Trends and developments for logistics service providers in 2020
December. The month filled with festivities, happiness, (too much) lovely food and presents. And this fuss is something you as a logistics service provider experience the most. Because the more we consume, the more stores sell and the more you store and ship. After this month it is time again to look forward and I am happy to help you with this. Take a look at the trends and developments for logistics service providers.
As the introduction might give away, logistics is closely connected to our daily lives. Is logistics down? Then the entire country will notice it. At the same time the reversed applies: our daily lives influence logistics a lot. The trends below have an effect on logistics from society, or the other way around. Anyhow, logistics service providers will experience them.
Economic trends logistics service providers
Let’s start with the economic trends. Because this area is one-on-one connected with the logistics sector. A better economy means more consumption and thus more jobs coming from retailers and other customers. What can you expect regarding economics in the transportation sector the coming year?
Less or no sector growth in 2020
Where the transport sector showed a steady growth the last few years, this growth will stagnate in 2020. Some institutions even expect a shrinkage of the market. Despites the differences between these predictions, every trendwatcher agrees that the coming year will be less positive than the ones before. This also effects the business trust.
International trade affects business trust
The economic situation of the sector is making companies less enthusiastic. This mainly originates from the international trade conflicts. Think about the trade wars between the United States and China. And most definitely since the latest elections about the Brexit. In January 2020, it is really coming this time. But we need to place a remark with these numbers: the sentiment amongst logistics service providers and more specifically amongst package transporters is still positive. They expect growth in their businesses.
HR challenges are still there
Finally, I would like to point out the labor market situation in your sector. Because this has been putting pressure on your activities for some time now. Over 30% of logistics companies in the Netherlands says the struggle with finding new personnel is their main limitation in their work. The economic growth of the past years combined with this situation make the wages rise. And in an cost focused sector with just a few percentages margin, it has quite some effect on your results.
Technological trends logistics service providers
Next, we will move on to the technological trends that apply to you. In the last decennium, logistics made a transition towards Smart Warehousing. Looking at the labor shortage, this is highly necessary: your dependency on (expensive) personnel is something you should limit to guarantee your profitability. This trend already took place, so I will appoint you to two trends of the future.
Smart warehouse is the standard, warehouses will become intelligent now
In another blog, I already elaborated on the fact that warehouses will soon be intelligent instead of smart. The definitions of smart and intelligent are actually the same, but not in practice. The biggest difference? Smart usually stands for real-time information provision and intelligent for predictive and advising. This can be combined with automated robots, but this is not necessary. Then again, robots will be more and more in warehouses in 2020. For intelligent warehouses you need two important things: data and calculation power. So, prepare for necessary adjustments of your system, so you too can move on together with these developments.
Durable transport: how can you achieve it?
The second and last technological trend can also be defined as a political trend. Because international political discussions about emissions and the climate in general is something that concerns logistics. The conclusion? Transport needs to be more durable. The main question is how. Electrical trucks seem unrealistic due to their limited action radius. Hydrogen-driven trucks might be a better alternative, but a complete transition before 2025 cannot be achieved. This is mainly because of the minimum growth (or shrinkage) of the sector. But still, politics expect that you will do your best to reduce your emissions. Rabobank mentions a few solutions: new diesel models financed by the government, local collaborations for more efficient planning and a increase of hubs (=decrease of driven miles). Which solution do you think fits best?
Business trends for logistics service providers
All these trends and developments obviously affect your way of doing business. What do we see in the market and what can you expect the coming year? To start, the “from bricks to clicks” trend keeps on going. Logistics service providers expand their service package with e-fulfilment. But a threat comes forward: big e-tailers such as Amazon are going to mingle in logistics and this might lead to you having a strong new competitor.
Another business trend is the rise of providers of total logistics services. The rising wages and tight labor markets mainly affect labor intensive companies like road transporters. Combine this with the rising need to external storage (also due to the brick to click movement), and you will see that transporters also offer third party storage as a service. That way they support their customers even better (and create more customer loyalty), expand their service package and boost their margins.
The biggest challenge for logistics service providers for 2020
The latter brings me to the latest attention point of 2020. Your margins. Because Rabobank also states the following: transport is too cheap. But at the same time this is the price your customers are used to. This leads to the biggest challenge of 2020 for logistics service providers: managing rising costs with minimum growth. How can you react to high costs if you have tight margins and a limited growth? Can you increase your prices? Can you work with standard margins instead of an asking price? Prepare yourself for 2020, but above all: enjoy the new year.