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Demand for transportation is falling fast

Demand for transportation is a derived demand. People use transport service not because of its direct benefits, but because they wish to access other services. The demand for transportation is shaped by factors affecting the need for transportation, which is changing at an unprecedented pace.

The need to visit banks has almost vanished after widespread availability of ATMs, online banking and digital transactions. Here, the demand to travel to visit a bank has declined steeply. Likewise, practices such as working from home, online shopping, conducting meetings through video conferencing and online studies are impacting demand for travel.

According to ‘The first report of Commission on Travel Demand, May 2018, UK’, “We travel substantially less today, per head of population, than we did one or two decades ago. We make 16 per cent fewer trips than 1996, travel 10 per cent fewer miles than in 2002 and spend 22 hours less travelling than we did a decade ago.”

This unexpected decline in demand for transportation is driven by alternatives offered by emerging technologies which are undermining the very need of transportation. In this context, it becomes pertinent to appreciate factors affecting transportation demand in times to come.

Flexible work schedule

The traditional fixed schedule working is increasingly being replaced by telecommuting, flexible work hours. Telecommuting improves quality of life and alleviates travel expenses, delay, and stress associated with urban commute trips.

According to American Community Survey (ACS) 2017, 5.2 per cent of workers in the US — or eight million — worked from home in 2017. That share is up from 5 per cent in 2016, and 3.3 per cent in 2000.

More and more companies are adopting flexi working hours to attract talent and retain them. Companies such as Intel, Deloitte, Oracle, AirBnB, and NASA’s Jet Propulsion Laboratory are actively promoting flexi-work options. It is estimated that 43 per cent of American workers were following flexi-work schedule in 2016.

Freelancing on the rise

We are entering into an era of free market system, also called gig economy, in which temporary positions are common and organisations contract with independent workers for short-term engagements.

McKinsey Global Institute report on ‘Independent Work: Choice, Necessity, and the Gig Economy’ estimated that 20-30 per cent of the working-age population in the US and the EU-15, or up to 162 million individuals, engage in independent work.

In the gig economy, freelancer would like to work from home, avoid travelling in peak hours, prefer to do video conferencing instead of meetings and thus reduce the travel demand.

Co-working space

A co-working space is a shared office space where anyone can hire a workstation for the required duration. The workstations are equipped with modern amenities such as wi-fi connection, power, IT facilities, fax machines, projector, flipcharts, printers, etc.

In London, there are more than 150 co-working places. With co-working places everywhere, the freelancers as well as employees (if allowed to work from remote location) would like to work from the workstation nearest to their residence.

E-comm and home delivery

E-commerce is replacing the conventional supply chain of physical shopping with online shopping. A McKinsey survey in 2018 reveals that at least 70 per cent of the 2,500 respondents undertook some form of online consumer packaged goods (CPG) shopping activity.

Millennial shoppers (aged 18-29) are the largest group in most of the countries who mostly undertake their shopping for CPG products online. The convenience seeking millennial generation is showing a greater appetite for having food delivered at home. With growth in e-commerce and use of drones for food delivery, the travel demand for shopping and food is likely to be reduced further.

Vertical cities

A vertical city is one where an entire habitat of humans is housed in skyscrapers. Vertical cities can address the twin problems of overpopulation and overcrowding without destroying forests and swamps to build houses, shopping centers, and factories.

Vertical cities will be equipped with high-speed elevators, escalators, monorails for transportation within the city reducing the demand for land transport further.

AI and robotics

AI and robotics are going to change the canvas of the workplace completely. The traditional ‘routine and predictive’ jobs of a clerk, receptionist, personal assistant, data entry operator, typist, waiter in a restaurant, farm worker, machine operators, shopfloor worker in factories, and call centre operator are at high risk of being taken over by robots or machines designed to perform specific tasks.

This kind of change in the job market is going to reduce the demand for travel to reach the workplace.

With a 3D printer, one can easily create clothes, shoes, jewellery, etc. 3D printing will bring manufacturing closer to home or at home itself, which will lead to a reduction in transportation of manufactured goods.

Telemedicine offers remote delivery of healthcare services, such as health assessments or consultations, over the telecommunications infrastructure such as audio/video call, video-conferencing, chat, etc., without the need for an in-person visit.

E-learning primarily uses e-mail and the Internet for delivering lectures and instructions. With the growth of e-learning, the travel demand of student to go to education centres will be reduced, more so in peak hours when students usually travel.

The travel demand of teachers, employees, others engaged with educational institutes will also be accordingly curtailed.

Way forward

The world is currently on the cusp of the fourth industrial revolution where technology is changing every ‘nano’ second. Transportation sector is also profoundly impacted by this tsunami of change. A number of studies have established that travel demand per capita has been on the decline over last few years due to the changing job market and large-scale adoption of technologies.

Given the fast pace of change, the landscape of transportation may undergo unfathomable changes in next 10-20 years. The transport planners need to be careful while estimating travel demand and designing transportation systems.

A strategy would be to estimate demand for the medium term, design transport infrastructure for this demand, leaving scope for incremental addition in capacity as per the prevailing demand trend.

The writer is with Northern Railway. The views are personal

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