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. Hello and welcome to today's episode of The Rebound, when self-driving trucks meet the supply chain, bottlenecks, barriers, and benefits. I'm Bob Trebilcock.
Abe Eshkenazi: I'm Abe Eshkenazi.
Bob: Joining us today is Aaron Campbell. Aaron is the Go-to-Market and Partnerships Lead for the Autonomous Technology Group at Daimler Truck North America. Aaron, welcome.
Aaron Campbell: Thanks for having me.
Bob: We're thrilled to do it. This is an exciting topic for me. I've been looking forward to doing this one. I became fascinated with autonomous vehicles in the supply chain after attending the first two manifest events in 2022 and then again last year in '23. Now, both years, if you went to the back of a hall, there was a row of about a dozen big, shiny, autonomous, over-the-road trucks. It was like being a kid in a candy store or if you went to the fire station on a school break, everybody wanted to be the fire guy that drove the truck.
Yet when I talk to fleet managers, it's clear there's interest and some tire-kicking. There's going to be several areas we need to address before we see autonomous vehicles in the supply chain in any numbers. Those include the technology challenges associated with the vehicles, the regulatory challenges, and perhaps last, the acceptance of the public, the big vehicles without a driver. That's what we're going to talk about today. Let's get started. Aaron, just to kick us off, tell us a little bit about yourself, your background, and about your role at Daimler.
Aaron: Yes, absolutely. I think the easiest way I describe what I do and why I do it is I really like working on hard problems, it would seem. That's really led me to the autonomous space. I've worked with mobile robots and startups, and then more recently with larger firms, helping firms like Google, Amazon, and then SoftBank as well. Then most recently, obviously, Daimler Truck North America. Really think through how do you bring this technology to market? If you're on the customer side as well, do some work there. How do you adopt this technology and build what I call the automation roadmap?
Ultimately, there's different sides to the equation. I spend a lot of my time thinking and advising, consulting folks on really how to bring the technology to market and how to make it successful, not just within organizations, but really as a space more generally.
Abe: Hey, Aaron, let's pick up on that a little bit. From Daimler's perspective, what's their approach towards self-driving vehicles? How long have you been at it? What's the trajectory of this? Are you moving at pace or are you behind or ahead of your plans now?
Aaron: Yes. It's interesting. Daimler Truck specifically has a really strong decade now experience with autonomous technology and then even the commitment in terms of investment in making this space happen, thinking through some of the partnerships like Torque Robotics. The strategy is pretty simple. Autonomous for Daimler truck is core to the future. Daimler as the market leader in this space in commercial trucking and commercial vehicles has a lot to lose, but also a lot to gain.
The strategy for thinking through how to get this self-driving truck technology to market is focused on making sure safety is first and foremost met, making sure also simultaneously that the customer ownership and value is understood and realized. Then lastly, of course, participating with the network, dealers, servicers that make Daimler what it is today in terms of the powerhouse and making sure that they participate in that. Daimler's pretty clearly said, we're not competing with our customer's business, which is important to note because this technology enables a lot of new business opportunities. Daimler Truck's role is really to enable the ecosystem and really create the wave rather than just ride it.
Bob: Aaron, a minute ago, you talked about the automation roadmap, and we'll come back to that in a little bit. Before we get there, a roadmap implies a starting point. Let's talk about the present state of things. Can you tell us where we sit today, for instance, where I can operate autonomous trucks and how are most users utilizing them in their operations for those early adopters?
Aaron: Yes, that's a great question, Bob. The lay of the land or the state of the industry is really interesting. We're further along than we were a decade ago in terms of adoption and in what we actually see on the road perspective. We still are in early innings, but increasingly closing in on that market launch date. Daimler Truck specifically has said by 2027, at our last capital market date, that we will have self-driving trucks being commercially available. Right now, what that means in terms of the work to get there is a lot of testing, is a lot of piloting. That's largely where our engagements with early adopters, as you called them, are.
It's through piloting and really working through the kinks, understanding the nuances of each customer's business model to really understand what the risk, but then what the opportunity is for integration of autonomous technology into our customers' business models, as well as the business models of our dealer networks, et cetera. It's piloting largely. Geographically, Bob, you can find a lot of this activity, and this is going to be broadly across the industry, true in the Southwest region, think New Mexico, think Texas.
From a regulatory standpoint, as well as just a technology conditions standpoint, it makes for a really natural starting point where we're going to see this early activity, especially commercially. That's really where I would scope the thought around where's this technology going to be seen today, as well as where will it be seen in scale or at scale really as we near the end of the decade. Obviously, everyone has their own dates in terms of firms and when they think they're putting things on the road and, in Daimler Trucks case, on the highway. That's largely how everyone's thinking about it in terms of at least scope and strategy.
Bob: How about use cases? What's the common use case?
Aaron: Different people in different firms have different approaches. I can speak for Daimler Trucks, go-to-market here. We're focused on the on-highway application. That's basically automating the middle mile. We've talked a little bit about in some of the materials that have been put out around what we call our hub-to-hub strategy. Really what that is think off the side of the highway, there's some piece of real estate that has the ability to be a drop and hook point on both sides.
