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A look at the distribution sector of the future

Thursday, 11 July 2019

The world of logistics is facing an enormous transformation. One recent report from Cushman & Wakefield on the future of the sector exposes the problems and focuses on the opportunities lying ahead.

 

 

The distribution sector is under enormous pressure. At a time when the impact on the environment is being looked at with a critical eye, transport companies know what they have to do: reduce the CO2 emissions of their truck fleet and minimize their ecological footprint. But this shift to greener means of transport and an environmentally-friendly supply chain will, for the time being, be accompanied by higher costs. So, things aren’t moving fast.

 

Companies that do not immediately put a green transition on their agenda will also have to face rising costs. The most important factors for these increases are the price of oil and the introduction of more toll roads in the fight against structural traffic jams. Eurostat predicts that operational costs for transport companies will be as much as 40% higher in 2030 than today, and an estimated 80% higher in 2050.

 

Increasing volume

 

In addition, the volume of freight traffic will continue to increase, driven by a growing e-commerce market. Today, around 75% of freight in the EU is transported by road. These enormous quantities cause gigantic traffic jams on Europe's motorways, generating frustration in the transport sector. According to a recent study by Inrix, the ten major transport hubs in Europe will account for a total economic cost of more than EUR 200 billion by 2025. No solution seems to be in sight yet, on the contrary. Despite the search for alternative means of transport, the volume of freight traffic is expected to grow by about 180% by 2050 compared to 2010. Almost a threefold increase, in other words.

 

What are the alternatives to conventional road transport? For decades, the distribution world has been looking for ways to avoid traffic jams by means of combined transport, yet connections with the European waterways and railways continue to be difficult. The e-commerce growth mentioned above doesn’t help this trend: if you want your order to be delivered a day later, you can't ignore the efficiency of road transport.

 

Technological solutions

 

It is clear that the transport sector needs green solutions not only for itself, but also in order to keep European cities liveable. Replacing diesel trucks with electric vehicles seems a logical step, but it is easier said than done. Due to high costs and relatively short battery life, in combination with the currently limited charging infrastructure, most transport companies are holding off. Large truck manufacturers such as Daimler and Volvo are taking the lead in the development of electric trucks with ambitious plans and major investments, but their presence on our European roads will be limited in the first few years.

 

Fortunately, innovation in the distribution sector goes far beyond the construction of a green vehicle fleet. The advent of big data and IoT technologies makes it possible for companies to connect the different parts of their supply chain together, resulting in greater productivity and enormous cost savings. Other promising opportunities are the use of artificial intelligence in planning and goods checks and the introduction of autonomous vehicles, both on water and on roads. Self-driving vehicles can be extremely efficient, but they have to cope with strict legislation and very extensive testing phases.

 

The development of new “bananas”

 

In recent years, new logistics corridors have been created throughout Western Europe, following in the footsteps of the classic 'blue banana' from the Benelux to northern Italy. Although some of these new corridors are still in their early stages, it is clear that the logistical map of Europe is slowly but surely being redrawn. An important role seems to be played by sustainable axes with combined road, rail and sea transport. Over the coming years, if these corridors can increasingly become fully-fledged and efficient alternatives to the classic motorway axes, they can be an inspiration to the entire distribution sector.

 

Because there is no doubt that things must be done differently. Sustainable solutions to the problems of the transport sector are not just welcome, they’re essential. Time for the whole sector to resolutely shift up a gear.