A 25 year veteran of the supply chain and logistics industry blogs on all things logistics. Experience in 3PL, automotive and consumer goods logistics help bring a unique insight to this topic
It is so interesting that the human mind almost always takes previous history and subconsciously projects it out into the future. It is a real danger when conducting business analysis. For example, I have always said to those who say GDP is the best indicator concerning transportation volumes that they should not assume a 1% move in GDP 20 years ago is the same as today. Why? It is because the make up of GDP is not nearly as "freight intensive" now as it was 20 years ago. Finance, services, health care etc make up a lot more of the GDP now than does industrial production which is the real mover of freight volumes.
In reading this article concerning Vehicle Miles Traveled - VMT (for automobiles)I am fascinated by the same type of scenario. We all think that auto sales will move in roughly the same proportions as it has in the past with GDP. However, what we really need to be looking at is whether driving behaviors are remaining constant. Once could easily envision an economy growing dramatically yet VMT actually going down which would put a damper or even downward pressure on automobile sales relative to the economy in general. Here are some key factors:
Movement to cities - Less number of miles traveled as people walk and/or use public transportation.
Smaller households - As families shrink the need for the infamous "third and fourth car" shrinks as well.
Move to "shared" transportation - A fascinating development is the growth of people "crowdsourcing" and borrowing each other's items. A car stays still for a vast majority of the time it is owned and as people share their assets more, less cars get purchased.
And, the chart below shows some of this happening:
In the end, it is very possible we could have a growing and robust economy yet have far fewer automobiles on the road. This, of course, has big implications for transportation in the long run because automotive manufacturing consumes a lot of truck and intermodal transportation miles.
This will clearly not happen overnight and you may say it won't happen in your working lifetime however there is a good chance it will happen and is already started to happen. One thing I have learned about these types of trends (call them "Mega-trends") is they aren't noticed until it is too late and they generally go a lot faster than you expect.
You have heard me say over and over again that the ultimate goal is not just cost reduction it is the actual elimination of costs. Think e-books and iTunes® and think of all the costs which just were totally eliminated. No one figured out how to "reduce" the costs of shipping books rather they just eliminated the shipment all together.
An early trend I am watching now is the idea of 3D printing. This may even be too early to call it a "Mega-trend" however I think it is something we should be aware of. Just like the elimination of shipments of things which have been digitized (books and music) the next frontier are physical "hard" parts.
At the end of this post is a neat little video which explains this technology. Think of it this way: If you need to make something which is made out of one material you could just load the material, load the digital specs and the printer does the rest. The key for Logistics people is the part is printed at the point of use and on demand. This has two implications.
First, as this gets better and better and costs come down for the machines more and more product will be made this way. This means less product is made at some far away factory and shipped. This will result in a continued headwind on shipping volumes.
Second, this will also dramatically reduce or even eliminate inventory. No need to stock 30 days supply of something when you can "print on demand". This also puts downward pressure on freight demands as less and less distribution will be needed (also has huge implications for warehousing).
To the left you can see what these machines look like. I just found these off the Tasman Machinery website (no endorsement just a good picture). Like all electronic machines during their infant stage there is a lot more development to happen and I am sure it will happen.
Here is a picture of actual wearable shoes made with 3D printers and above is a picture of a model / replica of a ship made with 3D printers.
You may look at these products and say there is nothing to worry about as it will take a long time for these types of products to be brought into production. Of course, I would have to remind you this is what people say about all disruptive and new technologies at the beginning.
I think this will develop rapidly and this could be the "new normal" for a lot of manufacturing of sub assemblies and parts. As I said above, this will eliminate the need to ship this product and, of course, lessen the demand for transportation. One can clearly imagine a day when you walk into a store, need a basic product and rather than the hassle of inventory and distribution, the store clerk will just "print on demand" for you in the store. Huge implications for freight costs and demand, inventory and warehousing and S&OP processes.
According to a blog post by Richard Gottlieb at Global Toy News we may be at a tipping point as it relates to the use of 3D printing in the toy industry. He rightfully highlights the implications and benefits of this technology by saying:
If you own enough 3D printers, why would you need to own any inventory? You could print out on demand. It’s JIT (Just in Time) in its truest sense.
If you can print out small batches without the need for molds or factories? Anyone can enter the marketplace with a new item. The only cost is for the material.
If the need for factories and engineers declines, what happens to people who currently hold those jobs?
Again, this is pre "mega trend" stage but watch it closely as these types of technologies have a way of taking off.
Below is a great little video explaining what this is all about:
