What are the current Transportation challenges?
- Sharp Fluctuations in fuel pricing
The sharp fluctuation in fuel pricing can be explained by the constant rise and fall in oil. The OPEC (Organization of the Petroleum Exporting Countries), led by Saudi Arabia, has often refused to curb production on the overall market which has resulted in an abundance of crude oil. This increase caused a disparity between the demand and supply of crude (which is later converted into other products such as fuel), with repercussions on fuel prices. The matter is still to be solved.
- Driver shortages
Though the future looks bright for the truck industry, the shortage of drivers is a result of various factors. Demographically, a lack of availability has been noted. Low wages have also contributed to a decrease in some drivers. One more important factor is the working conditions which apparently are unsatisfactory, taking into account the dangers and weather conditions while driving in extreme regions.
- Expansion in 3PL / 4PL providers
Charging higher prices for providing external services to a company’s logistic operations is a new addition to supply chain. 3PL and 4PL providers are third party and fourth party logistics company which manage part or the complete supply chain distribution. Obviously, if you need them, charges may be higher given that corporations have to cope with increased competition on the market, creating a need to provide better service. Or the service may be out of your demographic area.
- Commoditization of carrier pricing
Commoditization in transportation has a direct impact on whether a company dispatches its products or hires a third/fourth party provider to do so. The transportation services market, being heavily price-driven, results in consumers having less focus in distinguishing between companies’ products and services, but will put more emphasis on buying the cheapest alternative. Pricing is the only competition which transportation services rely on. In a recent article published in Logistics Management, Maersk was cited to finding an innovative way to increase the scope of its services through an end-to-end approach with a new trade finance offering to counter commoditization. IMD insights, in an article written by Professor Stefan Michel and Michael Sorell with Michelle Perrinjaquet, further suggested Pricing Excellence as an effective strategy to contain commoditization. The main driver is to create more value; a company needs to understand the core capabilities that influence organizational pricing and capture this value in its pricing strategy.
- Expanding use of technology tools
Many companies are still reluctant to adopt new technologies. Digital technology innovation is sure to transform the trends of supply chain and procurement in the future. However, a slow conversion to technology may give other companies which are digitally equipped, a competitive advantage.
- Increasing regulations
Regulations are imposed to create a clear and legal functioning in any field, which also applies to supply chain. Regulations on the hours of services, compliance, and safety, accountability are vital requirements. Fulfilling all of them without falling prey to legal complications is a real hassle. Some companies have a real trouble meeting this end.
Adapted from: Transportation 2025 Megatrends &