There may not have been an image of a truck or shipping container in a presentation entitled “Logistics in Today’s Global Environment” last week for local alumni of Washington University and its business school.
It turned out to have been a talk not about trade policy or geopolitics but about an industry being reshaped by new technology to meet the always rising expectations of customers. Maybe that shouldn’t have been surprising. This could easily be a theme for a talk on the future of retailing, health care delivery or any number of other industries.
For those of us who have marveled at how fast business processes seem to change and new technology gets adopted, one message last week from a logistics executive is that the pace is only going to accelerate.
The speaker was Andy Clarke, a Washington graduate and since 2015 the chief financial officer of C.H. Robinson Worldwide, one of the biggest third-party logistics companies in the world and the biggest in the United States.
Logistics just means the practice of efficiently moving goods and materials from where they are made to where they are needed. Logistics as an activity requiring a set of skills to master is a relatively recent idea, as for most of human history people just consumed food and other things they needed that mostly came from the area around where they lived.
The logistics industry continues to grow in size and complexity. It now represents about 12 percent of global economic output, Clarke said, as the population grows, food and other goods come from regions far from population centers and as people around the world grow wealthier.
With affluence comes a desire for more stuff. As Clarke pointed out, today the average household in the United States has about 300,000 goods, double what American households of 30 years ago had. And maybe 90 percent of what we own comes from another country.
He added that the food we eat had an average trip of about 1,500 miles before it reached us.
The business of C.H. Robinson Worldwide is called third-party logistics. Not long ago in North America shipping freight took only two parties, as a manufacturer or distributor with goods just hired a trucking or rail carrier to take it.
In third-party logistics, customers turn to the likes of Eden Prairie-based C.H. Robinson to move their goods. And all along the way, as freight moves along a chain from one loading dock to another, C.H. Robinson doesn’t own one truck, one shipping container or one ship. Those assets are owned by companies that C.H. Robinson hires for the job.
Arranging all the details sounds labor-intensive and costly, and it would be if each shipment had to be manually put together, finding a hauler with capacity and so on. Instead C.H. Robinson’s 15,000 or so employees relied on carefully worked out processes and technology to handle about 19 million shipments in 2017, the company’s last fully reported year, using about 73,000 transportation companies to move stuff for about 120,000 customers.
There are benefits to being the biggest in this business, as the more customers and carriers the company does business with, the easier it is to match loads and capacity and make the whole process more efficient.
A bigger company also has more money to buy software, computer hardware and other information technology. C.H. Robinson spends close to $200 million a year on it, Clarke said. While he didn’t quite say so, you would have to assume competitors are also investing like mad in new information technology.
“By 2020 the average person will have more conversations with [computer] bots than their spouse,” Clark told the audience. He pointed out that when trying to order online and clicking a button to start a “chat” with the retailer, the consumer probably doesn’t realize that at the other end is likely a chat bot, or robot, and not a real person.
“When our customers are going online and they are asking us questions, we are beginning to program bots to answer those questions for them,” he said. “We can be more responsive and give them better information sooner.”
Autonomous trucks are another emerging technology that looms large in the thinking of logistics executives. The hours of service rules for American truck drivers essentially cap the amount of time a trucking rig is productive at 11 hours per day, and that number may include a lot of idling time, too. A fully autonomous truck can be a productive asset around the clock.
The one technology often in the news that seemed to leave Clarke so far unimpressed is block chain, the decentralized electronic ledger system that ushered in the era of Bitcoin and other cryptocurrencies. Shippers and customers already rely on a proven technology to communicate with each other, Clarke said. It’s known as EDI, for electronic data interchange, and in some form EDI has been around for decades.
As artificial intelligence and other technologies increasingly become commonplace, Clarke’s main piece of advice to the Minneapolis audience last week, ranging in age from young Washington University graduates to silver-haired veterans approaching retirement, is to invest. He didn’t just mean invest in new technology. He meant invest in your own skills to stay on top of the technological and business process changes underway.
It’s not a small challenge for successful managers, at companies that sell to businesses as well as those that sell to consumers: They need to know enough about customers to make sure the local warehouse has exactly what the customers will need before the customers even realize they may need it.