Think first mile that happens the way it does today to these hubs. At the hubs, we see drop and hook happen to the autonomous tractors, which then, just much like a conveyor belt along the route until that next hub to complete the mission, at which point the final mile is commenced or the baton’s passed, so to speak. That is really where for the past, let's say, two decades, thinking about autonomy and then past decade and experimenting with it and understanding it, the value is just so clear, where you look at the labor shortages or the cost benefit opportunities there, which I'm happy to get into a little bit more. That's where we're focused from an application in a segment perspective.
Abe: Aaron, interesting that you pointed out the stage that you're in and you identified a couple of companies in regions where you're seeing piloting of autonomous trucks. Walmart is doing this right now from central fulfillment to regional centers. Pitney Bowes's using it in Texas for short runs between distribution centers and hope to expand. Give me a sense of the industry as a whole. Are we still in the pilot stage or are we getting into adoption and more utilization as the standard course of business?
Aaron: Yes. I think the easiest way to answer this is I'm thinking about listeners, or folks thinking through strategic planning, should I be doing this? Is there something to do or not? If you are someone who is either squarely in the business of moving goods or are potentially impacted in terms of that supply chain, either upstream or downstream from that, you have something to both lose and gain from participating with this technology and deciding when to.
Right now, you can sign yourself up with different firms in terms of reaching out and just letting your interest be known. That is going to allow you to have a seat at the table, or at least be in the conversation of being in that early adopter crew. What that looks like, again, I can just speak specifically to Daimler Truck and some of our partners, but that's largely pilots. Why is it pilots? Well, because there are regulatory considerations. We have to get certain milestones and benchmarks in terms of hours spent operating on the road to hit certain levels of standards from a compliance perspective and safety.
Where we're going, and it's a really interesting transition period, by the end of the decade, most folks in this space anticipate having something commercially viable. What that means, and going back to the automation roadmap that I mentioned, is if I'm a leader and I'm thinking through, I have something to lose or gain from thinking through efficiency, whether that's the cost benefit or the productivity benefit from this space.
*If I'm piloting now or signing myself up to pilot, I'm basically getting my competitive advantage that I can then cash in when this is ready, because I've already thought through the operational challenges. I've already thought through the change management elements. I've already planted the seed with my colleagues in terms of what this opportunity looks like. It's not new and intimidating, and I'm trying to rush to get things done. That's where the opportunity is today. We're increasingly seeing for the earliest of adopters, the pilot period is slowly or actually quite rapidly graduating because folks have figured really interesting things out in terms of that benefit and how to make this work for them.
They're also seeing that support both externally from the markets and investors, as well as internally in terms of the advantages this can have for the top and bottom lines, quite frankly.
Bob: Hey, Aaron, let's talk a little bit about the technology, and we'll focus it on the middle mile where you're concentrating. Abe and I had somebody from Waymo on a couple of years ago. It was either 2021 or 2022, which, even though it's only two or three years down the road, is probably the Stone Age compared to where you are today. Can you talk a little bit about how the technology has evolved? Realistically, if you think of the middle mile, what can you do today? Also, what do you think are the limitations where we're at today that we're going to have to address?
Aaron: Yes, great question. For technology, it's interesting. You hit on something that's so true, but often underappreciated. When you're in the emerging technology space, what is typically a decade of movement in terms of advancement and innovation for other more mature spaces is a year. It is six months in some cases, in terms of how improved things are. Today, where we're at is everyone is really thinking through safety standards and seeing really significant outcomes to that in terms of the tests of the pilots being done in the commercial transport space specifically, to be clear.
We're seeing really promising results from the technology safety standpoint, which, again, as I mentioned, was pretty much paramount to even starting the conversation here. Now what we're looking at and seeing is how these solutions, because it's both hardware and software, how they're coming together is the integrations are becoming deeper and more streamlined. What's the benefit there? There's a clear customer benefit in terms of the overall quality of product, as well as the efficiencies to be gained that can then be passed through cost-wise as well.
That's really, I think, at a high level where things are at is we're starting to see that true marriage rather than just the early stage combinations of things. What that means in practice, Bob, is, the technology is getting really, really good at operating in the condition. There's something we call ODD, the operating design domain, which basically means effectively what weather conditions, what types of settings, what environments. In this case, with Daimler, it's on highway and on the road in the southwest region. In those conditions, the technology is used to that and it's getting really, really good and now just fine tuning extreme conditions and how to navigate those.
I'm speaking specifically to that combined solution of, in Daimler's case, this redundant platform or chassis, which is doubled up on critical components for safety, as well as the autonomous driving partnership that makes for that holistic solution. That's where we're at today is we're really now in the rounding error sort of the equation where we're just perfecting within the conditions that we need to operate within the edge cases.
Abe: Aaron, we're all familiar with the hype of technology and the promise that it holds in terms of advancing us. Being in the Phoenix - Tempe area, I've seen enough of the driverless cars. It first started with somebody behind the wheel and then it started somebody next to the wheel. Are we getting to the point where there's nobody behind the wheel and we as consumers, as well as drivers and partners in the transportation system, are we ready for that collectively to have those robotic trucks take over?
