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Dr. Stefan Heck is CEO and founder of Nauto. Prior to starting Nauto, Heck was a consulting professor at the Precourt Institute for Energy at Stanford University. Previously, he was a senior partner at McKinsey and cofounded and led the Cleantech and Sustainability practice. Heck earned a Ph.D. in cognitive science from UCSD and a B.S. with honors in symbolic systems from Stanford University.
David Maloney, Editorial Director, DC Velocity 00:00
AI helps create safer roads. How manufacturers feel about current conditions. And the most important metrics for distribution.
Pull up a chair and join us as the editors of DC Velocity discuss these stories, as well as news and supply chain trends, on this week's Logistics Matters podcast.
Hi, I'm Dave Maloney. I'm the group editorial director at DC Velocity. Welcome.
Logistics Matters is sponsored by PERC, the Propane Education Research Council. Propane is the safe, reliable energy for material handling. Propane-powered forklifts can improve air quality inside your facilities for a healthier, more productive workforce. See how propane can give your productivity a boost at propane.com/forklifts.
As usual, our DC Velocity senior editors Ben Ames and Victoria Kickham will be along to provide their insights into the top stories of this week. But to begin today: June is designated as National Safety Month. Drivers on our nation's roads have less than two seconds to react to most situations that can result in an injury, accident, or possibly even death. But there are technologies that help to assure safety on our roadways. To find out more about what they are, here's Victoria with today's guest.
Victoria.
Victoria Kickham, Senior Editor, DC Velocity 01:27
Thank you, Dave. Our guest today is Dr. Stefan Heck. He is CEO and founder of Nauto, which is a provider of AI-based vehicle-safety technology for fleets and the automotive industry. Welcome, Stefan.
Dr. Stefan Heck, CEO and Founder, Nauto 01:41
Thank you. Nice to meet you.
Victoria Kickham, Senior Editor, DC Velocity 01:44
Yeah, thanks for being here. So first, I wanted to see if you could just tell us a little bit about Nauto. What does the company do and who does it serve?
Dr. Stefan Heck, CEO and Founder, Nauto 01:51
Yes, as you already mentioned, we're an AI company, and we use artificial intelligence and computer vision to help drivers stay safe on the road. Our primary mission is to identify, through computer vision, risks that are taking place both right now and a couple seconds into the future, and then to give the driver a heads-up on those risks. Most of our work is with commercial fleets; increasingly also with auto and light-commercial vehicle manufacturers, but also heavy-truck manufacturers. So, we do everything from long-haul to last-mile logistics, and also fleets that are installing, maintaining, servicing. And our goal there is really to avoid collisions as much as we can — we typically get somewhere between 50 and 80% reduction in collisions — and to help the drivers get home safely at the end of their day. Now how we do that is, most of the risks that drivers are taking today — particularly commercial drivers, who are better than your average consumer driver — most of those risks are risks that they're not aware of. You know, they're not teenagers trying to drag race or deliberately run red lights, so most of the high-risk scenarios for a driver are either other people's mistakes — somebody else runs a stop sign, runs a red light — or they miss something. They didn't see the stop sign, they didn't see the speed limit sign. And so our solution essentially identifies those high-risk moments, and then gives the driver feedback. If it's an imminent collision, it's an alarm, just like a collision alert that may be built into, you know, [a] higher-end new luxury vehicle. And if it's a high risk situation, but there's no imminent collision, it's voice feedback to the driver. So it will say things like, "Leave more following distance" or "Pull over to use your phone." And we're particularly interested in situations where there's multiple risks. So maybe you're tailgating, speeding a little bit, like many of us do, and then you start looking down at your phone. And the reason for that is a very deep insight into how risk works. Risk doesn't add; risk actually multiplies. So, if I'm doing two different risk behaviors, or three different risk behaviors, my total risk isn't just the sum of those risks. They actually accelerate each other. So if I'm distracted and tailgating, that's substantially more dangerous than just either of those two alone added. To put a number on it, something like speeding is usually about 10, 15% riskier than driving exactly the speed limit. Something like tailgating, it depends on how close you're tailgating, but anywhere from double the normal risk to about four or five times normal risk, if you're tailgating really tightly. And distractions about 40% elevated risk if you're just looking away from where you're driving, but it can be four times normal driving risk if you're dialing or texting or something like that. But you put those together and you may be four, five hundred times normal driving risk, which really means you're going to have a collision. It's just a matter of time till your luck runs out. And so we're trying to avoid those situations by letting the drivers know. And what we've found is most of the risks that drivers are taking, they're completely unaware of. ZComing back to distraction, most people say "Yeah, I occasionally look at my phone. I might do it once or twice a day for one or two seconds." Well, the data shows the average commercial driver is doing it seven times per hour, and typically for four seconds or longer, so it's a lot riskier than people self-assess.
