Author: Dr. Jean-Paul Rodrigue
Transportation is a service generating a substantial amount of information, and the diffusion of information technologies has transformed the mobility of passengers and freight.
1. Information Technologies and the Material Economy
The diffusion of information and telecommunication technologies (ICT) resulted in several economic and social impacts. Historically, information required physical means to be diffused, implying that the domains of transportation and information diffusion were similar. For instance, postal services require physical means, making information mobility similar to freight mobility. The invention of the telegraph was the first significant technology contributing to the separation between transportation and telecommunications. Later on, the telephone, the radio, and the television would further contribute to this division by creating information networks separated from transportation networks. A new range of ICT that emerged in the 1980s contributed to a reversal of this trend by making telecommunication and transportation more integrated. These include computers, satellite communication, mobile phones, and finally, the Internet.
Transportation is a service that requires and processes a large amount of information. The transport sector was conventionally perceived in terms of vehicles and infrastructure managed as assets delivering value by the mobility they confer to passengers and freight. For instance, transportation users decide where and when to travel, which mode to use if they operate their vehicle, and which routes to take. Inversely, the providers of transportation services must manage their assets to effectively match the demand (information) sent by various transportation markets in which they compete. Yet, the interactions between transport supply and demand are far from efficient, leading to enduring situations of mismatches (overcapacity, under capacity, and imperfect competition). Better sources of information and the ability to distribute information enable transportation systems to function with a higher level of efficiency because of better interaction between their supply and demand.
Looking at the potential impacts of ICT, such as the Internet, may have on mobility must consider how they can support, modify, expand, or substitute the mobility of passengers and freight. It is important to underline that information technologies do not lead to a dematerialization of the economy, which is a common misconception. This is associated with a series of paradigms:
- Platform corporation paradigm. Usually, a corporation focuses on a set of core competencies (high-profit tasks) and outsource activities perceived of lower value. In the manufacturing sector, it is common to focus on product design and retailing and to rely on a network of providers to supply and assemble parts through outsourcing and offshoring. A platform corporation thus organizes the production, distribution, and retailing of the goods it sells. It indirectly and directly generates large amounts of material flows for the supply chains it manages through its information network. Still, the corporation itself may not be manufacturing any material goods.
- E-commerce paradigm. Online retailers have challenged the conventional paradigm in the retailing sector by acting as an intermediary between suppliers and consumers. They operate a network of e-fulfillment centers (distribution centers), storing hundreds of thousands of items, processing large volumes of orders that are then packaged and delivered by postal or parcel services. A whole array of online retailers is dependent on material flows with the distribution center as the key component of this strategy.
- Asset management paradigm. Elements of what has been labeled as the ‘sharing economy’ are more effective means to manage existing assets, such as real estate or vehicles, by linking providers and consumers. Even if the managing platform can be perceived as immaterial, it involves tangible assets that are more intensively used.
The above paradigms underline that the global economy is getting better at producing and distributing goods as well as managing existing material assets by creating extended market opportunities. At times, efficiency can be confused for immateriality because of the digital interfaces in place between assets and their users, including transportation.
2. The Digitalization of Transportation
With the emergence of an information society, the transactional structures of the economy have changed drastically towards networked organizational forms of individuals, institutions, organizations, and corporations with more intensive interactions, many of which are associated with new forms of mobility. Mobility can be provided in three major forms:
- Modal-oriented. The direct ownership and operation of modes and terminals by corporations (owning a fleet) or individuals (owning a vehicle for exclusive use). Ownership guarantees access to mobility at any time. Digitalization involves a more efficient internal use of the assets such as tracking and navigation. Still, the optimal use is bounded by the ownership setting.
- Operation-oriented. The direct lease and operation of modes and terminals by corporations and individuals. Leasing guarantees access to mobility for the terms of the lease, such as time and condition. Digitalization involves making assets available across a market, reconciling supply and demand.
- Demand-oriented. Accessing mobility based on expected demand (for corporations) and need (for individuals). Digitalization involves accessing in real-time the availability of transportation assets to temporarily rent their use for a purpose.
Mobility is supported by physical foundations, including transportation infrastructure and energy supply systems, as well as a regulatory environment. The digital foundation (or digitalization) of this mobility is becoming increasingly important as it creates new transportation markets.
