Trade wars, higher oil import costs, and a spike in interest rates weighed down on the growth of the global transport and logistics industry in 2018. The industry is poised to grow supported by the growth in cross-border e-commerce, finds the Global Transport and Logistics Industry Outlook, 2019.
Brexit, trade war impact industry prospects
Legislative policies like geo blocking and new rules on online cross-border trade in Europe improved transparency in pricing. European regulations on electronic freight transport information, which enabled cargo operations to go digital, resulted in significant savings in administrative costs.
However, the trade war between the U.S. and China resulted in economic uncertainties, which affected trade growth. The renegotiation of the North American Free Trade Agreement resulted in the creation of new regional trade agreements. Meanwhile, Britain’s impending exit from the European Union resulted in increased customs procedures at border points, while also spiking the demand for short-sea shipping between UK ports.
The year also saw the emergence of several logistics start-ups that wanted to address the key challenges in the sector, including empty miles, low capacity utilization, and acute driver shortages. It’s predicted that the shortage of drivers, along with the ongoing capacity crunch, and the intensifying need for digital supply chain, will accelerate the adoption of online freight brokerage services in 2019.
Europe, North America, and Asia will lead this shift to online platform-based freight brokerage and warehouse aggregation services.
Emerging business models
Labor shortages, spiralling labor costs, and the reduction in automation costs will accelerate the adoption of digital technologies such as robotics solutions, additive manufacturing and predictive analytics. In turn, these technologies will enable innovative business models in freight management, warehousing inventory optimization, and e-commerce logistics.
The introduction of Blockchain—a distributed database maintaining an ever-growing record (blocks), where the information cannot be altered—in shipping transactions could save and generate additional revenues in 2019. The technology is expected to overcome current issues related to technology scalability by facilitating a digital ecosystem for data interoperability. Blockchain technology will be adopted by major ocean freight industry participants in 2019.
Big Data will create unlimited opportunities for logistics providers. From driving consumer insights to understanding product flows, such as container lead times, optimized routes, and driver insights, Big Data will revolutionize the global transport and logistics industry.
Smart connected physical assets are the future of logistics
Major warehouses are likely to deploy compact and efficient infrastructure, equipped with robots and drones, to facilitate omni-channel purchase and urban e-commerce delivery. Operational flexibility and scalability of warehouses will be supported by augmented reality and robotic solutions.
Delivery automation will include the more widespread use of automated locker boxes, and increased collaboration with local stores as pick up and drop off points for delivery. Smart containers powered by the Internet of Things (IoT), apart from commercial vehicles with telematics systems, will boost supply chain visibility in the freight transportation value chain.
The decrease in electric battery prices has driven the market penetration of smart grid and electric vehicle (EV) fleets, thereby boosting their concentration in the urban last-mile delivery space.
New transportation initiatives to boost logistics growth
Growth in the market will be uneven, with major economies such as South Africa and Nigeria expected to witness slower growth. Regionally, growth will be driven by investments in infrastructure in key markets such as Kenya and Ghana.
Emerging markets such as India, China and ASEAN countries will lead the logistics industry growth in 2019, powered by domestic demand, rapid urbanization, and infrastructure developments. Developed markets are expected to face uncertain headwinds during 2019 due to rising trade protectionism, labor shortages, and capacity pressures.
In the Big Five countries—the U.S., the United Kingdom, Japan, Germany, and China—economic slowdown and uncertainties over Brexit will affect regional growth. Connectivity and infrastructure improvements and the One Belt and One Road (OBOR) transportation network will support logistics growth in Eastern Europe. Belt and Road Initiative (BRI) projects are expected to have a positive impact on industrialization and trade, increasing the demand for logistics services.
Asia to lead cross-border e-commerce
Cross-border e-commerce formed 18% of the overall e-commerce market, and is expected to grow faster than domestic e-commerce in major regions such as Europe, Asia, and Latin America. About 20% of global e-commerce in 2019 will come from cross-border transactions; with Asia Pacific dominating the segment with an average growth rate that is double that of US and Europe.
The growth in e-commerce will also boost the Courier, Express, and Parcel (CEP) segment. However, the freight transportation and warehousing segments continue to dominate the global transport &logistics market with an 83% share. Given the rapidly growing cross-border e-commerce between Europe and China, CEP participants will have an opportunity to expand their service offerings with a distribution hub that facilitates cross-border exports/imports and customs clearances.
Infrastructure to improve connectivity
With more than 28% of China’s trade is routed to Europe, the development of the Silk Road, an alternate mode of transportation is expected to emerge between China and Europe Increasing cross-border e-commerce is forcing logistics service providers to introduce regular long-haul consolidated truck services across Europe, stretching more than 3,000 kms. The number of rail services between China and Europe is expected to exceed 3,500 in 2018.
The development of economic corridors is expected to form new trade routes and provide alternate modes of transport, leading to increased demand for multimodal transportation. The exponential growth in cross-border e-commerce is pushing the demand for high-mix and low volume over traditional bulk high-volume transportation
In conclusion, the spike in cross-border e-commerce, increased adoption of technology, and improved connectivity will drive the industry in 2019.
For more information on the Global Transport and Logistics Industry Outlook, 2019, please contact Suriya Anjumohan, Senior Industry Analyst – Transportation & Logistics Practice, Mobility at suriya.anjumohan@frost.com
