Challenges for the transport sector in the digital age

Online businesses have been gradually establishing themselves and growing over the years in our country, and have become a reality for the vast majority of users. This has meant a new working model for some dependent and collaborating industries, such as transport and logistics, which have seen how this change has made them evolve.

The customer, understood as a consumer user, has an increasing variety of providers, solutions and services to choose from, and the barriers to change are lower and lower. Mass connectivity, dynamic pricing, service integration and new business models are just the tip of the iceberg…. The power of the customer is growing, while business competition is getting tougher.

The search for profitability, the definition of a business strategy and collaboration between operators are issues that require an urgent solution.

But it is not only these factors that have an impact on logistics and road freight transport; there are other elements that create new challenges for the sector. The pandemic, the recent fuel crisis, rising inflation and the war between Russia and Ukraine also play an important role.

All this evidence means that organisations are becoming increasingly concerned. It is important to understand what is happening, to know what challenges the sector is facing and how to respond to them.

What is digitisation?

It is difficult to share an exact definition of digitisation, but we could define it as the conversion of analogue systems into digital ones, i.e. processes that have changed to introduce a technological evolution in terms of actions that companies used to carry out with analogue systems or directly manually.

On a more business level, digital transformation or digitisation is the re-organisation of all processes and work actions of a company by optimising them in such a way that the company saves time and considerably improves its entire business strategy. This is made possible by the implementation of new technologies that offer much greater control over all processes in the supply chain.

The main characteristics of digitalisation are:

• Cost reduction.
• Automation of actions.
• Improved information and communication.
• Increased efficiency.
• Disappearance of borders: globalisation.

Challenges of the sector

In general terms, the transport sector is highly atomised, fragmented and with a high level of intrusiveness.

Stressed supply chains, digitalisation to become more efficient, increasing omni-channeling, driver shortages, CO2 emissions reduction and flexibility in the face of the current uncertainty are the main challenges. Let’s take a closer look at some of them:

Tensions in the global supply chain

The imbalances caused by the Covid crisis and amplified by the war in Ukraine since then have changed the situation. Transport companies will continue to face the challenge of ensuring service in a context of disruption: bottlenecks in shipping and shortages of raw materials cause delays in goods flows and production to accumulate, forcing the search for new supply points and alternative goods movements.

Complexity due to increasing michelinization

Consumer buying habits have changed, consumption has opened up to a myriad of distribution channels, and this creates new operational challenges for the sector, which must ensure availability in each channel.

Cost increases

Linked to fuels and legislation. Fuel prices experienced an unprecedented rise during the first two quarters of 2022, where we saw the average price of diesel in our country rise from €1,388 per litre on 1 January 2022 to €2,042 on 16 June, an increase of 47% in just 6 months.

For 2023 a reduction in petrol prices is on the horizon, however, these do not seem to be very striking, as they are reduced by 20 cents per litre, this adjustment would be made at the end of December, which would give a slightly different start to the year 2023 in the country.

Driver shortage

This is a decisive point which has been critical and dramatic in recent years. The transport profession, despite being an essential activity for the economy, has little social recognition and offers unattractive working conditions for new generations.

Decarbonisation of the transport sector

It is not yet easy to find transport providers that can measure the carbon footprint of their operations. However, the EU is committed to achieving climate neutrality by 2050. To achieve this, the transport sector must undergo a transformation that will require a 90% reduction in greenhouse gas emissions, while ensuring affordable solutions for citizens. This is a challenge that the sector will have to meet in order to make its commitment to the environment a reality.

Customer experience

Improving customer service and satisfaction is increasingly important, requiring faster deliveries and delivery to any location, which calls for a shift towards increased collaboration between operators specialising in particular groups of operations or customers.

Recommendations on how to address industry challenges

The new customer experience and empowered business models are forcing companies to transform internally to develop a digital culture, more agile processes and operations, and networked working and collaboration, enabling them to cope with change as quickly as the market demands.

A number of challenges are identified that persist over the years, although the new economic and consumer realities imposed by the
The new economic and consumer reality imposed by the COVID-19 pandemic has accelerated the search for solutions and the profound transformation of the sector:

Process automation and new technologies

Optimisation of preparation and delivery times requires the creation of automated processes to reduce errors and increase speed. Automation in warehouse management, transport and distribution, waste recycling and environmental protection, as well as administrative support management.

Other advances that we can make use of today are Big Data, the Internet of Things or AI (Artificial Intelligence). With them we will achieve greater efficiency throughout the process and almost immediate connectivity between the different areas of the chain.

Jobs adapted to the new reality

In a changing, technological environment, human resources are of great importance for logistics and transport companies. Prioritising the human factor means improving loyalty and gaining productivity.

Logically, for this to be achieved, the sector needs professionals with a clear specialisation. Operators with profiles with advanced knowledge and experience. In other words, quality technicians who supervise the performance of the supply chain.

Digitalisation of document management

Sharing information in a more agile way, digitalisation of both internal and client documentation with the consequent saving of space in the office, automatic filing of documents, automation of processes and forms.

Anticipation and flexibility

The pandemic and the many other problems that we have experienced and are experiencing in recent years, which we have already mentioned in general terms, have made us realise the importance of anticipating and adapting to possible problems that may arise. The transport industry must evolve towards a more flexible model that can adapt to both service demands and external incidents.

Collaboration

In two areas: on the one hand, at an internal level, digital tools allow for increased collaboration between operators, thereby increasing personal productivity. On the other hand, new mechanisms for collaboration with complementary companies and synergies must emerge. Learning to partner and collaborate.

Sustainable logistics

Another point that cannot be overlooked is the sustainability of the sector: reducing carbon dioxide emissions both in warehouses and in transport, digitising a large part of the documentation or the reuse and recycling of materials must be a priority for everyone.

Improving service quality

Customers increasingly demand a better quality service, with better conditions and with guarantees that deliveries are made on time and in the right way. Achieving a top quality service will make us become the recurring company they turn to when they need a delivery, and this involves adapting both working conditions and vehicles for a better working day.

Looking to the future

The rapid evolution of new technologies and their affordability is driving people to adopt them on a massive scale, making their lives easier. This is causing organisations and their ecosystems to transform, not only to improve their competitive position, but sometimes to maintain it.

The road freight industry faces 2023 with a mixture of optimism and uncertainty. According to experts, “in the next decade the sector will undergo the biggest transformation in the entire history of road transport”, brought about, among other external factors that we have already mentioned, by changes in the habits of consumers who want goods to arrive immediately, cheaply and in a personalised way. We are facing a new, different and demanding customer.

For this very reason, these sectors, in which we include ourselves, have in the improvement of efficiency, sustainability and digitalisation our main challenges for the future. Will we manage to overcome them? At Conde Fernández Hermanos we have no doubt that we will.