Encouraging prospects: Expert group presents optimistic forecast for logistics sector for 2022
Urgent recommendation to digitalise and establish standardised technologies for operational and administrative processes
First the good news: In its Executive Summary*, the summit of the logistics advisory panel of the initiative “Development Forecast For Logistics In Germany” under the honorary patronage of the Parliamentary State Secretary at the Federal Ministry For Traffic And Digital Infrastructure, Steffen Bilger, concludes that the logistics sector will continue its dynamic growth during the year 2022. The report sees real growth potential of up to 3 per cent, powered by the expected gradual removal of the current supply chain bottlenecks affecting raw materials and components, and recovering consumer confidence. However, growing demand and an increasing vehicle maintenance overhead will drive up prices significantly. In particular, transport capacity shortfalls and the shortage of skilled labour will force companies to spend more money on providing the same services. Similarly, IT expenses will continue to rise as the necessary digitalisation efforts continue. But the report sees no particular reason to worry since these investments will ultimately help save costs. To maintain its competitive edge, the logistics sector should demonstrate courage, determination and the willingness to change perspectives, and deploy “the right technologies”, the experts say in their ‘recommended actions’.
The expert group’s predictions for 2022 at a glance
- The expert group predicts that the current supply chain bottleneck affecting critical components will gradually dissolve during the year 2022, prompting a significant increase of the demand for logistics services from the automotive and industrial goods sectors.
- Furthermore, the investment gaps which accumulated during the COVID-19 crisis will gradually be closed in 2022.
- The experts do not expect the pandemic to play a decisive role in 2022 as the crisis wanes; rather, they see consumer confidence rise steeply in the wake of a high savings ratio in 2021, predicting a growing propensity to buy in the private consumer segment where the accumulated demand is highest.
What does this development mean for part-load logistics?
Speed, flexibility and a high volume of small orders – factors characterising B2C e-commerce – will continue to have a noticeable effect on the B2B market in 2022. Similar trends were clearly evident in 2021. In its study “Stückgutlogistik in Deutschland“* (Part-Load Logistics in Germany) published on 24 August 2021, the German Federal Forwarding And Logistics Association (Bundesverband Spedition und Logistik e.V., DSLV) wrote: “The change of the ordering behaviour of private households, which has accelerated during the COVID-19 crisis, has strengthened the ties between the services offered by supply chain logistics networks and online commerce. This has caused the share of direct deliveries to private households (B2C) in the sector’s overall transport volume to grow abruptly from 10 to 17% in a matter of a few months. This ongoing trend is accompanied by shrinking unit sizes.” With a combined transport volume of 130 million units during the year 2021, operators in this segment had to manage an enormous and steadily growing number of individual shipments amid worsening operating conditions, with specialised personnel, especially dispatchers and drivers, in short supply.
This ‘atomisation’ of consignment processing and delivery processes has caused process costs in the B2C business to rise much more steeply than in the B2B segment. In its “DSLV Groupage Index”*, DSLV reported a 3.5% jump of distribution costs during the first six months of 2021. The torrent of shipments pushed many network operators to the limits of their capacity, the report said; the volume of consignments had risen by nearly 20% compared to pre-crisis levels. The resulting need for additional staff, which the market is unable to fulfil as mentioned above, has driven up personnel costs by 5.1% in 2021, according to the report.
Unpredictable demand aggravates the situation
The disruptions of global supply chains, which have been in the news on an almost daily basis, are an additional factor eating away at the profitability of part-load logistics operators – for two reasons: Deliveries of new vehicles, trailers, vehicle spare parts and AdBlue have seen repeated delays which have hampered fleet availability, in addition to the lack of drivers. Furthermore, repeated lockdowns along with numerous staff absences due to illness during the COVID-19 crisis have caused massive staffing problems, especially in East-Asian ports. All the major ports around the world are congested, and cargo ships have to spend days at sea waiting to be granted passage to the piers for discharging. Container terminals are notorious bottlenecks in multimodal logistics, even more so in the current situation. As a consequence, there is a severe shortage of containers, the supply of raw materials to the industry is erratic, and commerce is struggling with an unpredictable supply situation. Despite the high general need for transport services, unit-load logistics companies cannot count on a steady flow of orders. Since the entire industry, including its subcontractors, is affected by this uncertainty, planning has become extremely difficult – yet another factor that has a negative impact on the cost situation. In the event that COVID rules are tightened again in the coming weeks and months and traffic across international borders is affected, further staffing problems due to travelling restrictions could result.
Part-load logistics is “a resource-hungry network, a mechanism that needs to operate as smoothly as possible, supported by fine-tuned processes,” the August 2021 DSLV report stated. It sees the greatest optimisation potential in digitalisation and automation of administrative processes. Beyond cloud-based sharing of data across depots and GPS-connected vehicles, the industry is hoping for further technical enhancements to improve planning as well as integration of digitalisation and Artificial Intelligence to mitigate the current challenges. These expectations are consistent with the digitalisation recommendations of the expert group of the logistics advisory panel for a successful year 2022. In summary, the experts encourage the industry to:
- be more willing to take risks and embrace innovative technology and new business models
- optimise predictability by implementing a rigorous strategy combined with flexibilisation
- improve the operating framework and find new ways to recruit specialist staff
- enhance training and education efforts in logistics and take decisive action
- empower logistics systems to account for volatility, complexity and dynamics
The transport logistics industry is undergoing a fundamental transformation. A shortage of trained staff in nearly all segments and rising energy costs, combined with a growing awareness of the importance of green logistics, are giving fresh impetus to digitalisation initiatives in logistics. At the same time, new digital forwarders increase the competitive pressure while the volume of shipments continues to grow, driven by the pandemic. As a consequence, many logistics companies have reached the limits of their manual dispatching capacity. Digitalising the dispatch process is therefore much more than just another step to optimise business operations; it has become a matter of survival.
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*Available in German only