Analyst Insight: Never before have transport and distribution been the focus of such public discussion. Disruptions caused by events of the past three years have made transport and distribution increasingly difficult. The industry has been confronted by cost challenges, environmental pressures and an increased level of competitiveness. Transport and distribution are seeing a shift from being an “always available commodity” to an area of potential competitive advantage. 

The biggest challenge for the transport and distribution sector this year will be the continuing need to tackle these ongoing issues, as they show no sign of easing for businesses. 

In recent years, particularly with the shift in retailing from the high street to online, transport and distribution have become a competitive capability. This was largely fuelled by the rise in e-commerce during the pandemic, which saw the likes of Amazon.com reporting profit increases of nearly 220% in less than a year from the first lockdown. Businesses were forced to compete on speed of service. With the introduction of next- and same-day delivery and ever more competitive promises of service, these new offerings are requiring nimble and efficient transportation capability.  

The price of transportation is continuing to rise in line with inflationary pressures. Fuel prices have reached an all-time high, especially in the United Kingdom, and remain volatile with geopolitical circumstances and the dollar-pound exchange rate. Add to this the well documented driver shortage crisis, which resulted in spiralling labor costs. 

The rising cost of fuel and labor is coupled with environmental pressures on businesses to switch to more sustainable options. Some have made meaningful steps toward sustainable transport, with Waitrose in the U.K. developing a fleet of electric vehicles with wireless charging technology for short-distance journeys. However, there remain barriers to the growth of EVs, including the lack of infrastructure and charging capabilities.  

Looking forward, transport can’t continue to be seen as a commodity by users in 2023. There needs to be significant investment in technological advancement, for both financial and environmental reasons. A major investment in technologies to speed up last-mile deliveries is vital if businesses are to stay competitive in the rapidly changing market. Increasing the number of drones used to deliver small packages quickly to local areas, as well as driverless vehicles, will be paramount to the success of the transport and distribution industry this year. 

Furthermore, investment into the development of alternative fuel sources is desperately needed to meet government and business net zero targets and to avoid businesses collapsing due to extortionate transport costs. This includes improvements to the availability and technology behind hydrogen and electric vehicles, and the development of Electric Road Systems (ERS). While there have been some green initiatives introduced by the government concerning transport, considering that up to 90% of a business’ carbon footprint comes from its supply chain, more needs to be done, and fast.  

Outlook: Ideally, the next 12 months will be a period of real change for the transport and distribution industry, as it adapts in order to cope with ongoing global disruption by embracing technology to reduce costs, improve sustainability and stay competitive.