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ASCM Insights

Episode 30: The Future of Autonomous Vehicles in the Supply Chain

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Bob Trebilcock: Welcome to The Rebound where we'll explore the issues facing supply chain managers as our industry gets back up and running in a post COVID world. This podcast is hosted by Abe Eshkenazi, CEO of the Association for Supply Chain Management, and Bob Trebilcock, Editorial Director of Supply Chain Management Review. Remember that Abe and Bob welcome your comments. Now, to today's episode.

Bob: Welcome to today's episode of The Rebound, The Future of Autonomous Vehicles in the Supply Chain. I'm Bob Trebilcock.

Abe Eshkenazi: I'm Abe Eshkenazi.

Bob: Joining us today is Charlie Jatt. Charlie is the Head of Commercialization for Trucking at Waymo Via. Charlie, welcome.

Charlie Jatt: Thanks, Bob. Thanks, Abe. Great to be here.

Bob: It's great to have you. I grew up in the '60s and '70s when popular music and movies romanticized truck drivers, especially long-haul truck drivers. Smokey and the Bandit featured Burt Reynolds and the hit song East Bound and Down. Clint Eastwood and a chimpanzee starred in Every Which Way but Loose. Kris Kristofferson starred in Convoy along with Ali MacGraw.

Those were some Hollywood heavyweights and heartthrobs outrunning the law while driving cross country. It was a renegade spirit, a call of the open road, and a chance to chart your own course as long as you got to your destination on time. Those were powerful images. I think most of us would agree that when it comes to truck drivers, the trucking industry is in a crisis today, and has been for a long time.

Now, those movies may have been heavy on a cool CB chatter and truckstop honeys, but they glossed over the reality of days and weeks away from the family, long hours behind the wheel, relatively low pay, and health problems associated with being sedentary for so long. The average age of US truck drivers today is nearly 50. I've actually heard recently that it's more than that. Most trucking firms will tell you they experience a hundred percent annual turnover of drivers.

Charlie might correct me, but I saw a figure the other day that pre-COVID, we were short about 60,000 truck drivers, and in COVID, we're short now about 80,000 truck drivers. Whatever was going on before COVID, just got worse. Trucking firms will also tell you that young people who didn't grow up bingeing on Burt Reynolds movies, they're just not interested in truck driving.

It's no surprise that the industry is interested in the potential of autonomous vehicles, just as the rail industry has been running freight trains without engineers on routes for some years. Where are we? What does the future of autonomous trucking look like? That's what we're going to talk to Charlie about. Abe, why don't you get us started?

Abe: Thanks, Bob. Charlie, this is going to be fun, trying to find out a little bit more of what we all are experiencing right now. Let's start with the foundation setting, Charlie. What is Waymo Via? We know that you're an Alphabet company, but specifically, what do you do? Do you consider yourself a technology company, a transportation company? Give me a sense of what your position is.

Charlie: Thanks, Abe. I’m excited for this discussion. It's an interesting time in supply chain. We're really interested about what role we at Waymo and Waymo Via can play to help improve the future of supply chain. Let's start with Waymo. What is Waymo? Waymo, as you pointed out, we're an Alphabet company. We are an autonomous driving technology company with a mission to make it safe and easy for people and things to get where they're going.

We were started in 2009 as the Google self-driving car project. You may have seen us in the news way back under that identity. Since then, we've been on a decade-long adventure and mission to automate all forms of driving. You asked whether we're a technology company or some other type of company. We are really a technology company.

What we're focused on building is the autonomous driver. Here in Waymo, we call that the Waymo Driver. Now, that's a driver just like you, or I could drive a truck or a car or any other type of vehicle. It's really one system that can be used across many types of applications. When we talk about Waymo Via within the context of Waymo, that's one of our applications. That's our goods movement, business unit, where we focus on heavy-duty trucking, as well as local urban deliveries.

On the flip side, we also have a consumer offering called Waymo One. That's also a really interesting endeavor that we've been on, which is a public-facing ride-hailing service where we actually today have fully autonomous cars serving passengers in the Phoenix Metro Area, fully open to the public. When I say fully autonomous, that means really truly no driver behind the wheel.

I'm actually in Phoenix right now. I took one of our Waymo One fully autonomous rides to get to and from dinner last night from my hotel. Being a technology company in a space that's really heavy on manufacturing and logistics as is the supply chain and the trucking use case, it's really interesting about how we fit in with the ecosystem. We're creating the technology. We're not making a truck, probably pretty apparent from my answers so far.

