Currently, several bottlenecks in the transport industry are causing increasing operational costs in the delivery process. In this blog, we discuss 6 factors that have a negative impact on supplier profitability in the transport industry.
Rising customer expectations
Increasing inventory fluctuations and constraints are accompanied by rising customer expectations. For example, products need to be delivered more cheaply and in a short time and products are shipped in small batches. As a result, suppliers in the transport industry see it as a challenge to reduce their operational costs. One attractive solution is to invest in digital innovation. Digital innovation creates an automated supply chain, making it more responsive to market demand.
We are facing the highest inflation in decades, which means suppliers are continuously seeing the cost of raw materials and various other materials rise. This translates into excess inventory, inventory shortages, rising operating costs, smaller profit margins, lower revenues and an increase in inflation forecasting and modelling.
A growing labor shortage
There is a growing shortage not only of materials, but also of labor such as truck drivers. At the same time, suppliers are increasingly reliant on temporary labor. This makes it difficult to deliver on time. An automated delivery process can save a lot on operating costs, but it is not the only solution. Consider also, for example, the use of smart packaging to reduce shipping damage.
Rising freight rates
The need for container transport increased significantly during the Covid crisis. Under pressure from global lockdown measures, demand for e-commerce sales exploded. The result is increased demand for imports of raw materials and manufactured consumer goods (a large percentage of which are transported in sea containers). Because this demand was much higher than expected, it creates an unprecedented shortage of empty or available containers, leading to huge price increases. All the more reason to handle the delivered goods carefully, as new goods are not readily available again in the warehouse.
The Covid crisis caused considerable port congestion. This still remains one of the biggest challenges for port owners, carriers and shippers. Congestion occurs when a ship arrives at a port but cannot load (or unload) its cargo because the port is already full of other ships. Because of these blockages and the resulting backlog, many businesses are unable to get their goods out the door on time. This also prevents carriers from complying with delivery obligations.
Environmental law and regulations
There are several environmental issues that have a major impact on the supply chain. For example, from 1 January 2022, only diesel trucks with emission class 6 will be allowed to enter the HGV environmental zone. The same applies to buses, if a municipality declares the environmental zone applicable to these vehicles as well. The European Commission also mandates chain responsibility for the impact of transport on the environment and working conditions. Thus, companies in the supply chain are increasingly forced to implement environmentally friendly transport from procurement to distribution.
Get started on a sustainable transport scheme!
Get started on an automated, efficient and sustainable transport scheme. Would you like to find out about smart technologies that remove the above bottlenecks and increase the profitability of your business? Download our new eBook: 7 Technologies That Reduce the Risk of Shipping Damage.