What will 2014 bring for the logistics industry?
Tim Fawkes of transport management experts 3t Logistics (www.3t-europe.com) discusses the key issues facing the logistics industry in 2014.
Traditionally a time for optimism, the New Year looks likely to mark a more positive period for the many organisations involved in logistics. Whilst hauliers and their customers have struggled with rising transport costs, as well as reduced demand and margins, the consensus is that 2014 will be a better year for the UK economy and British businesses. However, key to this recovery is the implementation of efficient and cost-effective logistics processes across a whole range of industries.
So, what is the coming year likely to bring for hauliers and their clients? Based on over 20 years’ experience working in transport management, these are my predictions for the key logistics issues in 2014.
- Technology has revolutionised the speed at which we operate, which means that consumers and clients expect quicker deliveries as a matter of course. Many companies that we work with are reporting increased demand for next day deliveries. Whilst the industry is geared up to provide this service, it does place significant pressure on carriers to have vehicles available to meet demand. Furthermore, meeting these requirements requires sophisticated transport management systems to facilitate the flow of information. This may explain why the transport management sector is one of the fastest growing enterprise application markets according to global research company ARC Advisory Group, with shippers becoming aware of the significant return on investment that such systems offer.
- European freight transport activity is predicted to increase by over 80% (from 2005 levels) by 2050. Furthermore, the Department of Transport recently reported that the total number of goods vehicles travelling from the UK to mainland Europe in Q3 was 12% higher than during the same time in 2012 - and the highest total since 2008.
- Whilst this is a great sign for the general wellbeing of the economy, it does place pressure on transport infrastructure as well as the availability of HGV vehicles and drivers. This means that, as in the early noughties, we are likely to see an increase in the use of foreign drivers and companies to meet initial demand. Longer term, as the market picks up, sustained demand will drive an increase in the number of trucks available as carriers begin to invest in fleets and personnel once more.
- Even with the depleted value of the pound, UK hauliers still have significantly higher operating costs that most of their European counterparts - a situation that looks set to continue for the time being at least. The government has made a concession to the problem of fuel price rises by pledging to freeze fuel duty during 2014, but for many this does little to offset other high operating costs.
- There are ways of reducing the impact of rising transport costs e.g. splitting fuel supply between contract and spot purchases. If prices fall, purchasing on a spot basis may be more economical than sticking to a contract. However, when prices are consistently rising, contract purchases, such as fuel cards and bunkering can be more economical.Improved vehicle utilisation can also offset any rate increases that are passed on by carriers, but this often requires a creative approach.
- Good customer service is key to logistics service excellence. However, as service levels become tighter and even more demanding, the increased strain on carriers is also likely to add pressure to haulier efficiency – driving higher prices. The bottom line is that you need to be able to cover the cost of providing clients with a higher service level. However, the cost impact of improved service levels aren’t always obvious and transport cost is often the tip of the iceberg, making an accurate understanding of cost to serve essential to profitability.
- When the economy is in recession, companies traditionally focus on day-to-day survival, often neglecting to invest in the processes or technology that could make their business more viable in the long term. However, as conditions improve, companies will be looking to innovation as the way forward. For example, smart phone mobile technology will play an increasingly important part in the provision of proof of delivery and in delivery confirmation, creating increased visibility of delivery status, improved cash flow, better management of supplies and reduced admin. As pioneers of this technology at 3t, it’s my belief that this will become standard in the near future.
So, whilst many carriers and their customers face a challenging year, prospects look brighter than they have for some years. In fact, 2014 should hold plenty of promise for those companies and their logistics partners who have a positive approach and who are prepared to invest in the right technology.