We're also not here to build a large fleet of trucks, operate a large fleet of trucks. We're going to achieve a lot of that through our partnerships. One example partnership, and we can talk about the others as well, is our strategic partnership with Daimler Trucks North America, one of the leading Class 8 truck manufacturers in the US.

We're partnering with them to integrate our technology onto one of their leading truck platforms, the Freightliner Cascadia so that we can focus on what we do best, they can focus on what they do best and we can make the best of that combination available to the industry.

Bob: I'm going to ask you a question about the business model, but let me ask you another question as part of that. First, as I'd mentioned before we started this, I had a chance to talk to your colleague Seungju Lee yesterday. One of the things she talked about a little bit was the state of the technology, in terms of what the trucks can do and what they can't do. She had a really interesting video, that obviously we won't have here, showing the trucks' live view from the cab, trucks merging on to traffic, and things like that.

Can you, as part of this, tell us where the state of the art is and then talk a little bit about the driver as a service business model? Because it reminds me a little bit of the robotics as a service model where company X doesn't buy the robot. It's almost like power by the hour in terms of a jet engine, the airline doesn't buy the engine, GE owns the engine, and then they pay for every hour of use. Tell us a little bit about the state of the technology and then explain the business model, the driver as a service model.

Charlie: There's some really interesting analogies that you draw there, Bob. Let's start with the state of the technology. I think it's actually best to talk about it from the standpoint of Waymo holistically, both the cars and the trucks. I mentioned that we have our fully autonomous cars already in operation in the Phoenix Metro Area, fully available to members of the public. If you're ever in town, just download the Waymo One app. If you're in our service territory, you'll be able to hail a ride.

In that sense, autonomous driving technology is already here today, but there's still a long way to go. On the truck side more specifically, we haven't hit that first milestone yet. We haven't gone to a fully autonomous operation with no driver in the cab, but we're working towards that, of course. When you think about the progression of the technology, we've got a lot of those foundational capabilities, whether it's the vehicle's ability to perceive all the road agents around it, the ability for the vehicle's computer to predict what all of the other road users are going to do on a real-time basis.

All of that foundational technology is there. What we're working on now is customizing to the trucking application. Some of the unique things about operating a truck versus a car, like long-range stopping distances, the need to see far down the highway to anticipate vehicles stopped on the shoulder, for example, pedestrians that shouldn't be on the highway, but are because of a broken-down vehicle or something like that.

It's a lot of those edge cases that we're really focused on, as well as thinking through and working on some of the fundamental technology for being able to scale up the application once it is ready. In some senses, most of the foundation is there, but we're really focused on some of those really tough issues that's the hurdle between having a really good demo and having a really, truly commercializable product. That's the state of the technology and happy to go into more detail on that as interested.

On the business model, you drew some really interesting analogies, Bob, and I think they're pretty spot on. We are pursuing what we refer to as a driver as a service business model. What we mean by that, first and foremost, actually goes back to your first question, which is, who are we? Are we a technology company? Are we a manufacturer? Are we a logistics company, technology company, through and through?

We're going to make the autonomous driving technology. We're going to partner with manufacturers like Daimler to make that technology available to fleet operators. Then, of course, there's an ecosystem of support that's going to be needed for these trucks as well. It's early days, but we're already starting to see a lot of this model come together. I mentioned our partnership with Daimler. A couple of other partnerships I can mention is we have a partnership with Ryder who does maintenance service for our autonomous trucking fleet.

Right now that's just for our truck fleet, but you can imagine how that partnership could evolve to eventually supporting future end customers who are using our technology, and able to get service through a company like Ryder. We've also been collaborating with J.B. Hunt, carrying freight for one of their leading customers in Texas.

The purpose of that collaboration is to figure out how can J.B. Hunt, a future customer of this technology, a company that's actually going to put it to use in their business as a logistics company. How can they prepare to be ready for that moment when the technology is ready? In terms of this power by the hour concept or a usage concept, it's actually something that we're being pretty flexible and open to the industry on.

We're going to make the technology and what we've found is that depending on which company you talk to, there may be a different way that they're interested to actually pay for that technology. Some folks might want to pay for it upfront and just own an asset that they know how they're going to use it. Other folks might want to pay for it more on an ongoing usage basis. We're staying pretty open-minded there, but the important part is who we have relationships with which is really all parts of the ecosystem

Abe: Charlie, you're describing a rather complex relationship with a lot of suppliers, a lot of vendors, and even the consumers that you're targeting here. When you're affecting a lot of the decisions that you make, how much collaboration, for example, the implementation of distribution centers in urban areas, is now becoming a significant part of an e-commerce strategy?

