From Austin Vernon's substack, Jul 06, 2025:
The Outsize Impact of AI Logistics
Automated logistics will heavy impact one third of GDP.
A common criticism of recent AI advances is that they only impact the digital world and not the physical one. Robotics can increase the impact, but which robots are the most important? Below, I'll make the case that logistics robots should have a dramatic effect on our economy and daily life.
Logistics In America
Logistics directly accounts for ~10% of the US economy and heavily impacts another quarter of GDP through the manufacturing, wholesale trade, retail, and construction industries. The usual ways to move goods are:
Truck
Trucking accounts for the majority of freight by volume and value due to its flexibility and speed. It beat rail due to the interstate system and improved truck technology. Costs are typically $0.10 to $0.30 per ton-mile for full trucks. Less-than-truckload can be 10x-100x more per ton-mile.
Delivery Vans, Consumer Cars, etc.
Mostly local, last-mile delivery. The cost tends to be astronomical, often $15 to $200 per ton-mile. Consumers also pay similar rates shopping at retail stores but internalize the costs by sacrificing time and adding personal vehicle miles.
Freight Rail
The US has one of the best freight rail systems in the world. Railroads focus on grain, coal, oil, or chemicals. Long-haul containers have also been a growth area. They charge $0.03 to $0.05 per ton-mile under normal conditions. Rail tends to be slower and less predictable than trucks and has high fixed costs. It is not competitive in higher-value shipments or short hauls.
Air Freight
Air freight is specialized for speed and costs more than $2.00 per ton-mile. Air freight still requires some form of last-mile.
Domestic Barge/Ship
Shipping on water costs $0.01 to $0.03 per ton-mile. It is mostly river barges in the US because of the Jones Act. It makes sense for bulk goods without time constraints or large items that can't fit on rail or truck.
Pipelines
Pipes are an absurdly inexpensive way to move liquids and gases in bulk.
The relative importance of different logistics systems shapes America. Firms build big box stores or select factory locations to minimize their logistics burden. Wal-Mart and Costco are directly downstream of truck dominance, for example.
Any advance in logistics has massive effects on our fabric of life and standard of living.
Breaking Down Cost Structures
Trucking and last-mile dominate total revenue share and matter most. Trains, pipelines, and water transport will continue to move large quantities of bulk goods. Traditional air freight will remain niche.Trucks main cost categories are labor-related costs and fuel. They are >70% of semi-truck costs. The truck itself and maintenance account for the remainder.
Last-mile and sorting are the majority of the total logistics costs for parcels and deliveries. Labor costs are much higher because a driver carrying 500 pounds of packages costs about the same as a semi-truck driver carrying 30 tons of freight. Packages are unloaded one by one instead of with forklifts. The percentage of cargo weight to vehicle weight is low compared to semi-trucks. These inefficiencies are why many stores are warehouses where customers can load up and make the most of their trip. And why distribution centers for last-mile delivery are close to customers. The proximity allows semi-trucks to carry as many ton-miles as possible.
Labor, fuel, maintenance, and vehicle weight/cost are the most critical metrics to attack for improvement. The primary tension is that our existing transport technologies require scale and centralization for efficiency, but final customers are diffuse.
The AI and Electrification Opportunity
The first-order answer for cost reductions is clear. Remove the driver with software and reduce fuel costs with batteries. Automated driving is improving rapidly. LFP battery packs for autonomous semi-trucks are already theoretically cheap enough except in the US. Trucking would see significant cost declines. I think this result is already a given, especially since AI drivers can use small battery packs that charge more often than human driver hour rules allow.The second-order optimization is much more interesting. The minimum cost of any size shipment plummets by removing the human driver and using a versatile electric powertrain. Haulers can use lower minimum costs to break up shipments into smaller chunks. That means more point-to-point, eliminating much of the distribution that today's truck logistics require. Prices for some categories, like less-than-truckload, could decline by 80% to 90%. These changes are extreme enough to reorganize goods-oriented businesses.
Full Trucks and Pallet Aggregation
The humble pallet is the default unit of transport in the US. Truck trailers are glorified pallet transporters. Only categories like parcels or e-commerce shipments still regularly stack boxes. The pallet is so productive because it allows mechanized transport via forklifts, eliminating break bulk labor. The risk of damaged or lost goods also falls precipitously. It is a modern miracle. Aggregating and disaggregating dozens of pallets in trucks happens to gain economies of scale in shipping.The name of the game for minimizing truck logistics costs is to have full trucks drive point-to-point with no side stops. Less-than-truckload type pickups and deliveries incur last-mile inefficiencies. The distribution center, perfected by companies like Wal-Mart, unlocks full trucks point-to-point. A truck can take a load of grape jelly from the factory to the distribution center. Pallets of grape jelly are loaded on different trucks heading to stores. These trucks also carry other assorted items, like peanut butter, bread, or paper plates, that arrive on single trucks from their respective factories. The most efficient of these systems can "cross-dock" pallets in <24 hours. Sam's Club and Costco are the peak of this style of logistics, where pallets are not even unpacked but wheeled into aisles for customers to pick from.
The drawbacks of this system are that it only works at very high volumes, and distribution centers are expensive.
The extra handling is costly because one pallet might require 5-6 forklift moves to reach the shelf at Costco. And the intermediate goods to create those products require many times that. There are incredible efficiency and speed gains available for any technology that can cost-effectively end pallet aggregation....
....MUCH MORE
Previously from Austin Vernon's substack
June 2025 - Removing Carbon Dioxide From The Air: "A Review of Massively Scalable Enhanced Rock Weathering"
I wanted this on the blog as a personal bookmark, he goes deep....
