across the board in terms of logistics costs is central to rapid-delivery business models.
You’ve probably read about how Kiva’s robots are cutting costs and speeding up operations in Amazon’s warehouses — all while reducing the number of workers required to get products from the shelf to your front door. A $775 million investment in the company has cut Amazon’s operating expenses by 20 percent. But warehouses are a relatively controlled space — the real test for automation, and where additional savings could be found, is on the road.
Self-driving trucks are right around the corner. At the beginning stages, this automation will take the form of driver-assisted technologies, such as the newly launched Embark, which can autonomously navigate highways until a human driver takes over to exit. But other competitors, such as Uber’s Otto, are looking to a fully autonomous route that doesn’t require a human operator at all, allowing for continuous shipping across long distances without the need for rest or refreshments. If you’re counting, that’s as many as 3.5 million truck drivers who may soon be looking for a new job.
Removing the human operator is not the only way for transportation companies to reduce costs. One example is through truck platooning: Using either assisted-driving features that aid human drivers or fully autonomous technology, trucks would be able to travel highways in a tight convoy, following almost exactly one behind the other. According to the European Truck Platooning Challenge team:
With the following trucks braking immediately, with zero reaction time, platooning can improve traffic safety. Platooning is also a cost-saver as the trucks drive close together at a constant speed. This means lower fuel consumption and less CO2 emissions…Meanwhile the short distance between vehicles means less space taken up on the road.
One platooning technology startup, the aptly named Peloton, estimates fuel savings of 4.5 percent for the lead truck and 10 percent for following trucks — offering the opportunity to save quite a bit of money when applied to the $140 billion that the U.S. trucking industry spends on fuel each year. That’s at least $6 billion in savings that could be passed on to consumers.
Autonomous Vehicles Will Deliver a Majority of Consumer Goods
McKinsey forecasts that over time, autonomous delivery will be responsible for “close to 100 percent of [consumer goods] and 80 percent of all items.” And while autonomous trucks are great for commercial shipping, they’re not ideal for residential delivery. For that purpose, a nimbler approach is required that is both flexible and efficient: Drones would come into play here, either for autonomous ground delivery or aerial drone delivery.
You’ve probably read about Amazon’s foray into aerial drones, but end-to-end aerial drones seem unlikely as a complete solution in the short term. Urban areas could become too congested with drones, and it seems unlikely that people will be comfortable with a constant stream of drones — carrying heavy objects — above their heads at all times. Not to mention regulatory agencies like the FAA will be very cautious about the intersection of aerial drones and airline flight paths.
Instead, logistics companies should consider a hybrid approach that combines these two formats — taking advantage of the flexibility of aerial delivery while using vehicles to narrow a drone’s flight delivery radius. Mercedes-Benz is experimenting with this model in a concept called the Vision Van.
Rather than fly products from the warehouse to your front door, this vehicle is designed as a van that acts as a staging ground for aerial drones. Putting the staging ground in a neighborhood rather than a warehouse enables a single drone to deliver more parcels at a faster rate. The aerial flight time for each parcel would be decreased to just a couple minutes within a narrow and more easily managed flight area. Although an employee could ride along to oversee the process, most of the work would be done autonomously with an automated package loading system and aerial drones to navigate between the van and each home.
“With the Vision Van we are presenting the intelligent, clean, and fully interconnected van of the future,” said Volker Mornhinweg, head of Mercedes-Benz Vans…
“We are integrating the intelligence of a state-of-the-art logistics depot into a van. We estimate that this vehicle would enable an increase in productivity of up to 50 percent in last-mile delivery services.”
Even with this model, however, human delivery would likely not be completely eliminated. McKinsey estimates that primary exceptions could be within limited urban areas for perishable grocery deliveries (especially if returns would be required) and for high-density commercial shipping.
Overcoming Economic and Regulatory Barriers Will Take Time
McKinsey projects a rough 10-year time horizon for logistics companies to adopt autonomous technology. The primary barriers to reaching this goal are hourly labor rates, public sentiment, and the extent of government regulation on the industry.
The FAA rules on drone technology that went into effect last year apply only to human-operated drones, rather than automated drones used for delivery. This may pose a problem for Amazon in particular if the company is serious about this flying-warehouse patent. And regulators will probably have much to say about the proliferation of autonomous ground-delivery robots, like the ones being built by Starship Technologies, that may soon appear on a sidewalk near you with your pizza order, among other delivered goods.
The key factor determining how fast this all happens will be the extent to which popular demand presses governments and regulators into action. Autonomous vehicles would significantly decrease the delivery time and cost for many consumer goods, which in part contributes to the majority of millennials McKinsey surveyed who would “definitely or likely use” autonomous delivery options. Are people passionate enough about the benefits of this technology that they will lobby their representatives on its behalf? And will they be louder and more visible than the opposition to this technology in logistics as it relates to human employment, safety, or aesthetics? If not, consumers may fail to realize autonomy’s full potential.