When you're evaluating how your relationship with Ryder or the other organizations, do you see it as-- you described a lot of the ecosystem. Do you see it starting in the short-haul or do you see it in almost every aspect of the business that you're trying and to respond to your customer's expectations? There's a lot on the table here in terms of the short hauls, long halls, as well as the distribution centers. How do you factor all those players into your ecosystem?

Charlie: Abe, the opportunity is so large we could easily drown ourselves trying to go after everything at once. It's something that we have to be very conscientious of, and be pretty focused and targeted about what are really the best first use cases. Acknowledging that, "Hey, everything's on the table when you look 10, 15 years out." The applications that we think are going to be best suited for early deployment are highway driving, line haul, and long haul routes. Think 200 miles or greater dedicated repeatable lanes.

You're not working with a different distribution center or manufacturing facility every time for the pickup and drop-off. Leveraging what a concept we call transfer hubs. This is an interesting concept. I'm not sure if you've come across this in some of your other supply chain work. What we plan to do is really automate the highway driving and then leave the first and last mile at least to start with still to human-driven trucks.

Think you've got an origin and a destination, and just like it is today, human-driven truck shows up the origin, picks up that trailer, but instead of driving the entire 500 miles to get to the destination, they drive two to five miles. They drop that trailer at a transfer hub. It's picked up by an autonomous truck which drives the 490 miles and then drops it at a transfer hub at the other end. Then a human-driven truck again takes it for that last mile to get to the final destination.

Now, this is a really interesting model for a couple of reasons. One, of course, technologically speaking, it helps us narrow down the scope of the problem for that early deployment. When you think about the operational hurdles, so much is going to need to change about logistics. When you think of autonomous vehicles at scale. A truck showing up today, a driver plays a big role in that interaction point with the origin or the destination. We are other customers of these trucking companies in many cases and every operation is different. Drivers play a huge role and just managing that day-to-day complexity. By leaving that interaction point untouched at least to start, it lowers a big barrier to entry to get involved with this technology.

Bob: First, an observation. When you were talking about the relationships, particularly with Ryder to provide the technology maintenance, it struck me a little bit like Tesla putting in charging stations, right? If I buy the electric car that's great, but where do I charge it? Tesla enabled adoption by putting in Tesla charging stations. Maintaining a truck is one thing, maintaining the autonomous technology is another issue and it's going to require a different skillset. Given Ryder’s many locations, it strikes me that having Ryder take on that role really is an incentive to adoption like providing the charging stations.

Go way back Kodak wanted to sell films so it created the camera, right? You bought the camera with the film and it solved that problem. That was interesting. Around the transfer hub, another model-- I had to chance to talk to a chief supply chain officer who said he was really interested in this idea of autonomous vehicles. He mentioned the transfer hub idea that you could use the autonomous vehicle for the long haul, and then use an operator truck to do the last mile.

The other model he said that they were talking about-- I don't know who, whether they were talking to you or not, but was a model where you would have a tandem where you might have one truck in a two-truck or a three-truck convoy. One truck where a driver drove the truck and it would be trailed by two autonomous vehicles or one autonomous vehicle. Is that another model you're hearing about that customers are exploring?

Charlie: It's certainly a model that we see being explored by as some of the other technology firms in the space. It's not an application that we're pursuing. From the experience that we've had in making a fully autonomous vehicle with our passenger cars, we've found that you develop technology very differently when you are really focused on the end state you're going after.

We're very cautious that we don't want to get caught up in some interim steps that might be exciting milestones, but might not be the right long-term technology path to get to the real, scalable, commercially valuable offering that we think that fully autonomous driving can produce. I won't go into the some of the specifics on the challenges we see with the convoy model that you described, but it's not something that we're pursuing at Waymo Via.

Abe: Based on how you see the technology evolving, do you have a timeline where you think you're going to be able to move beyond like what you're doing in Texas as pilots to deployment? Automakers like GM are saying 2035 and all their vehicles would be electric. What timeline, if you can share with us, are you looking at for deployment?

