Good morning, and welcome to TEG Transport Insights.
In preparation for a recent talk on transport pricing, earlier this month, I considered the factors that have influenced road transport prices over the last five-or-so years. The list is long: from Brexit to trade barriers and covid to conflict, in recent times, our industry has endured a storm.
A sector on the up
And yet, despite volatility, our sector is on the up. Here in the UK, the logistics industry added £139 billion of value to the economy in 2019. By 2023 (the latest figures available), that figure was £170 billion; a 22% increase. Volatility should impede us. It hasn’t. Why?
Shifted mindset
There are several explanations, but chief amongst them is a shifted mindset. External shocks have long affected our sector, and the textbook response is to batten down the hatches. This decade, however, severe and frequent shocks have been met with little more than defiance. 3PLs have, as opposed to cowering, adapted typical operating models. They are now stronger as a result.
Using data to predict the future
Some 3PLs are responding to the new normal by investing in data, in an attempt to see farther ahead and sense disruptions early. This makes sense: with AI technologies advancing, it has become possible to bend big data into elaborate predictive models, and when you know what’s coming up, you can adjust your operation early. Could a model trained on past data forewarn of the unexpected? Even enthusiasts see flaws.
Diversification
Other 3PLs are focused on spreading risk, serving a broader range of sectors and markets to hedge operations. When one sector or market dips, the theory goes, another expands. So long as you are serving either end of the see-saw, buffers to misfortune will always remain.
Collaborating for greater resilience
And then, of course, there’s collaboration: adding not trucks and warehouses to balance sheets but carriers and partners to black books. ‘Hybrid logistics’ is growing quickly because it grants 3PLs not just security but anti-fragility. With agile networks, 3PLs can cash in during demand spikes yet they remain unharmed by contractions. 3PLs have long talked of greater levels of collaboration. Now, thanks to advances in supplier onboarding, compliance and payment tech, their plans are playing out.
The above list is not exhaustive. But following any of its strands leads us to the same conclusion. How are logistics firms prospering given our current, shaky environment?
By accepting the current environment as shaky – and reacting.
James Mead
