Monday, September 30 2019
By Jeannette T. Goldsmith, Vice President, Strategic Development Group
“Every company is a technology company.” I can’t remember who said this first or where I heard it, but there is no doubt that this statement is true. Even with the inevitability of it, we continue our collective hand-wringing about the move to greater automation and artificial intelligence on the manufacturing floor. There can be little doubt, however, that technology has already resulted in dramatic shifts in the transportation and logistics industry. These shifts have affected all facets of the industry including warehousing, distribution channels, fleets, and workforce. Strategic Development Group has seen how these changes are impacting the way in which companies select new locations for their logistics business.
Autonomous Vehicles and Drone Delivery
Federal and State Regulations
Opponents of the AV Start Act cited the threat of public safety as their chief concern, noting that the bill rushed to allow the widespread sale of automobiles under the façade of safety, but would not require them to meet all of current safety standards. It was less than a year ago that an Uber self-driving car killed a woman, after failing to make an emergency stop. The National Transportation Safety Board also has pending investigations into crashes involving cars with partial automated driving capabilities.
While we wait for Congress to act, states are taking the lead in adopting legislation to regulate where and how autonomous vehicles can be used.
For example, in 2017, 33 states have introduced legislation related to autonomous. Governors in Arizona, Delaware, Hawaii, Idaho, Illinois, Maine, Massachusetts, Minnesota, Ohio, Washington, and Wisconsin, have all issued executive orders related to autonomous vehicles. The primary focus of these efforts fall into one of three areas:
While traditionally logistics companies have focused on states and locations that are most appropriate for their distribution network, it is now often the case that companies are considering states where autonomous vehicle infrastructure is being developed. For example, some states are beginning to allow “vehicle platooning” (Vehicle Platoon is a group of motor vehicles that are traveling in a unified manner under electronic coordination). For example, a number of states including, Indiana, Kentucky, Louisiana, Maine, Mississippi, Nevada, Pennsylvania, Ohio, South Carolina and Tennessee, have all enacted some sort of legislation to clarify what defines a platoon and what types of vehicles can be included in a platoon. In addition, these legislative actions also lay out specific regulations for vehicle platooning. It is critically important for companies that are considering new locations or expansions and intend to heavily invest in new technologies for transportation and logistics, to review and understand the legislation in each of the states they are considering.
One important impact of insurance changes to logistics companies and their expansion requirements is in the area of uniformity of insurance requirements. Currently, insurance requirements are governed by the states. As car manufacturers are required to accept more responsibility for damage and injuries, they will likely push for a greater uniformity in order to eliminate compliance costs. Again, we are seeing differences in the way that states are handling the issue of insurance and legal liability. Again, companies will need to evaluate states requirements for insurance prior to making location decisions. For example, in Michigan, there is legislation that limits the liability of a manufacturer or “up-fitter” for damages in a product liability suit resulting from modifications made to automated vehicles. This might expose truck companies or truck owners to additional liability.
Some needs are more simple. For example, AVs need clear lane markings and signage in order to operative. In a recent demonstration of an autonomous vehicle, the vehicle behaved erratically due to poor road markings. Investment in infrastructure is going to be different from state to state and location to location. This will require careful consideration during a company’s search for new facilities.
For logistics companies implementing drone technology for inventory management, the lack of rules and regulations will likely limit the use of drones to inside the facility’s footprint.
The Federal Aviation Administration (FAA) has been slow to allow commercial use of drone aircraft, much to the chagrin of companies like Amazon and Google. However, the agency may be on the verge of loosening restrictions to make commercial drones more useful in the U.S. Under a set of proposed rules, commercial drone operators could fly aircraft at night and use them over populated areas.
There are a number of hurdles to the larger adoption of drones in the logistics industry. The most significant of these hurdles is the “line of sight rule,” which requires that drone operators keep the aircraft within eyeshot at all times. This clearly removes any benefit that the use of drones in the delivery space, as the need to keep a drone in the operator’s sight defeat the purpose of using the drone to drop off a package at an individual house or building. A second impediment is that the solution still requires not just the technology, but a certified pilot to oversee the drone.
The FAA will let licensed operators fly certain drones over populated areas. The most notable restriction is that only small drones can do so without any additional regulatory oversight. The small unmanned aircraft can weigh no more than 0.55 pounds (0.25 kilograms). That’s one-hundred times smaller than Amazon’s proposed Prime Air drones, which weigh about 55 pounds (25 kilograms). For drones larger than the limit, manufacturers have to conduct testing that proves they would not cause serious bodily injury if they crashed into a person. That means exposed rotors are out.
Most state regulations focus on use of drones in law enforcement, emergency management, agriculture and forest management, etc. Other legislation deals with what drones cannot be used for. Very few states have tackled the issue of how, where and when drones can be used for commercial or transportation purposes.
One area where states and municipalities could make a difference in the adoption of drone technology in the logistics industry is the adoption of legislation and the appropriation of funds to develop drone docking stations (technology that Amazon has recently patented). At this time, however, there are very few states and communities that are discussing this issue and, as such, it has not yet become a critical location factor for companies seeking to build new, expand or relocate facilities.
Robots Take Over the Warehouse
Again, the issue of public infrastructure is key to the successful adoption of robotic and artificial technology in warehouse operations. Broadband capacity is obviously key to the ability to use the robotic technology. In many locations, there is limited access to broadband service.
In addition, access to electric capacity is important. Robotics require additional electric capacity both inside and outside the facility. Access to sufficient electric power will become a key factor in location decisions for highly-automated warehouses.
Companies that are considering expansions should look for communities that place a heavy emphasis on workforce development and training programs. Specifically, companies should look for communities that have robust and sophisticated Career Technical Education (CTE) programs. These programs allow high-school students to explore different educational opportunities in variety of different areas. In addition, communities should evaluate the program offerings of local technical colleges to ensure that they have associate degrees or certificate programs in relevant areas. Finally, companies should look for areas that have high-school internships or apprenticeship opportunities. Immersive programs like apprenticeships have an increasingly positive impact in terms of increasing awareness of jobs in different industries.
As technology continues to evolve, it becomes easier to adopt into new environments. The transportation and logistics industry will be no exception. The adoption of these technologies will mean companies, who are considering new facilities, will have to investigate different location criteria. No longer will the evaluation focus solely on the size and configuration of a site and availability of labor. New criteria include the evaluation of the built environment in an around the region to allow for autonomous vehicles and robots guided by wireless computers, access to electricity at potentially larger loads than current warehouses demand, access to a more sophisticated workforce, and any legal and insurance regulations that are being adopted at the state and local levels.
About the Author: Jeannette Goldsmith is Vice President of Strategic Development Group, where she specializes in site selection and incentive negotiations for clients worldwide. Jeannette’s background spans more than 20 years in site location consulting, incentive negotiations, and economic development consulting with McCallum Sweeney and then with her own company, Goldsmith Strategy. Her specific experience includes a heavy focus on manufacturing (specifically, aerospace, logistics, advanced materials and automotive sectors), as well as office sectors. Recent clients include Suntory, Boeing, Nissan North America, Suncoke Energy and Vought Aircraft. Among Jeannette’s most notable projects, are Nissan North America’s headquarter relocation from Los Angeles to Nashville, the Boeing 7E7 Final Assembly siting project and the Vought Aircraft/Alenia Aeronautica 7E7 supplier site project. For more information about Strategic Development Group visit https://strategicdev.com/process/ or https://strategic.com/contact-us/.