The transportation and logistics sector has undergone significant consolidation in recent years, yet it remains an extremely competitive industry across air, marine, rail, and road transportation as well as in the transportation equipment and industrial distribution segments.
The sector faces a number of challenges even beyond concerns of falling demand due to global economic conditions; the trucking industry especially has faced severe labor shortages, which have been exacerbated by recently implemented electronic logging requirements. This has impacted costs and availability of equipment for shippers. While some labor driven concerns have receded, long-term the trucking industry will continue to be faced with an aging driver pool which is not being refreshed. Companies in this highly competitive industry should leverage technology to overcome these challenges and improve margins.
The transportation and logistics industry has seen the entry of many non-traditional technology competitors which have the potential to revolutionize LTL and containerized shipping. In more complex project logistics, project specific needs and the high value placed on customer service and the ability to respond to challenges will likely slow adoption. Technologies that allow companies and customers to optimize fleets of trucks, containers and tanks and minimize waiting times are much more likely to have a near term impact.
The marine industry’s fleets are ageing after a period of intense building activity, and concerns around global trade flows due to increased protectionism and the current global economic downturn are increasing. Smaller, just in time shipments due to better supply chain and inventory management should lead to increased use of freight containers and ISO tanks. While the outlook for certain vessels such as crude and LNG tankers seems relatively bright, some vessel segments face structural overcapacity problems which should lead to continued depressed rates. IMO fuel oil regulations have helped boost many rates but the long-term costs to the industry are still in flux.
The third-party logistics industry remains highly competitive, as goods get lighter and of higher value revenue generated by traditional weight-pricing models declines. The sector is under acute and growing pressure to deliver a better service at an ever-lower cost. Technology providers are pushing to displace traditional 3PLs by exploiting technology or asset light business models adapted from consumer transportation. On the other hand, shippers are turning to 3PLs to help them address increasingly complex distribution challenges fueled by growth in e-commerce, rising customer expectations around speed of delivery and ongoing transportation capacity constraints. Supply chains continue to become increasingly complex. Some organizations are trying to focus on their core competencies rather than supply chain decisions and relying more than ever on third-party (3PL) and 4PL logistics providers while other customers are further integrating their logistics operations.
Distributors are making dramatic advances in commercial and operational excellence, but margins have remained narrow and are increasingly under pressure. Businesses built on customer relationships may falter as customers increasingly chase the marginal dollar while at the same time other warehousing and distribution businesses grow as companies are more mindful of balance sheets and wish to reduce their activities in non-core businesses.