Victoria Kickham, Senior Editor, DC Velocity 01:51
I was gonna ask you, you know, how this affects, you know, trucking and fleets in particular. You just kind of, sort of mentioned that statistic about trucking. What more can you say about that, and maybe what fleets are looking to accomplish by using this type of technology? Obviously, reducing accidents, but is there any kind of, you know, sort of general accomplishments they're looking for?
Dr. Stefan Heck, CEO and Founder, Nauto 05:36
It's really, how do you reduce collisions while empowering your drivers, rather than, you know, monitoring them, surveilling them, right? There's a lot of technologies out there that beep a lot, and that may not be very accurate. Lane departure warning systems, for exactly, for example, are notorious. They only have about 50% accuracy. They beep a lot when you're deliberately changing lanes, and so most people ignore those. There's some statistics that over half of all drivers that have that feature in their vehicle actually turned it off. And so, our goal is to be more selective, intervene only in these high-risk moments, do it in a way that it's clear what's going on. In very simple terms, I describe it as, if the driver is getting feedback, they should be looking and going, "Oh, shit, that was dangerous," because if they have that experience, that kind of shock of "Oh, my God," then then that's when they learn. And what we found, if you do it very selectively, handful of interventions per day, you know, once every couple hours, and you do it in these moments where the driver immediately recognizes the risk when they look up or pay attention suddenly, or realize how closely they're tailgating, the behavior changes incredibly quickly. Zbecause people want to be good drivers. They want to get home safely. And what we found is — and this is really what fleets are focused on — we can reduce the risks really quickly. About 80% of all the driving risks disappear in the first week or two, and in particular, the most severe risks are completely eliminated. And that's the main mission for the drivers. Of course, the fleet also cares about the financial aspects. If you reduce risks, you then reduce collisions, which reduces either your insurance costs or your damage payments, deductibles, and reduces your lawsuits. So, that's why people are motivated to do this. The risk for a commercial vehicle is quite high, not because the drivers are bad. The drivers, as they said earlier, are actually better than consumers, but they're on the road so much of the time. You might be driving eight hours a day, five or six days a week. That's a lot more miles, a lot more hours of driving than an average consumer does. And so we see that a commercial fleet will have costs for their risks of anywhere from about $5,000 to $15,000 per vehicle per year. And by cutting that in half or by two-thirds, you're saving a huge amount of money for a commercial fleet.
Victoria Kickham, Senior Editor, DC Velocity 07:26
Right. Thank you. How, though, expensive is the technology, in general, sort of to implement? Are most companies sort of able and willing to make the investment, or how does that play out?