Charlie: We don't share it from timeline projection, but I can give you a pretty good idea. The technology is not a decade away. I think that's a big fork in the road that we see with some of our conversations, is there's a lot of folks out there who say, "Wow, this sounds amazing. I can't wait until 2030." No one's going to have to wait until 2030 for this technology to begin its initial scaling. Like I said, we've already got it on the passenger car side. That's what really gives us the confidence to know that it's going to be ready to launch in the coming years.

Now, the flip side of that is that the scaling of this technology is not going to be an overnight process. This is not build one widget and then manufacture a million widgets. This is really an operationally intense service, intense partnership and collaboration, intense type of technology. That initial launch will then scale up and you'll see it first on some initial routes, in some initial geographies, serving really specific use cases. You'll see this gradual expansion where we add new routes, add new use cases, add new customers while we scale up the volume of trucks.

When you look out far to say like 2030 or 2035 your GM electric vehicle example, like I said, we don't make firm projections, but we do expect that by that point in time there's going to be a lot of fully autonomous vehicles out there on the roads, both cars and trucks. We think there's going to be a lot of Waymo drivers operating those vehicles. It's an exciting time. It's a tough effort. It's going to be certainly a lot of time and energy to get to that place. What's exciting about it is that this technology is within reach. This is not a hypothetical science fiction project here.

Abe: I think you hit the right term there in exciting. I think it was an operative word in terms of the changes and the impact that you're describing here. Let's go on to the other side. One of the major challenges that you're facing in implementing the solutions here, whether Waymo Via or one. You're a technology company. My assumption is you indicated technology is way ahead of us right now so, is it consumer acceptance, is it regulatory? Where are your hurdles?

Charlie: Yes, Abe. The technology is really advanced, but it's still is the core challenge that we're trying to solve. There are a bunch of other challenges that come along with deploying that technology, but that's the really core vector that we are driving forward and trying to make progress on. That's the obvious one, we need to get these things to work and we need to get them able to work at scale. We've got a reasonably clear path to do that, but it's going to take a lot of time and energy to do it.

Once you get to that point, and we're already starting to see some of this, like you said, there's a bunch of other factors that come into play too that we can't ignore and we can't put off until some later date. We have to be addressing those today. Some of the examples are the regulatory hurdles. We're fortunate that the US in general and the Southwest region where we're operating most of our cars and trucks is generally a pretty supportive regulatory environment for autonomous vehicles. There's a ton of complexity that goes into that.

We spend tons of time working at all levels of government and public agencies in order to ensure that people know how this technology is going to be deployed, and everybody's ready and comfortable for that. One of the other interesting angles specifically for trucking is around operational complexity and operational readiness. You were talking about it earlier, Abe, with just the depth and complexity of the collaborations we've got, whether it's with the manufacturers, the fleets. The service companies, their end customers, the actual shipping companies. There's a bunch of questions about like, "Okay, so, great. The truck can drive itself, now, what do we do? How do we actually use it well and how do we actually extract the value that this technology can promise?"

That's going to be a really fun one in that it's going to be ever-evolving. The initial challenge we're working on is how do we get that first use case to work and prove out value? Then as you start going into all these other use cases, each one's going to come with some challenging but fun challenging types of solutions to come up with. Then less on the trucking side, but certainly broadly speaking this autonomous driving, public acceptance is, is a huge issue as well.

It's something that Waymo and even before we were Waymo, when we were the Google self-driving car project we spent lots of time and energy and just building trust with our local communities, building trust with like the broad dialogue around autonomous driving technology to ensure that we're not getting ahead of what people are comfortable with us doing. Building and earning and keeping that trust with the public is really essential to our identity as a company.

Abe: It's really interesting having lived in Phoenix for a while. It was a curiosity when I first saw the Google vehicles on the road. I don't think security acid anymore. We're no longer. I accept that that car is out there and without the driver. I agree with you. I think it's going to take some time, but it's easy to see that this is evolving. More importantly, the adoption curve, I think, is starting to bleed into the general public that the acceptance of this. Really, Charlie, I can't thank you enough for discussing this exciting topic with us. We look forward to all the changes that you and Waymo are not only driving, but autonomously driving into the future. Thank you very much, Charlie. We hope you'll be back for our next episode of The Rebound. I'm Abe Eshkenazi.

Bob: And I'm Bob Trebilcock.

Abe: All the best.

Bob: The Rebound is a joint production of the association for supply chain management and supply chain management review. For more information, be sure to visit ASCM.org and scmr.com. We hope you'll join us again.

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