Transportation invests for a new future: Automation is rapidly accelerating and disrupting the industry

December 1, 2016

Executive summary

The replacement of labor with capital is a broad trend in the U.S., but in few sectors has it been as evident or as profitable as it has been in transportation. On a compound annual basis, in the last 10 years almost no sector has increased its capital spending more than transportation, and almost no sector has seen faster growth in revenue per employee.

In the past, selling an airplane ticket or scheduling a freight pickup required greeting a customer at the counter or over the phone, and transportation companies invested heavily in their staffs. They needed to, in order to make the customer experience as smooth as possible. Digital technology and automation have altered that dynamic and, as a result, they are now the main targets of transportation companies' investments.

This shift from a workforce-based advantage to a capital-based advantage will require substantial changes in how transportation companies are positioned, their planning abilities, and the design of their operating models. Transport companies shouldn't make the mistake of thinking their future workforces will be smaller but otherwise similar to today's. In fact, most transportation companies — whether B2C or B2B — will need to invest in some very new capabilities if they are going to have a chance of winning in the future. Recent developments suggest these changes are coming with surprising speed.

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There’s no question that automation is benefiting the transportation sector. The data suggests that transport leads virtually every other major sector in the extent to which capital has replaced labor over the last decade. What’s more, the substitution of capital for labor is just getting started and will likely accelerate. When people talk about a future time when autonomous cars owned by companies will start to replace individually owned and operated vehicles, they can now point to experiments with self-driving cars around the country. Likewise, the notion of autonomous trucks hauling 40 tons of cargo down the highway, or drones delivering small packages to the homes of shoppers within minutes of their having clicked “Place Your Order” is no longer a fantasy. Instead, these are developments that, with the right commercialization efforts and regulatory changes, could soon be part of the world we all inhabit. Many of these changes will require transportation companies to reimagine how they create value for customers. All of these changes will require transportation companies to become better at strategic planning and to rethink their use of labor.

Transportation is a bit of a zero-sum game, in which a finite universe of demand is fought over by incumbent and upstart suppliers. Automation is rapidly accelerating and disrupting existing transportation businesses. This is not an area in which followers will fare well. Our bet is on those that are proactive and act boldly.


Transportation invests for a new future: Automation is rapidly accelerating and disrupting the industry