If you are involved in logistics, you are probably ready for some good news. There’s no doubt that the past five or six years have been tough for hauliers and their customers as transport costs have risen both proportionately and in real terms, and margins have significantly reduced. As the effects of the Euro Zone crisis recede, the consensus is that 2014 will be a better year for the UK economy and British businesses. Furthermore, as most industries are heavily reliant on cost-effective logistics processes, having good transport management systems in place is key to economic recovery.
Predictions for key logistics issues in 2014
So, what is the New Year likely to bring for hauliers and their clients? Based on over 20 years’ experience working in transport management with companies from a range of industries, these are my predictions for the key logistics issues in 2014.
Advances in technology mean that everything moves faster, which in turn means that people’s expectations have changed, ultimately becoming more demanding. The companies that we work with are increasingly reporting that more and more of their clients are demanding next day deliveries. Whilst the industry is geared up to provide this service, it does place increasing pressure on carriers to have vehicles available to meet their clients’ demands. Furthermore, managing the organisation of these requirements requires improved communication and sophistication in the form of transport management systems. This may go some way to explaining why the transport management sector is one of the fastest growing enterprise application markets, according to global research company ARC Advisory Group. One of the reasons cited for this is that shippers are increasingly aware of the return on investment that such systems offer.
European freight transport activity is predicted to increase by over 80% (from 2005 levels) by 2050, a statistic which is substantiated by recent figures released by the Department of Transport. Whilst the lowering of demand during the downturn resulted in a fall in the number of goods vehicle operator licences (a 4% decrease between 2010 and 2011), a sure sign that the economy is recovering is the rise in freight transportation as demand for products and services rise. The Department of Transport 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 bodes well for the state of the economy, it does place pressure on the availability of vehicles, as well as the need for HGV drivers. In fact, we may see an increase in the use of foreign drivers and companies to meet the initial demand, as was the case in the early 2000s. However, as the market picks up, this will eventually drive an increase in the number of trucks available as carriers become more confident and start to invest once more. Increased collaboration between companies and reduced empty running will help to counteract an element of this trend.
The cost of transport has continued to be a major thorn in the side for most hauliers – and in turn their customers. UK hauliers already have significantly higher operating costs that most of their European counterparts and this is a situation which looks unlikely to change anytime soon. Transport rates are likely to increase, driven by the rise in demand as well as the inevitable fuel price increases. The government has made a concession to this issue by pledging to freeze fuel duty during 2014, but for many this does little to offset other high operating costs.
There are strategies to reduce the impact of the rising cost of transport; for example, you could consider splitting your fuel supply between contract and spot purchases. If fuel prices are falling, purchasing on a spot basis may be more economical than sticking to a contract. However, when prices are consistently rising, contract purchase, such as fuel cards and bunkering has its benefits.
Getting customer service right is the key to logistics service excellence. However, as service levels become tighter and even more demanding, there will be a greater need for improved communication of service issues. The increased pressure on the carriers is also likely to add pressure to haulier efficiency – which in turn will drive higher prices. Providing your clients with a higher service level is all very well as long as you are covering the increased cost of doing so. The cost impact of improved service levels may not always be obvious and transport cost is quite often the tip of the iceberg. In order to stay on top of this, an accurate understanding of cost to serve becomes imperative.
Advances in technology have much to offer the logistics industry and its customers. Whilst many have been too pre-occupied with their survival during the economic downturn, as conditions improve, companies will increasingly look to innovate their processes and the technology that they use to manage those processes. The advent of innovations such as smart phone mobile technology in the provision of proof of delivery and in delivery confirmation will impact positively all along the supply chain, creating increased visibility of delivery status, improved cash flow, better management of supplies and reduced admin. This is technology that 3t are currently pioneering, and it’s my belief that this technology will become the standard in the near future.
Technological innovation also has implications for recruiting personnel with the necessary skills needed to develop and implement new technology. The logistics sector directly employs around 1.45 million people in the UK; a figure that is predicted to rise significantly by 2020. This means that employers face increasing competition for personnel with relevant skills and experience. Through driving continuous improvement in our own business and for our customers, we are pushing the boundaries of the standard offering aiming for customer service excellence. Our objective is to be able to offer our staff an exciting career in logistics to help ensure that we attract and develop the very best logistics professionals that the industry has to offer.
So, whilst the logistics industry continues to face some difficult challenges, the outlook certainly appears brighter than it has for some time. With the right approach and the right technology, 2014 should hold plenty of promise for many companies and their logistics partners.