Logistics Is Changing, But Is The Industry Ready?

Logistics is one of the biggest industries on the planet, responsible for moving vast quantities of goods from source to market. It’s also an industry undergoing dramatic change, thanks partly to new technology, and partly to the demands of the market. Corporate responsibility is driving some firms to source locally, changing the structure of the logistics sector from one focused on the international movement of goods, to one that is more domestic.

The trucking industry is expected to change in several important ways in 2019. None of these changes will be fundamental, but rather a continuation of trends already in operation across the sector. Logistics has always been at the forefront of shifts in the economy and will continue to be so in the future.

Consolidation Will Continue

Land-based logistics services continue to be highly competitive. But scale and cost considerations have led to the consolidation of major shipping firms, with only a handful dominating the market in 2019. The problem for smaller shipping firms is one of cost. If a company can’t reach sufficient scale, then it becomes less competitive, must charge higher prices and can go out of business. We’ve seen a spate of purchases of small shipping businesses across the industry, as well as a series of failures, suggesting that the new international logistics industry is going to become much more concentrated.

Smaller players, however, are fighting back by forming alliances: partnerships that aim to bring overall costs down so that they can compete with the big independent firms. The three largest shipping alliances in the world are 2M, The Alliance, and Ocean Alliance. Together, they comprise over eleven shipping lines and are helping to prevent the industry from becoming too concentrated in too few hands.

Independent cargo fleets may one day become a thing of the past, but as long as these alliances survive, smaller players have a fighting chance. Unions help them to negotiate lower port fees and fill container ships closer to capacity for every voyage. Alliances also mean that major players in the industry can rely on each other when it is convenient to do so, sharing resources in mutually beneficial ways to keep prices low for customers.

There Will Continue To Be A Truck Driver Shortage

While futurists worry about the impact that autonomous trucks might have on people who make a living as truck drivers, the main concern for the industry right now is a shortage of people with the skills to pilot heavy goods vehicles. There are two reasons for this: the aging workforce and the increasing demand for goods.

The US, for instance, is in an unfortunate position. Many truck drivers are entering their 50s and 60s, and few young people want to be in the sector. Commercial trucking companies are having to put up wages to attract new people while at the same time fighting fierce competition from other distribution modes. Pushing up their costs is not ideal.

Then there’s the safety element. Every year, thousands of people go to a truck accident lawyer because of smashes involving heavy goods vehicles. These accidents are often a lot more severe than those involving regular motor vehicles because of the size and weight of the trucks involved. Truck drivers face a risk to their health and are a liability to other road users, making the notion of driving a heavy vehicle for a living less appealing.

Finally, there’s the demand issue. The economy continues to grow, goods continue to get cheaper, and people continue to order more of them. The sheer volume of stuff that needs transporting around the country rises every year, and that requires drivers with the skills to shift it all from A to B.

What is surprising is how demand is not driving new people into the sector. The market is not reacting how economists might predict, and even with increases in wages, more people are dropping out than entering. While demographics are partly to blame, a lot of the reason surely has to do with the worry of young people that truck driving jobs won’t be around forever. People want job security, and they’re not convinced that they will get it in the logistics sector.

Blockchain Is Changing The Supply Chain

Hundreds of thousands of small businesses export and trade abroad. But performing these international transactions is a challenge. Cross-border exchanges of goods are fraught with security and fraud concerns, meaning that it’s easy for companies and customers to lose money because of criminals.

The solution, some believe, is blockchain. In 2019, we’re likely to see smaller exporters with less robust security systems rely on the blockchain to determine when goods exchange hands. Blockchain creates a permanent record of who owns what at any given time, providing companies with the security that they need to receive international payments and transfer ownership.

Blockchain also promises to reduce the incidence of human error associated with international transactions. Right now, it’s easy for a supplier to make a mistake on an invoice. But with blockchain, companies can trace every purchase.

Safer Payments Across Borders

Related to this will be safer payments across borders. Logistics companies are perhaps the firms that stand to gain the most by using cryptocurrencies. The advantage for these firms is the fact that digital currency doesn’t care about borders. It has the same value whether you’re in Bahrain or Burma.

Shipping companies will find cryptocurrencies appealing for another reason: the fact that they will get paid faster. Current banking arrangements mean that some shipping firms have to wait up to seven working days for transactions to go through. The slowness of the current system means that many end up with cash flow issues and have to take out expensive bridge loans to continue their operations. Safer payments across borders will end all of that and allow the logistics industry to bypass the somewhat outdated international banking system.

Logistics has always been at the forefront of change and will continue to be so in the years to come. The industry will adapt, but the worker shortage will continue to be a concern.

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