Aaron: Yes. It's interesting. There's a practical side and a public acceptance side as well. I think we'll get into the public acceptance side. Practically speaking, the technology today, and you see it more on the passenger car side as well, we really are there. If you were comparing tit-for-tat safety standards and safety performance stats, autonomous, you don't get distracted, you don't get drowsy. You typically see higher outcomes in terms of some of those things. From a practical perspective, are we ready to be driver out? I think that's a case-by-case decision based on the particular firms and the technology and the proof points there.
From a practical perspective, there is a really clear advantage based on the data that would suggest this technology and the safety promise that came to being with, it's there. It's really, I think, a matter more so of, "Are we ready for it?" The capital W, We sense, meaning the public, are we ready to participate and to be alongside autonomous vehicles?
Bob: We've talked of two things that I think are related, maybe not. One is that a hurdle is regulatory, right? Which appears to be happening on a state-by-state basis. The other is geographical, and again, might be related, where right now it's in the southwest where a lot of this is happening. I lived in New England for many years and when I would drive across Vermont, I kept thinking, I cannot imagine an autonomous truck going through the mountains in Vermont. Can you talk a little bit about where we can currently operate autonomous vehicles, and why, and what do you see as the regulatory challenges that the industry is going to have to overcome for broad adoption?
Aaron: Yes. In terms of autonomous trucks, I'll stay there maybe, we're going to see it in the Southwest first. That is clear, from a regulatory and a legal perspective, it's very favorable. The legislators down there are open to that technology. They're making it easier for, effectively, their economies to be benefited by the advantages and the opportunities that autonomous provides. Texas comes to mind as a really clear early adopter of this technology, right? They have a lot of land and a lot of trucks that pass through them. The same thing is true for that Southwest corridor.
When you have both sunny conditions, quite literally, in terms of making it easy or easier for this technology, the autonomous driving sensors, for example, to operate, but you also have sunny conditions in terms of regulatory favorability and legislative favorability, it creates that pull factor that allows for the market to unveil itself and to be addressable. That's where we'll see it first, Bob. Where we'll see it next it's anyone's guess. I try to not get ahead of myself in terms of bets because I've been proven wrong, but I think it's going to be largely that combination of regulatory, legislative favorability, and then ultimately, technical feasibility.
I think if history repeats itself, we'll see that while we think it's difficult for certain things to go in extreme conditions, technologists, they like to prove us wrong and oftentimes do, and do typically far ahead of regulatory and legal favorability. I expect to see that play out. I think a lot is hedging on adoption within the Southwest. To be honest, from an opportunity perspective, there's plenty of juice to be squeezed out of that lemon.
Abe: Aaron, last question. You can't punt on this one. That is, what is it going to take to win the public acceptance? Are we looking at a cost function? Are we looking at a safety function, a combination? Is there an inflection point that you see?
Aaron: It's the million-dollar or billion-dollar question, actually. Public acceptance is going to be huge. One thing that is probably the most profound thing that I never realized until I started my work with the leadership team and ultimately the space with Daimler Truck, is most of the goods that we have and touch day-to-day, the computers that we're calling in from, they've traveled at least at some point in their life on a truck. Daimler, depending on which particular product you're looking at, is a clear market leader, and chances are they touched a Daimler truck.
When we think around what the public acceptance side of the equation looks like and when that will happen, we also have to recognize another trend that I think, again, I learned, but is pretty profound, and the truth of the matter is we were short at the beginning of the decade, about 80,000 truck drivers in the US, according to the Association for Trucking here in the US. By the end of the decade, we're projected to be conservatively about 160,000 drivers short in the market and yes, that is a doubling. If we had wages and also productivity, what it was, let's call it 2020, we expect, for example, that to be doubly as bad or doubly as perhaps expensive depending on how it correlates by 2030.
What does that mean? That means that between the proof points and the comfort that we're going to continue to see with autonomous technology in this pilot early stage, next to the core critical challenges that is going to be faced with supply chain not moving because we're not able to find drivers, especially for those long haul distances or the cost of goods effectively having to rise to accommodate that scarcity in the labor market. I think that's going to be the second lever that needs to flip and that will flip and is increasingly flipping by the time we get there.
I think those two things, the comfort level as well as just the brass tacks reality that we have a giant labor gap for the backbone of our economy and it's going to impact delivery times, it's going to impact consumer costs. Quite frankly, I think autonomous technology and transport is going to be a deflationary lever. I think once we realize that or once we hit that inflection point, I think we're going to see the combination lock come unlocked and ultimately a little bit more favorability both on the public side as well as the firms participating.
Abe: Really fascinating, Aaron. I'd like to put you down in about two to three years and have a follow up conversation and see how we progress in the industry. We could really go on just every few years here. It is all the time we have today, though. A special thanks to our guest, Aaron Campbell from Daimler Truck North America. Thank you for joining today. We hope you'll be back for the next episode. For The Rebound, I'm Abe Ashkenazi.
Bob: I'm Bob Trebilcock.
Abe: All the best, everyone. Thanks.
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.