The three major spheres of the digitalization of transportation involve:
- Personal. ICT enables individuals to interact through additional mediums (e.g. email, messaging, video conferencing), which may lead to more interactions, but also to changes over how these interactions are conducted. The diffusion of mobile personal computing devices (e.g. laptops, smartphones, and tablet computers) has also enabled individuals to enrich their mobility by performing various tasks while in transit or outside a conventional work environment setting. Several applications, such as global positioning systems, also enable individuals to manage their mobility better. The intensity and the scheduling of mobility can become highly interactive since users are able to coordinate their mobility considering real-time changes, such as congestion or changes in time and cost preferences. The smartphone acts as a trip optimization device that has improved the efficiency of vehicles through less confusion and errors, as well as the capability to re-route because of changing traffic conditions. At the aggregate level, these improvements are substantial and could be associated with 10 to 20% in overall efficiency improvements.
- Consumer to business (C2B). ICT enables consumers to interact with the transportation services they use more effectively. A direct form is purchasing transport services, which are now done online through booking systems for air and rail transport and ride-sharing services. An indirect form is E-commerce, which has opened a whole new array of commercial opportunities complementing or substituting conventional shopping, from basic necessities to discretionary goods. One important convenience of e-commerce is removing the distance and temporal restrictions associated with conventional retailing. Customers needed to physically travel to a store, which had defined opening hours. E-commerce does not necessarily imply more consumption but that a growing share of retailing transactions is taking place online, resulting in the growth of home deliveries, which are an indirect form of transportation.
- Business to business (B2B). ICT enables businesses to transact more effectively, which indirectly results in changes in their transport operations. The increasing scale and intensity of business transactions are commonly linked with supply chain management strategies. For instance, inventory management strategies permitted by ICT enable a more significant share of the inventory to be in transit (‘stored’ in vehicles and at terminals), often in line with an increase in the frequency of deliveries.
The digitalization of transportation incites the development of new platforms where actors can interact in the provision, use, and exchange of transportation services. The conventional urban mobility landscape is characterized by a patchwork of passengers and freight transportation services, which is associated with the inefficiencies of these assets. By integrating transportation service providers in an ICT platform, a new paradigm emerges, which is referred to as mobility as a service.
Mobility as a service concerns transactions related to transportation and supply chains. Conventionally, each actor along a transport chain tended to keep its own centralized ledger recording its information and transactions. The emergence of Blockchain technologies provides an extended and distributed form of ledgers, adding value to the process. It has the potential to improve the transactional efficiency of supply chains by enabling the providers and users of transport services to share a common and distributed electronic ledger system. Exact copies are maintained and simultaneously updated across several nodes. It becomes possible to more effectively manage access to transport infrastructures and conveyances (from a seat in a plane to a slot in a containership), the related data exchange, and payments for service provided.
3. Telecommuting and Tele-Consuming
One of the ongoing tenets is that ICT can offer forms of substitution for the physical mobility of passengers and freight. When this substitution involves work-related flows, it is called telecommuting, and when it involves consumption-related flows, it is called tele-consuming.
Telecommuting. Using information and telecommunication technologies to perform work at a location away from the traditional office location and environment. Commuting is thus substituted, and it is implied that it took place remotely instead.
Tele-consuming. Using information and telecommunication technologies to consume products and services that would typically require a physical flow to access.
Both have been facilitated with advances in information technologies, particularly the ubiquity of high bandwidth connectivity as well as mobile devices. There are degrees of telecommuting ranging from a partial substitution where a worker may spend one or two days per week performing work at another location, to a complete substitution where the work is performed elsewhere, such as in an offshore location. The latter is much less likely as the vast majority of work tasks tend to be collaborative and require face-to-face meetings.
Tele-consuming is more ambiguous and the main factor behind the perception of a dematerialized economy. For instance, many media such as books, newspapers, magazines, movies, and music used to be physically delivered and consumed; they are now mainly accessed (consumed) online. Software that used to be distributed through physical means, such as on disks or cd-rom, can directly be downloaded. Still, telecommuting and tele-consuming require substantial telecommunication infrastructure and networks to be effective.
Telecommuting has often failed the meet expectations, and its share of total commuting movements remained low and relatively unchanged; 3 to 5% of the total workforce can be telecommuting at least once a month, but this share appears to be growing slightly. There are many reasons for this enduring low share, ranging from activities that cannot be easily substituted to a loss of direct control from management because workers are not present on site. One major factor is that if a job has the potential to be complemented by telecommuting, it is also a target to be relocated to a low-cost location either through outsourcing or offshoring. There is thus a large amount of telecommuting that took place as offshoring instead. Also, many workers use telecommuting forms to work overtime, carry extra work at home, or perform other activities that may still require transportation. Therefore, telecommuting allows employers to impose longer work hours and ensure employees are more available for work on an on-call basis outside regular working hours.
