In the dynamic realm of Transport and Logistics (T&L), every journey comes with its own set of obstacles. From cost pressures to technological advancements, the industry is constantly evolving, presenting both challenges and opportunities for growth.
In this blog, we delve into five pivotal pain points that T&L companies face today and explore how strategic solutions can pave the way for sustainable success:
1. Cost Pressure Management
Cost pressures is having a significant impact on T&L businesses cashflow and operating margins. Rising fuel and energy prices are increasing direct costs, while competitive contract pressures, to undercut rivals for the best routes, is also having an impact. In addition, supply chain issues, like the Red Sea shipping lane crisis, are exacerbating the situation.
T&L businesses must, therefore, assess costs and performance across their entire operation, from supplier to end consumer. Understanding both value-added and non-value-added time is crucial for improving efficiencies and profitability to gain a competitive advantage.
Cost management has become vital to controlling operating profits and cash-flow. Access to finance is also essential, with invoice discounting and financed fleets on Hire Purchase, being the sector’s funders favoured lending methods. However, T&L businesses are feeling a cashflow squeeze, due to accumulated debt from Covid-19 and high debt service costs, from increased interest rates.
The shortage of cash is further impacting subcontractor payments, where T&L businesses are struggling to meet finance obligations. This is causing funders to scrutinise T&L businesses Financial Statements and Management Accounts.
2. Staff Shortages
The T&L sector covers everything from managing raw materials to delivering products to the end consumer. To meet market demands, T&L businesses need defined customer service policies.
The sector is facing staff shortages, including drivers and warehouse operators. T&L businesses recognise the importance of enhanced training to develop multi-skilled workers, that can respond to changes in demand and shift patterns.
The market is also shifting from a product-based to a service-based set-up. Traditional T&L companies, with multiple layers of management, need to revise their organisational structures to remain competitive in changing markets, competitive forces and technologies.
3. Future Planning
T&L markets are becoming more competitive, requiring businesses to adapt their strategies for greater flexibility. Globalisation is also impacting the sector, emphasising the importance of effective supply chain management, to improve profitability.
Challenging trading conditions and market consolidations are also prompting change to existing mindsets. T&L businesses are, therefore, considering new strategies or even exit plans, including sales or divestments, to maximise trade sale value.
A clear strategic vision and understanding of the business’s financial situation and lending strategies are essential. Future planning methods being explored include, but are not limited to, reducing employee numbers, renegotiating supplier terms, moving to smaller premises, and even selling existing assets.
T&L businesses are also considering additional investment, debt restructuring, and organisational changes.
4. Increased Regulations
Increased regulations and ‘red tape’ are putting additional strain on the sector. Trade agreements govern cross-border goods movement; therefore, T&L businesses need to consider both import/export requirements and custom procedures.
Environmental pressures, such as ‘Clear Air Zones’ and ESG scores, are also having an impact. In addition, changes in the VAT rules, increased Audit demands, Grant Schemes and R&D updates are aggravating the situation.
5. Technology Changes
Customers and companies are time sensitive, therefore, T&L businesses must develop fast response systems, to gain a time-based advantage.
The transport infrastructure is also evolving, with customers comparing prices across various travel modes. Digital technology and ‘Big Data’ are becoming crucial. T&L businesses, therefore, need to invest in smart innovations as new tech-savvy companies enter the market, prompting existing businesses to adapt.
Big Data and AI
Big Data, Data Analytics and AI are transforming the sector. Traditional data interpretation methods can’t handle the data overload now available, therefore, Big Data analysis is essential for T&L businesses to gain a competitive edge.
Data Analytics basically converts existing data into useful information, organising and comparing it to other sources to make informed decisions, such as to:
- analyse past events
- understand causes
- forecast future trends
- improve performance
Although most T&L businesses lack the expertise in Big Data and Data Analytics, it should be considered and used to enhance supply chain performance, analyse costs/revenues and improve processes. This requires recruiting, training, and retaining a new type of employee for the future.
How can Xeinadin help?
Xeinadin offers a comprehensive professional service tailored to your needs. Our all-around Business Advisory Services include, but not limited to, financial analysis/forecasting, profitability enhancement, risk management strategies and so much more.
Browse our services page or contact us below to see how we can support your Transport and Logistics business.