Dr. Stefan Heck, CEO and Founder, Nauto 08:12
Yes, it's — well, it depends on what you compare it to. You know, our technology is a little bit more expensive than just a dash camera or telematics system that a lot of fleets have been experimenting with, and many, many of the larger fleets already have telematics, but we believe it's still extremely affordable compared to other high-end collision warning systems, right? If you buy an ADAS [advanced driver-assistance systems] package from an OEM, you're typically paying four or five thousand dollars. If you were to try to buy an autonomous vehicle, those are still 150 or $200,000. Our system is less than $1,000 to put in, about $500 for the hardware and installation, and then we have different subscription models, but somewhere between 300 and $500 per year, per vehicle. And in terms of affordability, if you if you go back to what I said a moment ago, let's just say $5,000 of risk per vehicle. If I eliminate two-thirds of your collisions, that's $3,000 that you save. Would you pay $1,000 for saving $3,000? Of course, makes sense. You're gonna get payback in four or five months. And then subsequent years, things get even better, because you're not having to put in new hardware at all anymore. That sensor package is already there. And that's, of course, just looking at the financial aspect. There's this intangible aspect of, you don't have drivers get into collisions, you're not injuring other people, you're not getting bad press. And really important in today's environment, collisions are one of the main reasons why drivers quit, and many, many fleets are having trouble finding enough drivers and retaining drivers. So, having a solution that empowers the drivers, keeps them safe, and keeps them working and on the road and productive is incredibly important.
Victoria Kickham, Senior Editor, DC Velocity 09:57
We've written and talked a lot about how AI technologies like these continue to evolve. Can you talk a little bit about, you know, how that is occurring? Like, how often do you have updates to the technology, and how is it changing over time?
Dr. Stefan Heck, CEO and Founder, Nauto 10:12
It's evolving very rapidly. We updated the hardware roughly every other year or so, and that has to do with more sensors, more powerful computes, as you know, follows Moore's law, so you get double the compute every couple of years. But the software evolves much faster than that. So, we learn from every collision and high-risk incidents in an anonymized way — so we just look at the movement patterns; we don't an actually care who was driving or where it took place — and we integrate that into our AI algorithms. So, it's essentially, our 800 fleets are all sharing with each other their best learnings of how to stay safe. And as a result of that, we actually update the software every few weeks. It's like your iPhone, what happens behind the scenes completely automatically. In our case, it updates overnight while the vehicle's parked, so it doesn't interrupt the fleet's operation at all. And you're getting the benefit of continued improvements. Now that can come in many forms. That can be more accurate detection of a risk. So, for example, we've really made a lot of progress on detecting drowsiness much, much earlier, not just when your eyes are closed, and you already nodded off, but the kind of early warning signs, as you're just starting to feel sleepy. And it can be detecting additional risks. One of the features I'm most proud of is, we've added the capability to detect pedestrians and bicyclists, which for many fleets driving in the urban environment, those are the multimillion dollar lawsuits when they injure a pedestrian, or what's called a vulnerable road user. You know, today we're seeing, as I mentioned, 50% to two-thirds reduction. We think we can probably get somewhere close to 90% reduction before it really is such rare corner cases that it's it's hard to address through technology.
Victoria Kickham, Senior Editor, DC Velocity 11:58
Terrific. Well, safer roads are certainly something we all want, so this is terrific. Great information. Stefan, thank you for joining us today. We appreciate your time.
Dr. Stefan Heck, CEO and Founder, Nauto 12:08
My pleasure. Thanks for having me.
Victoria Kickham, Senior Editor, DC Velocity 12:11
We have been talking with Dr. Stefan Heck of Nauto. Back to you, Dave.
David Maloney, Editorial Director, DC Velocity 12:16
Thank you, Stefan and Victoria. Now let's take a look at some of the other supply chain news from the week. Ben, we have seen the rise of manufacturing here in the U.S. as many companies are bringing their production back from Asia to North America, and you've reported this week on some new research about how manufacturers are feeling about the current conditions for reshoring. What did they say?