4. Impacts of ICT on Mobility
The potential impacts of ICT on mobility either involve a modification (different origin, destination, mode, or route), a substitution (from a physical flow to an information flow), or a generation of a movement. Such an outcome is contingent upon the socioeconomic and geographical context in which mobility is taking place. The expected impacts of ICT on the transportation sector can be summarized by the following.
a. Transport substitution
The rapid proliferation of ICT, such as mobile phones, intranets, and teleconferencing, promotes new forms of mobility and the possibility to substitute mobility. Reducing vehicle use is one of the expected primary benefits of ICT, as it is assumed that substitution will take place, or those vehicle assets will be used more efficiently. Yet, substitution remains relatively marginal for the physical mobility of people, and ICT has permitted additional forms of non-physical interactions.
The most important substitution effect has been on postal services, where online methods of communication and tele-consumption have been associated with a substantial decline in physical mail volumes and their associated transportation activities. While there were in 1990, about 268 billion mail items sent in the United States, this figure dropped to 146 billion in 2018, despite ongoing population growth. Another important form of transport substitution concerns e-commerce, where for an online transaction, in-store purchases have been substituted by home deliveries.
b. Navigation and tracking
While navigation devices have been available for a while, the combination of global positioning systems, wireless communication technology to access the Internet, and mobile computing devices enabled advanced forms of dynamic navigation and tracking. Navigation assistance and real-time information about traffic conditions provide accurate estimates about travel times and offer the possibility of alternate routes in case of disruptive events. It is estimated that one billion drivers worldwide are using navigation apps. This has enabled notable time and fuel savings by road users at the aggregate level, both for passengers and freight transport. Assisted navigation also creates challenges such as allocating vehicles on local streets, exacerbating local congestion, and dealing with disruptions such as school opening hours.
It is now possible to track the location of vehicles and consignments, enabling them to better estimate arrival times or delivery or improve fuel consumption. For temperature-sensitive goods, it becomes possible to monitor the condition of their transport. As an inventory management strategy, tracking also allows for more flexible use of transportation since a consignment can be differed or re-routed if demand changes. Industry standards such as Track and Trace (T&T) are being introduced for containers. It defines processes, data, and interface standards that allow stakeholders such as carriers, shippers, and third-party logistics services providers to interact and track containers and their shipments across several modes.
A forthcoming change concerns self-driving vehicles that are only commercially implementable if they are provided a substantial amount of real-time information about the environment they navigate through onboard sensors and information feeds supported by ICT. The large diffusion of self-driving vehicles would have substantial impacts on the transport system, reducing the number of vehicles required to meet the existing demand, enhancing the mobility of those that may have physical or financial impairments, reducing the risks of accidents, and improving the time and cost performance of passenger and freight flows alike.
c. Mobility as service markets
Conventionally, many transportation markets could only have been booked through intermediaries such as travel agents or freight forwarders. The development of the Internet has enabled users to book transportation services such as for air, train, and bus travel directly, commonly referred to as mobility as a service. These changes have been substantial for the airline industry, promoting competition and the convenience of air travel with the possibility to check-in online and even use a mobile device to carry a virtual boarding pass. A similar trend has taken place with rail services, particularly high-speed rail, but this is also entering the mass transit market, including bike rental services. An indirect benefit is a drop in the consumption of resources and energy for issuing travel documents such as tickets, boarding passes, or bills of lading. This also reduces the time passengers spend at terminals queuing.
More recently, the diffusion of ride-sharing services (e.g. Uber, Lyft, Didi), as well as car rental services, has opened an entirely new array of opportunities expanding the capacity to connect suppliers of transport services and customers. These services have been highly disruptive for the conventional taxi industry since they are competing directly with them. For public transit, ride-sharing appears to be both competing and complementary. Online commercial platforms are also developing opportunities for the freight sector, enabling providers of freight transport services such as shipping lines or trucking companies to auction services or bid for an offered transport demand. In 2019, the giant e-commerce retailer Amazon started a digital freight brokerage platform, which was able to reduce spot market prices by at least 25%. On a smaller scale, it is also possible for individuals to offer services like ride-sharing, but concerning the deliveries of packages, groceries, and even meals.
d. Transport asset management
ICT-supported transportation services such as ride-sharing result in better management of vehicles, routes, and assets (higher load factor, more trips per vehicle, fewer vehicles for the same capacity, etc.). This is particularly the case with freight distribution with the application of logistics supporting better levels of inventory management and more reliable deliveries. There are numerous applications of ICT in transportation asset management. One concerns appointment systems to terminals (ports and rail yards) and distribution centers. Users can use an online platform to reserve an access time slot to the facility, improving the efficiency of both the terminal and the vehicle assets.
