Overcoming transport and logistics procurement challenges

Supply chain disruptions, exacerbated by geopolitical tensions, natural disasters and ongoing effects of the COVID-19 pandemic, continue to be a major challenge. They lead to delays and increased costs and make it hard to maintain inventory levels. There are also fluctuations in global trade policies, tariffs, and trade agreements to contend with, creating more uncertainty. 

The changing dynamics of global trade can affect supply routes, costs and market access. So they demand that companies stay agile and can adapt easily. 

The sector is grappling with rising costs in a number of areas, including fuel (triggered by the war in Ukraine), labour and materials. For example,  in Europe, road freight rates have also seen significant increases. In the first quarter of 2024, European road freight rates increased by 3.2% year-on-year, driven by rising fuel costs and the ongoing driver shortage. Diesel prices were reported to be 52.7% higher than the previous year, which has substantially impacted transportation costs​​.

Inflationary pressures and fluctuating exchange rates further complicate cost management, making it harder to maintain profitability without passing costs onto customers. All this has seriously impacted the revenue and earnings of transportation businesses. Optimising shipping costs by leveraging technology to consolidate shipments and gain real-time insight into operations will help prevent ongoing losses.

Transportation infrastructure is a vital part of the industry, but many countries struggle to maintain and improve their highways, railways, ports and airports. 

Congestion, poor road conditions, and insufficient warehouse space can severely hinder efficient operations. Outdated ports, for example, might not be able to handle modern vessels and their cargo. And limited warehousing facilities can lead to overstocking or understocking, as businesses struggle to find space for their products. 

These issues can cause major delays in transporting goods, increase the cost of transportation, make certain areas and therefore markets less accessible, and, where safety is a concern, put your drivers and cargo at risk. 

A 2024 study of 1,000 logistics decision-makers from nine European countries, Canada and the USA by Descartes Systems Group and Sapio Research found that 76% of logistics operators are experiencing labour shortages. Transportation was found to be the area impacted the most, with businesses struggling to find qualified skilled truck drivers and supply chain managers.

While there are more job opportunities for workers throughout the transport and logistics supply chain – from warehouse operatives to HGV drivers – filling these new roles is proving a challenge for the industry. The UK, post-Brexit, faced a staggering shortfall of 100,000 qualified drivers (in 2021). And drivers are getting older too. A 2023 report by the Road Haulage Association found that an alarming 55% of UK HGV drivers were over 50.

According to the Boston Consulting Group, in 2023, transportation activities (aviation, rail, shipping, heavy and light trucking) accounted for 17% of global greenhouse gas emissions. Meanwhile, transport accounts for a quarter of the EU’s greenhouse gas emissions.

But with increasingly stringent environmental regulations (the European Green Deal aims for a 90% reduction by 2050), these transportation and logistics companies are having to adopt greener practices to reduce their carbon footprint and meet investor and other stakeholder expectations. 

By embracing cleaner technologies, like electric vehicles, adopting more sustainable logistics practices, optimising routes and reducing waste, companies can meet these regulations (avoiding fines and penalties), while boosting efficiency, cutting costs and protecting the planet. However, none of this comes easily – it requires significant strategic and operational adjustments.

Regulatory compliance aside, pressure also comes from discerning customers who want speed, real-time transparency, flexibility and reliability alongside sustainable practices. In order to meet these demands, businesses are having to invest in advanced tracking systems, enhance their customer service offering and improve logistics processes.

According to PwC, leading transport and logistics companies are prioritising customer experience, focusing on speed, self-service and multi-channel management. Evidence from other industries shows that these improvements will lead to higher growth rates and help businesses reduce costs by up to 25%.