Today’s global logistics environment is characterized by increasing complexity and a much greater number of parameters shaping the logistics environment.
The speed of trends is breathtaking and increasingly complicated – and there is a need for the public sector to provide greater levels of support to facilitate economic growth.
One of the immediate implications is the growth of regulation and protectionism. As the private sector seeks to expand its growth in emerging countries, there is increasing pressure economically in these countries to levy import codes and product restrictions to drive revenue and protect local industries. The failure of the WTO to drive liberalization has resulted in increased regulatory barriers to logistics.
Indeed, Globalization is forging ahead – but has changed direction. Globalization linked with increasing labor costs in countries such as China, as well as fuel costs and regulatory shifts, are driving a dramatic impact on where companies source, where they produce, and the complexity of processes required to sell to the customer. Risk is accelerating, and every two weeks companies encounter some sort of logistics problem as a result of volcanoes, wars, tsunamics, or other complications.
Data integration and big data is another key area impacting logistics. The sheer amount and spread of data that organizations are expected to capture, interpret, hold, and represent and make available to customers is a major impact. The cloud, the internet, machine to machine stuff, impacts how companies do things and manage logistics. Along with this requirement, shipment reliability is becoming a key area.
To make things even more complicated there is shortened leadtime for success. Capital decisions now often require an 18 month payback, and have to be more flexible because things change around it more quickly. One manager interviewed noted that “we used to design a logistics network for 5 years, but now these network designs are only good for 12 months. Impacts such as fuel, labor, tsunamis, route to market and all those things will change will make it essential to have absolute flexibility. We have to re-design our networks every 12 months now.”
Sustainability has also accelerated, although it has hidden itself under a stone because of economic crises and despite the crisis it is popping out and impacting the logistics industry to improve its carbon footprint. Along with this requirement, there is an increased focus on cost containment. The highway infrastructure is bloated, and will continue to grow. Even trucks with batteries highways will still have trucks queued up. We need more integral situations that will get containers off the road. Shippers are demanding sustainable transporting in the future, which can only be done through intermodal transport using all kind of modalities But for big shippers, it is very difficult to provide sustainable transport because they can hardly bring up enough volume for high connections into barges into many destinations. A connection once a week is NOT a connection. Nobody at the moment has a forwarder shipper with enough capacity to fulfill demand – and the trend is that people want to work together on this matter. For example, a large consumer company is seeking to bring their transportation profile from 100% truck to 50% truck and 50% intermodal – but they can’t do it on their own, even though they are one of the biggest global shippers. Independent terminal operators and government agencies can play a part.
European port operators are currently working on a hinterland strategy to integrate ocean freight with other modes. In Europe there are a lot of mono-modalities – boxes are trucked from A to B and on top of that intermodal –movements by barge on the Rhine are accompanied by the last mile in a truck. What is needed are not just modalities – but systems to cope with the diversion of logistics. A new way of thinking involves synchro-modality – to enable companies to switch from a modality on an hourly basis whenever needed. Government agencies will play a key role in helping to deliver that capability to the market – and we could see shippers and forwarders giving customers you more access to their systems – which than becomes a system that doesn’t pull containers, but pushes them into the market.
If you have bill of ladings and know where a container has to go, as well as knowing the final date and time – you could organize it differently then we do today. Ocean port operators could collaborate with forwarders, barges, truckers, and shippers to run synchromodalitiy pilots.
Companies are now also truly looking at end to end strategies, although they have largely paid it lip service in the past. With the need for increased productivity and increased flexibility, it has become a more important approach to drive solutions that are end to end. As one manager noted, “you are expected to expand what you do, do it better higher quality in more places – but also reduce your cost – which is complicated to do.” In this sense, reliability is one of the key issues that is on the forefront of discussion in this area.
There are also very interesting new developments in the area of collaboration, particularly with the growth of logistics clusters in key areas. Transportaiton collaboration has become a critical area of interest, with competitors even looking at collaborating on transportation resources, particularly for international logistics.
The importance of an information platform is also critical. In the future customers will have reach into supply chains, to be able to track the state of their product order. As IP addresses are attached to more and more processes and machines, customers will become increasingly involved in the supply chain and determining product customization requirements and outcomes.