We are currently managing the most substantial and unprecedented set of macro-economic shocks to logistics and supply chains in decades. With the compounding effects of a lack of drivers, record-high fuel prices, raw-material shortages, truck shortages, war, a pandemic and the return of inflation, the logistics industry has been front and center in the news on a regular basis.
COVID-19 was initially responsible for much of the initial disruption, impacting monetary policy, manufacturing, demand, transportation, and logistics. But significant additional factors like the war in Ukraine, changing EU road legislation, and complications post-Brexit, further exacerbated the situation.
The industry must address the fallout from these disruptions, such as ongoing supply problems, a shortage of capacity, rising fuel prices and still too few drivers. We must consider how we can mitigate the effects of these issues, restoring the effectiveness and efficiency of global supply chains to pre-pandemic levels.
An uncertain future
For the first time in nearly 40 years, we are generally living in a high inflationary environment — in July 2022 the EuroZone experienced inflation of 8.9% year-on-year. According to the European Road Freight Rate Benchmark for Q2, prices ended Q2 2022 at historic highs across Europe, following eight consecutive quarters of growth. The spot market is contributing to high prices — the same report states that the key Paris, France to Madrid, Spain corridor has seen a rate rise of 21.2% quarter-on-quarter — twice the average increase in European spot rates.
Drivers have been feeling the capacity crunch too. The truck and bus operation in late 2021 found that of the 427,105 trucks checked across Europe, more than 13,000 drivers — the highest number ever — were found to have violated rest time legislation, driving their vehicles for longer than legally allowed without stopping for mandatory breaks.
Regulation, in the form of the European Commission’s Mobility Package I, which requires trucks to return to their country of registration every eight weeks, puts additional pressure on the current situation. Furthermore, semiconductor shortages have limited the production of new trucks, resulting in lengthy lead times. According to the ACEA, in June 2022, EU commercial vehicle registrations tumbled by 22.5% compared to June 2021, counting 144,210 units. Therefore, even as freight rates increase, carriers are unable to upgrade or expand their fleets to match demand.
Fortunately, I believe there are two actionable steps we can take to improve the situation:
1. Mobilize industry and governments to focus on the sector’s most important stakeholder — its people.
We are seeing driver shortages across Europe. This is not surprising. Conditions are tough for those on the road and I’d like to see improvements, such as secure parking and showers, and a reduction in the level of administration surrounding training and tests for HGV licenses.
It is understandable that governments have made efforts to make journey times less grueling. But we have also seen a move to make drivers return home more frequently, making longer term trips challenging. The industry and governments must work closely to formulate legislation that works for everyone.
Historically, a career in the logistics sector might be seen as an unattractive option. As an industry, we need to change this misconception. The pandemic highlighted the importance of logistics, from transporting COVID-19 protective equipment to working around the Suez canal blockade, and trying to securely transport in-demand rare materials like semiconductor components. If we improve life for our existing drivers and get better at communicating its importance, we may well see an easing of the capacity crunch which would drive down shipping costs, speed up delivery times, and contribute to more resilient supply chains.
2. Continue to develop and increase the usage of technology, improving planning and efficiency.
Better utilizing industry technology is an essential action that’d benefit the logistics sector. It will help us plan for the unexpected and will also create a more efficient and resilient network. We cannot predict the future, but widely utilized risk-based scenario modeling and forecasting does help us to plan for a broad range of eventualities. Relevant examples include understanding the impact of driver shortages on capacity, and factoring this into tendering decisions, or identifying alternative routes that account for road closures and blockages. Operationally, a strong understanding of driver shortages and capacity can build resilience by informing supply planning and optimum inventory levels to anticipate and mitigate potential disruption ahead of time. As the information available grows, these models can be expanded and further automated.
Carriers are increasingly employing technology solutions to improve the efficiency of their fleets. Automated planning tools, in conjunction with real-time sensors and connected monitoring devices, can optimize routes and maximize full-truckload (FTL) initiatives, essential when capacity is limited. Indeed, companies booked more FTL movements during the pandemic to guarantee access to capacity. Furthermore, the use of tracking solutions to accurately trace a truck’s journey and reliably predict its departure and arrival times will significantly reduce time spent waiting at suppliers’ or customers’ sites, especially if real-time slotting is in place on site.
And, given the current delays in procuring new vehicles, carriers can use data from connected sensors to improve maintenance cycles and extend the life of their current fleet.
The logistics industry may have emerged from the worst of the pandemic but we have seen a new set of challenges across Europe this year. “Business as usual” may not look like how we remember, but I’m optimistic that the private and public sectors can work together to solve the capacity crunch. And, if we successfully utilize existing technologies, I feel we can create a better industry for all, at least in Europe.
Thomas Christenson is chief operating officer of sennder.
Timely, incisive articles delivered directly to your inbox.