How Autonomous Vehicles are Driving a Shift in Supply Chains

Driverless cars represent a crucial shift within both the automotive industry and the way we make and move products.

Technology and Automotive Join Forces

Technology and automotive are merging. The surge of interest from tech giants like Google and Apple in creating driverless cars is changing the way automobile works. Other players like Tesla are also changing the market landscape, challenging traditional companies like Ford, BMW and Mercedes to adapt. But beyond the way we commute, driverless technology is set to disrupt global logistics.

The automotive industry is now scrambling to catch up with progress since tech-focused businesses are pushing into car manufacturing, where self-driving cars get the lion’s share of attention. The technology is seeping into car systems, forcing producers to change models, incorporate new features, and find new suppliers. Auto parts are facing shorter and shorter product cycles, putting pressure on manufacturing strategies.

Car OEMs now face a decision to modify their production and supply chain network in anticipation of the technology. Well-known components such as analog gauges and ignition are growing obsolete. Jtekt, which is partly owned by Toyota, has started looking into the production of “steer-by-wire” system wherein the steering wheel, axles and tires function through electronic signals. This will eventually replace physical connections.

The blurring line is also applicable to consumer electronics. Automobiles and smartphones are slowly becoming integrated that car manufacturers have started replacing CD players as standard dashboard equipment. Fiat Chrysler Automobiles NV and Honda Motor Co. have been transforming their automobiles to be more compatible with mobile devices. Randy Stephens, Chief Engineer for Toyota’s Avalon, explained that the challenge is not just to provide new technology but to bridge old and new customers. Automakers are walking a tightrope, balancing between keeping old customers and enticing new ones.

For instance, audio supplier Harman International Industries Inc. has begun changing production focus to gauge consumer clusters. Throughout the years, fuel gauges, tachometers, and speedometers have become digitized. Japanese electronics makers like Hitachi and Sony are working on expanding their automotive offerings to balance out declining consumer electronics sales. These are just some of the changes that autonomous and more advanced driving present to the mentioned sectors. More shifts are anticipated for the logistics sector.

Driverless Cars and Logistics

The entire transportation chain depends on technological progress and market shifts. DHL commissioned a report the looked into the impact of driverless cars to logistics. According to the report, there are key areas that would benefit from the emergence of such technology:

• Improved Safety. Automotive vehicles experience fewer accidents due to the removed opportunity for driver error.
• Lower Environmental Impact. With ridesharing made easier, analysts anticipate fewer vehicles and improved fuel efficiency of newer cars.
• Higher efficiency. Improved traffic flows and more travel options will ease commute stress and free up busy city streets.

The logistics industry is poised to be the fastest adopter of driverless cars compared to other industries. The technology will impact logistics in the following core areas:

• Warehousing Operations. New technologies could emerge like assisted order picking, auto pallet movers and autonomous loading.
• Line Haul Transportation. More organized convoys and assisted highway trucking mean more trucks and better conditions for truck drivers.
• Last-mile Delivery. it is highly anticipated that last-mile delivery will be revolutionized through shared cars, parcel station loading and even self-driving parcels.

Driverless cars pose both a threat and opportunity for industries. Hundreds of billions of dollars are at risk for automakers, suppliers, dealers, insurers, parking companies and many other car-related enterprises should the technology be adopted and they fail to adapt. On the other hand, shipping and logistics can become more efficient and less risky for companies. Infrastructures will also likely change along with business models. However it pans out, driverless cars are inevitable. Their full adoption may take decades but their value will be indispensable. Companies that look far ahead, plan and execute the fastest will survive. Those who are still sticking to tradition are at risk of stalling.

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