Trucks Are Empty One-Third of the Time. AI Can Fix That

Well before the war with Iran began, retailers were facing an impossible tangle of challenges, from supply chain volatility to upticks in theft to stubbornly high rates of staff turnover. Recent geopolitical tensions have merely added insult to injury, in particular by gravely exacerbating what was already a growing liability in the sector: namely, the persistence of the empty-mile problem.

The empty-mile problem is simple. Unlike most of the rest of the U.S. economy, the retail goods transportation sector is direly uncoordinated, a balkanized patchwork defined at every level by a lack of communication. As a result, one in three truck miles are driven empty, a fact with massive implications for the broader economy. 400 billion in empty miles driven annually totals to no less than $1 trillion in wasted shipping expenses — a number not far removed from the total national deficit of the United States government.

Yet what's exciting is that this problem, for so long viewed as intractable, is in the process of being solved. New approaches to logistics centralization, facilitated by the rise of artificial intelligence, are reducing empty miles at a rapid clip. As it turns out, there's nothing inevitable about the old way of doing things.

The Current System is Broken

The longstanding failure of the goods transportation industry to adequately fix this problem can be chalked up to a focus on so-called "local optimization." The thinking has been that by stitching together small groups of customers, one can produce system-wide efficiency. This can go some way towards compressing leftover demand, but the ultimate result remains a chronic state of mismatch between where trucks finish and where demand next appears.

The truth is that scale merely creates the conditions for efficiency. That efficiency can only be activated through coordination.

Of course, coordination in the freight sector is no simple thing. Here, interests are only situationally aligned. The imperatives of collaboration only sometimes outrank those of competition. And these conflicts grow exponentially with each added partner: you would need a full-time team of lawyers to try to handle fluctuating negotiations between 20 or more contracted partners.

The only solution, in other words, is removing the negotiation layer entirely.

The Benefits of Orchestrated Collaboration

It’s clear why this matters for the retail industry: with e-commerce increasingly dominant, the health of retail is bound up with the health of commercial transportation. When a full third of miles are driven empty, inventory becomes harder to manage and fast shipping promises become harder to keep. Retailers, in turn, risk alienating consumers, who in an age of infinite options are less brand-loyal than they’ve ever been.

Additionally, retail shipping now operates in two directions: customers are buying more online than ever, but they're also returning more than ever. In fact, e-commerce returns today average 20 percent to 30 percent of transportation, with particularly high rates in apparel (10 percent) and electronics (8 percent). Empty miles slow down the process in both directions.

This is why orchestrated collaboration matters. In this paradigm, the focus is on the system as a whole. A neutral orchestration layer allows relevant parties to share information, permitting planning at the network level. Fears around dependence or the sharing of proprietary information are eliminated. The alignment of supply and demand is elevated, finally, from the fraught realm of the contractual. Participants can put their trust in the system, instead of each other.

This neutral orchestration layer can continuously rebalance asset positioning, plan round trips across multiple shippers and regions, and anticipate demand-supply mismatches before assets become stranded. In so doing, they fix the central problem plaguing the sector today — all those millions upon millions of empty miles. In deployments of this model in India, for instance, the percentage of empty miles fell from 30 percent to 35 percent down to 10 percent. And this happened, notably, without the need for renegotiated contracts or altered carrier behavior.

Retailers, in this paradigm, can process returns quickly and avoid inventory gaps and inflated, last-minute freight rates. The result is a steadier, more dependable flow of goods and a customer base less likely to jump ship.

Gary Atkinson is the CEO of Algorhythm Holdings, an AI-focused logistics and transportation technology company.