The Future of Trucking: Digital Transformation or All Hype?

Editor’s Note: Jeff Ward is a partner and the Global Transportation Practice Leader at global management consulting firm A.T. Kearney. He is based in Chicago. Andrés Mendoza-Peña is a partner in the Strategy & Top-Line Transformation Group at A.T. Kearney. He is based in Chicago. Victoria Pisini is a senior business analyst at A.T. Kearney. She is based in New York City.

While the trucking industry outlook remains bright—the American Trucking Associations predicts freight tonnage to grow 28.6 percent and revenue a healthy 74.5 percent over the next 10 years —trucking, like other logistics modes, seems to be at the beginning of a period of digital disruption.

If automation, optimized digital networks, and changing consumer habits come to fruition as some experts predict, it could completely upend trucking as we know it today.

In exploring the major industry disruptors, detailed below, two disruptive trends are the most uncertain and pose the highest impact on the future of logistics, and trucking in particular: changes to the regulatory environment and the rate of technology adoption. The regulatory environment is dependent upon the decisions of U.S. policymakers; many factors could alter the landscape in the next few years, such as new political leadership or actions taken to alleviate the shortages of skilled drivers. Critically, the question many ask is how will government leaders manage the adoption of new technologies?

Will regulators allow driverless technologies on the road, or will new policies slow down adoption? Beyond that, regulations such as more active monitoring of truck drivers, environmental standards that limit emissions (and thereby force older trucks off the road), and free-trade agreements that alter import and export dynamics are just a few regulatory trends that could play an outsize role in the future of trucking.

The trucking market is also ripe for technological disruption, thanks in part to its reliance on a manual brokerage model. In the next few years, assisted driving in trucks to increase driver productivity and safety will become reality; the Internet of Things might allow for greater accountability and connectivity, connecting consumers and producers like never before; crowdsourcing solutions could supplant traditional brokers; robotics and predictive analytics could change warehouse management.

Automation and “Uberization” seem imminent, even if the question of whether they will stick remains unanswered. And the trucking industry must worry about the threat of new, technologically advanced entrants—whether through superior software and TMS offerings or efficient vehicles and drone delivery.

Based on how these two trends shake out, our research points to four equally plausible scenarios based on whether the world leans toward vast technology adoption or not, and if regulations become more restrictive or not.

In the following section, we look closely at these four scenarios and how to succeed in each.

Super Highway

In Super Highway, widespread technology adoption and open markets lead to a fully automated world in which the transportation sector is transformed. Consumers embrace the digital economy, shippers benefit from volume reductions, and driverless vehicles go mainstream. Disruptors win the day, and the trucking industry as we know it ceases to exist. Shippers have the advantage in a world of increased options that alters fleet and carrier options as well as the last-mile delivery landscape.

New entrants, such as Google and Uber or Original Equipment Manufacturers like GM, usher in self-driving fleets that drive productivity up and shipping costs down. Access to capital and assets is paramount—without the need for human labor, new players unburdened by outdated infrastructure will emerge victorious.

Switching Gears

Widespread tech adoption but heavy government regulation struggle to coexist in this scenario. Regulation leads to a consolidated carrier base and tightening capacity, but crowdsourced solutions become prevalent and trucking maintains its advantage over other modes of transportation.

For shippers, this scenario presents a mixed proposition: technology improvements improve carrier-shipper relationships through enhanced transparency and faster ship times, but tightening capacity and a consolidated carrier base drive up prices and limit options. Trucking companies face pressures on their already tight margins to remain competitive. Scale, depth of expertise, and innovation will define success.

Traffic Jam

Incremental technology adoption and a restrictive regulatory environment in this scenario characterize a U.S. market in which consumer spending and economic growth are both quite weak. The sluggish environment hurts not only truckers but other modes of transportation as well; air and sea shipments drop, as do intermodal deliveries. Traffic Jam scenario represents a United States, and a global economy, in recession coupled with limited investments in transportation and logistics improvements.

This situation would affect trucking the most heavily, but generally it would not bode well for any sector of the transportation industry. In this operating environment, competition is fierce, and only the biggest carriers and brokers can survive, given the tight capacity and weak demand. The ability to scale rapidly thanks to a deep network will be crucial for success in an environment with low demand and tight capacity. Access to capital will help weather the
storm.

Open Road

This is the best-case scenario for brokers and logistics leaders alike, as the United States transportation system in this future would be an evolved version of today's landscape in which an open regulatory market is coupled with piecemeal and slower-paced technology adoption. A reversal of regulatory policy around driver age and origin opens up capacity.

At the same time, automation has not come to fruition as quickly as some expected, leading to slower tech adoption, which means that the traditional model remains viable, as the system has little need to innovate. Trucking, rail, air, and sea all benefit; those with the most to lose (trucking and rail, in particular) might stand to gain the most. The key success factor will be enhanced scale and will provide an edge in a rapidly growing market with strong supply and demand.

Whatever scenario emerges, the successful transportation company of tomorrow will not look like the competitors of today: it will be more digital, connected, automated, responsive, customer-oriented, innovative, and scalable. The right combination of these traits will depend on which scenario emerges, but it is clear that technological innovation, scale and access to capital stand out as critical capabilities in almost any scenario. Whether the future of trucking is all about transformation or just hype is still hard to say. But a strategy that accounts for these critical factors will lead any company to success.

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