Ben Ames, Senior News Editor, DC Velocity 12:40
That's exactly right. The quick answer is, it's a mixed report card. There was a recent study that showed that optimism in the manufacturing sector remains low, and that's because industry leaders in that area are struggling with a lot of familiar problems that we've all been covering: rising interest rates, questionable economic conditions, ongoing talent shortages. Now to be clear, the study found that more than half of manufacturers — 57% — rated their optimism about business prospects over the coming six months at 7 or lower on a scale of 1 to 10, so they're not actually pessimistic; they're just lukewarm on their optimism, if that makes sense. The information comes from a Chicago consulting firm called Sikich. They had surveyed, in March, executives from, obviously, manufacturing, and distribution as well, across the half-a-dozen different verticals to find out what's on their minds. In a quick answer, you know, that the, those variables that we mentioned before, but in terms of their operating challenges, labor is really the one. I know that our guest was discussing that as well, having better conditions on the job to keep worker retention up. Manufacturers likewise have had to increase their wages lately to meet those labor needs. Nearly a quarter of the respondents in the survey said they'd increased wages for their workers by 9% or more. A third of them said that wage increases over the last 12 months are significantly higher than wage increases that they had deployed over the past five years. So, this is an increasing trend. But on the upside, part of the pressure to maintain those labor levels exists because business is good. So, nearly half of survey respondents in the Sikich study reported that there was consistent or increased customer demand. So, of course, more customer demand, you have to hire more people to meet it, so, you know, it's a good problem to have in a sense.
David Maloney, Editorial Director, DC Velocity 14:45
Right, and as you do have that demand, then, you obviously have to have the labor to address it. So did the survey offer any advice on solving some of that labor pressure?
Ben Ames, Senior News Editor, DC Velocity 14:55
They did, actually. Yeah. So, they they advocate a sort of a multipronged approach here. Manufacturers say that talent acquisition is actually easier now than it was at this time last year. While only 20% of manufacturers said they're able to fill an open role in less than a month, 80% said that they can fill the opening in the same time or less than last year. So, still tough to do, but easier than it was last year. So of course, to keep them, increasing wages and benefits is the most obvious solution. It's not the only thing, however. According to Laura Fischer — she's a managing director on Sikich's human-capital management and payroll consulting team — he said that creative hiring strategies are also important. So, what she means by "creative" is offering alternative work schedules, strengthening employer branding initiatives, and working with external recruiters. So those are all effective strategies to attract and then retain your high-performing workforce. Finally, another area where manufacturers can improve their talent strategies is pay transparency. So, that's defined as the degree to which employers are open about what, why, and how much employees are compensated, and to what degree they allow employees to share that information with others. So, less than a third of the people in the survey already have, or even plan to have, pay-transparency policies in the next 12 months, but it did mention that some states have actually proposed pay-transparency legislation, so we may start to see that one become more widespread.
David Maloney, Editorial Director, DC Velocity 16:34
Right, and I do believe that we are going to see a continued increase in the growth of manufacturing domestically because of a lot of reasons — geopolitical reasons, the cost of imports and transportation. So it's something we'll have to continue to track as we go along, Ben.
Ben Ames, Senior News Editor, DC Velocity 16:49
Yep, we'll be sure to bump that one up. [There]'ll be more coverage in the magazine to come.
David Maloney, Editorial Director, DC Velocity 16:54
Thank you, Ben. And Victoria last week, you attended the WERC conference, that's W-E-R-C, that was in Orlando. What were some of the highlights you saw there?
Victoria Kickham, Senior Editor, DC Velocity 17:05
Well, one thing, Dave, was that WERC published annual industry research focused on warehouse operations this month, and the group officially unveiled the information at its 46th annual conference, which, as you noted, was held last week in Orlando, and I was there, and also in the pages of DC Velocity. So, the group present presented top-line findings and an executive summary of the report during the conference, and they also shared information with us that appears in an infographic in the June issue of our magazine. Listeners can access that issue online and in print. The research is called the annual DC Measures study, and it tracks what the group calls the latest developments in distribution strategies and operational metrics. The council offers the study as a way for companies to benchmark the performance of their warehouses as well as to track industry trends. The key takeaway this year is that companies are laser-focused on their customers when it comes to warehouse operations. And they figured this out, the researchers did, by saying that the perfect order == which consists of four things: orders shipped on time, complete, damage-free, and have the correct documentation — were the top four most commonly used metrics by survey respondents, marking the first time those measures all made it to the top of the list.
