Why investors are looking closely at transport and logistics
By Danny Hudson, Director of Retail & CPG at FarEye
- Investing in transport and logistics as we emerge from the pandemic
As Europe cautiously emerges from the pandemic and outlines its roadmap to economic recovery, the transportation and logistics industry looks set to contribute significantly to that process. We’ve seen the transportation industry face many challenges, regarding restrictions surrounding the movement of goods – especially considering imports and exports or, in some cases, regional transfers of items. However, new innovative thinking is optimising the transportation and logistics industry to adapt alongside recent trends and the latest investments in transport infrastructure.
The transportation and logistics industry is agile and inventive:
Despite the roadblocks, literally and figuratively, the transport and logistics industry has continued to innovate and work around unexpected market shifts. For example, the lockdowns which occurred due to Covid-19 ushered in a new consumer culture of online shopping.
But this also meant that transport and logistics had to reshuffle existing processing and delivery systems to get goods out on time and deliver on the increasingly high expectations of consumers.
The rise of Intelligent delivery technology
As a result, intelligent delivery systems and route optimisation became a priority for many large-scale logistics and transportation companies. Their use is not only about functionality, but also to give consumers a standout experience that differentiates from the competition – from shopping online, through to parcel delivery.
Here, we’ve seen how Business Performance Management tools (BPM) have assisted with route optimisation, live tracking and predictive analytics, like delay calculation. As for enhanced transparency, it’s greatly important for online retailers and eCommerce companies to partner with delivery agents who merge the ‘pick and deliver’ process seamlessly with real-time updates about package statuses.
Transport: Coordination and efficiency
In order to sustain economic growth during times of crisis, heavy reliance is placed on the efficiency of the transportation industry to move valuable goods from point A to point B. This means that there has to be great coordination between supply chain management and the different channels built into the operational process of logistics management. Great investments have been made in technology-driven infrastructure to insure all ends meet.
Logistics: Growing investments
Despite the economic disruption caused by COVID-19, the logistics industry has proved especially resilient as a result of two major structural trends, namely urbanisation and digitisation of the economy. According to a study by PwC, Urban areas are likely to receive the majority of future investments, as investors “follow the money” and focus on faster growing cities and megacities. Governments may need to offer incentives to ensure that rural areas remain connected when it comes to transportation routes.
Urbanisation and digitalisation will impact logistics service providers looking to make strategic decisions about entering new markets. One of which will be to ensure that both public and private investors give their support and comply with the financial aspects of expanding delivery regions.
- Investments in the transport sector creates opportunities for growth, generates jobs, facilitates trade and realises economies of scale
Investing in logistical services can have a positive economic spillover effect. For example, transportation can produce more employment opportunities per dollar value than that of investing in new road construction.
Evidence suggests that investing in smart-delivery fleet management can also improve collaboration between the stakeholders. And slot-based/appointment-based scheduling can significantly reduce fuel consumption and enhance trip efficiency.
Here, a positive spillover effect is that investments in logistical services contribute towards reduced traffic congestion as a result of smarter delivery route planning. AI has been introduced by many logistic service providers to incorporate this. It has been used to optimise routes, minimise fuel consumption, and limit travel time.
In terms of economic growth generation, investors are pouring capital into the infrastructure of the transport and logistics industry, due to the tremendous increase in freight transportation across Europe. This facilitates trade and economies of scale.
Why invest in logistics services?
Patterns of freight traffic have always been driven by consumer and business demand for goods and services, or by secondary demand (e.g. for electricity). The challenges of the past highlight fragmentation in logistics and the need for thoughtful investment in new technologies and infrastructure, alongside global changes in the nature of trade.
It also highlights the importance of onward connectivity from ports, via roads, rail and inland shipping. This is why investing in intelligent delivery could be key to increasing integration between global trade and supply chains, as well as ensuring better use of national transport assets.
Balancing consumer demand with a greener industry
The growth of in-road freight causes major impacts, particularly in busy urban areas. The last mile of freight is becoming increasingly important, as consumer demand for home and local deliveries rises.
However, this exacerbates urban congestion and air pollution, and generates the most carbon dioxide (CO2 ) per tonne of freight. Due to this, smart investments in planning for sustainable transport services should be prioritised to be in-line with the goals of creating a more sustainable future.
In terms of risk and security for the investors, the logistics and transportation industry is considered to be consistent when it comes to changing consumer landscapes and disruptive technologies.
Coupled with the multitude of innovative opportunities, investors stand to reap great financial gains on their investments. The rise of eCommerce has also led to increased demand and an economic boom in the logistics industry, and for investors, high demand means security surrounding sustainable investment growth.
Growing your profits by investing in logistics services
With global economic integration, a multitude of countries – across continents – are expanding their trade horizons. For the logistics industry, and its investors, this means turning greater profits. However, developing and expanding trade routes will require transport infrastructure capacity to meet freight logistics reliability, effectiveness and resilience for investments to yield optimal returns and profitability.
With smart delivery systems advancing, an increasing focus on sustainability and continuous route optimisation taking place, there’s much to leverage from the logistics and transportation industry as new opportunities take shape. With transportation at the heart of most economies, strategic investments in the logistics sector have proven to hold undoubted opportunities for revenue growth. Especially when it comes to investing in the infrastructure of logistics and transportation, value-generating profits are to be expected.