Just-in-time inventory management, which reduces inventory requirements, would not be possible without significant ICT support, including the ongoing automation of modes, terminals, and distribution facilities. Blockchains can support the complexity of intermodal transportation systems by allowing better synchronization of modes and terminals. Yield management and congestion pricing are also common to better manage available capacity in conditions of high demand, but this requires accurate real-time information about demand and supply characteristics. For instance, in the case of yield management, an airline can dynamically change the pricing of its seats and even request booked customers to delay their travel in exchange for compensation.
Although mobility itself has not changed, since it remains passengers or freight flows, ICT has impacted mobility in a variety of ways, often making it more efficient. It is increasingly able to offer a form of substitution to the mobility of passengers and freight, navigate in a changing environment (e.g. variations in the level of congestion), and track and manage transportation assets. However, ICT can also have unintended negative consequences. Since 2010, an increase in pedestrian fatalities has been observed, particularly in the United States. The main factor for this increase was attributed to distractions created by using portable devices while walking. A similar observation applies where mobile devices are providing a hazardous distraction to drivers trying to use them while operating their vehicles. This said, there is also the potential to exaggerate the impacts of ICT on mobility, as the issue of telecommuting underlined.
5. ICT and Location
In addition to substitution and mobility issues, ICT has an impact on the location and the operations of economic activities. The most important forces are those of decentralization and relocation. Organizational structures are being transformed from a hierarchy to a network of collaborators. This commonly results in management, which is more flexible and able to adapt to market changes, including new sourcing strategies. ICT improves locational flexibility by offering a wider array of locational choices for administrative, retail, and freight-related activities. This helps lower office and retail footprints by decentralizing some tasks to a lower-cost environment, such as the suburbs or at home, or by permitting their complete relocation (offshoring) to low-cost locations. ICT is, therefore, a corporate strategy to improve the productivity of labor and assets through higher locational flexibility.
Central locations and larger building sizes have dominated retailing and offices since the 1950s. Indeed, newer and larger stores overtook smaller rivals and established new distribution structures based on mass retailing. The standard 2,000 square feet market of the 1950s became the 20,000 square feet supermarket in the 1960s and evolved into the 50,000 square feet superstore of the 1990s. The retail real estate footprint increased substantially during that period, particularly in North America. Following a similar trend, the small office of a company has become several floors in a skyscraper located in downtown areas. The amount of space devoted to administrative functions has increased significantly. ICT is changing the retailing sector by rendering some location structures obsolete and minimizing inventory costs. The impacts of e-commerce are particularly salient since they permitted new forms of distribution and new retailing forms. Since the distribution center is taking a core role for e-commerce, suburban locations are becoming the setting for new types of facilities such as e-fulfillment and sortation centers.
Most corporations use ICT to reduce costs. For office-related activities, the costs of providing office space to employees are very high, far more than just the cost of leasing or building the space and maintaining it. It also concerns parking, which tends to be more expensive in high-density areas, often related to the clustering office activities. It can run as high as 20 to 30% of disbursed salaries per employee in some cases. With these high costs, a common outcome was to outsource or offshore the job instead of focusing on telecommuting. If a job could be substituted by telecommuting, it could be more cost-effective to outsource it instead. However, the growth of teleconferencing technologies has widened options. For retail, the most important cost is renting store space, leading to the conventional paradox that the locations that could generate the highest sales volumes were also those commanding the highest rents. A factor behind the competitiveness of online retailing firms is their lower rent structure because their footprint is more focused on distribution centers in lower-cost locations. They do not have the burden to maintain a retail presence in high-cost locations.
ICT has thus become a force shaping land use and transportation. Cheaper space in the suburbs is an important requirement for newer and smaller firms that are users of telecommunications technologies. A similar observation can be made concerning the distributional structures related to e-commerce, in which fulfillment centers have suburban and exurban locations. The most recent trends in teleconferencing provided an additional dimension with capabilities to undertake educational, conferences, and office work remotely. The growing capability of ICT allows businesses and other organizations locational flexibility and better tracking, asset management, and regulatory compliance of transport systems.
- Transportation and Blockchains
- Urban Mobility
- Urban Transport Challenges
- Transport and Spatial Organization
- Transport and Location
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