David Maloney, Editorial Director, DC Velocity 18:22
That's very interesting. Was there anything else that stood out in the research, Victoria?
Victoria Kickham, Senior Editor, DC Velocity 18:27
Yes. This year, the researchers also studied the increasing role that environmental, social, and governance initiatives, or ESG initiatives, are playing in the distribution center and throughout the supply chain. They did this not to stir up controversy — there are a lot of questions surrounding ESG and its implementation — but to create awareness, really and start a conversation about the growing role these initiatives are playing and will play in the future. They also said they wanted to learn where warehousing professionals stand on the issue. The bottom line seems to be that there's a lot of uncertainty out there. Among the ESG findings, respondents said they agree that these measures will affect their company, but they have mixed opinions about whether or not they will be positive or negative. According to the report's executive summary, 60% of respondents said ESG will make them more competitive, but just 23% agree that they will positively impact DC performance or help reduce costs. Again, the purpose of introducing this was to raise awareness and take the industry's temperature on this, so to speak. The researchers urged attendees to start setting goals, collecting data, and communicating progress about their own ESG initiatives, you know, whatever they may be, you know, whether in terms of energy reduction or similar efforts. And they say they should do this too, they can start, you know, building a story about what they're doing internally. The researchers also urged attendees to stay informed about ESG initiatives in their industry segments, you know, whether it's wholesale distribution, retail, manufacturing, third-party logistics, and to really keep tabs on broader conversations about this at the government level, regarding the evolution and potential effects of ESG on business and society. So, a lot going on and just, as I say, an initial look at this, these initiatives, and I'm sure, much more to come.
David Maloney, Editorial Director, DC Velocity 20:13
Yup, and certainly we'll be there to cover it. I think ESG is only going to gain in importance, and particularly in the eyes of the customers. I think the customers themselves are driving a lot of these initiatives within the industry.
Victoria Kickham, Senior Editor, DC Velocity 20:24
Absolutely.
David Maloney, Editorial Director, DC Velocity 20:25
Thank you, Victoria.
Victoria Kickham, Senior Editor, DC Velocity 20:27
You're welcome.
David Maloney, Editorial Director, DC Velocity 20:28
We encourage listeners to go to DCVelocity.com for more on these and other supply chain stories. Also check out the podcast Notes section for some direct links on the topics that we discussed today.
We'd also like to thank Stefan Heck of Nauto for being our guest. We welcome your comments on this topic and our other stories. You can email us at podcast@dcvelocity.com.
We also encourage you to subscribe to Logistics Matters at your favorite podcast platform. Our new episodes are uploaded each Friday.
Speaking of subscribing, check out our sister podcast series Supply Chain in the Fast Lane, coproduced by the Council of Supply Chain Management Professionals and Supply Chain Quarterly. We just started a new eight-part series on transportation tech. Check out the first two episodes in the new series by subscribing to Supply Chain in the Fast Lane wherever you get your podcasts.
And a reminder that Logistics Matters is sponsored by PERC, the Propane Education Research Council. Propane is the safe, reliable energy for material handling. Propane-powered forklifts can improve air quality inside your facilities for a healthier, more productive workforce. See how propane can give your productivity a boost at propane.com/forklifts.
We'll be back again next week with another edition of Logistics Matters. Be sure to join us. Until then, have a great week.
Articles and resources mentioned in this episode:
- Nauto
- Manufacturing firms complain about interest rates, economic conditions, and the talent shortage
- WERC releases the 2023 DC Measures report
- Infographic: For warehouses, it’s all (or mostly) about the service
- Visit Supply Chain Quarterly
- Listen to CSCMP and Supply Chain Quarterly's Supply Chain in the Fast Lane podcast
- Listen to Supply Chain Quarterly's Top 10 Supply Chain Threats podcast
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