A few weeks ago, a well-known British automotive journalist mused on the subject of who will actually buy cars in the future. His rationale was based on the occurrence of a number events coinciding to challenge the notion that car ownership, particularly in cities, is still something to which people aspire.
These events he highlighted were: The rise of ride sharing apps, the improvement in public transport services in cities, the cost of vehicle ownership, increasing hostility shown by governments towards combustion engined vehicles, the idealistic belief that increasing car ownership feeds climate change, and the list goes on. Indeed, as the journalist pointed out, why invest in an asset that is only used some of the time, when personal transport can be summoned on demand from a cell phone.
It is hard to defend attitudes from previous generations where car ownership represented personal freedom and mobility ‘on-demand’, so long as one could afford the cost of driving lessons, road tax and insurance. In those days, there were limited alternatives apart from public transport services that were decrepit and unreliable.
So what does this imply for the logistics industry?
Well first off, car companies have primarily been structured around the business model of selling cars to individuals. To a large extent this still prevails, despite the recent development of personal leasing and contract hire deals. The points outlined above are now challenging this business model and vehicle manufacturers are starting to explore alternatives. These alternatives fundamentally question what a car company really ‘is’, or should be.
For many people in the technology sector, a car is the ultimate personal computing device. Google, Apple and others are investing serious amounts of money into software designed to manage and operate vehicles. Tesla, the American electric vehicle manufacturer has shown what is possible if the design and manufacture of a car is approached as if it is a high technology product. Tesla’s ability to monitor, maintain and update customer cars at any time has been a revelation for customers used to scheduling and visiting conventional dealerships.
Unfortunately, the major element frequently overlooked by many people considering a future populated by electric vehicles, is that currently national power grids would be unable to cope if we all needed to plug in for recharging at the same time. To be fair, at least Tesla has recognised this with their efforts to design power plants for the home.
If car companies follow a similar model to that of the high-tech manufacturing sector, they will contract out the production and assembly of the hardware (powertrain, body and interior) and focus on software, marketing and support. This could potentially result in massive restructuring of inbound supply chains, as electric vehicles have much simpler drivetrains with very few moving parts. If 3D printing penetrates further into the manufacturing cycle, then the movement of components and assemblies throughout the automotive supply chain will reduce considerably.
Perhaps instead of manufacturers selling vehicles directly, they could be provided through a mobility ‘on demand’ service where customers sign up for having a car available when and wherever they need it, priced according to requirement. This is a very different model to their existing one and similar in some ways to that used by aero engine manufacturers, who provide engines to the airlines on ‘power by the hour’ contracts.
The number of sensors and microprocessors now installed across cars and trucks is immense. Their utility in being able to monitor, manage and inform the owners and operators has resulted in huge efficiencies, from a reduction in vehicle maintenance to geo-fencing driver routes to avoid delays and improve on time performance. In essence, any vehicle will be a computing platform, with the ability to be directed by the person in the vehicle, an automatic pilot, or autonomously by a remote operator.
If this is the future, it implies that cars and trucks will be operated as a choreographed network. If it is done well, it should improve traffic flow, enable predictable, reliable, transit time estimates and be far more energy efficient.
GLOBAL SUPPLY CHAIN INTELLIGENCE (GSCi)