We continue to publish the results of the logistics audit in the new conditions. The marketing research and analytics department of TELS Group has prepared an analytical report assessing the volumes of different market sectors and their response to crisis, forecasting economic development and the volumes of transportation and logistics market by transport modes and transportation routes.

The first article on Logistics 2020-2021. Life After the Pandemic published in November covers data from the report concerning the market trends that have been developing rapidly during the pandemic and are shaping the future of transportation and logistics. This article will review the capacities of different industries and the changes taking place in crises like the COVID-19 pandemic.

Impact of the pandemic on the industries

The reaction of industries to the coronavirus pandemic this year differs greatly. Some industries saw a serious decrease in demand for international transport and logistics services, which reached 40-50% during the peak crisis period (construction materials; iron and steel), while certain industries experienced an increase of 20-30% (soft drinks, juices and water; FMCG).

Such a circumstantial reduction in some industry does not mean that the industry will become less attractive for logistics providers in future. Sometimes the capacity of the industry (the demand for logistics services) allows it to remain attractive even against the temporary reduction.

For example, even though machinery manufacturing, chemical and construction materials industries have shown a considerable decrease during the pandemic, their capacity allows them to remain on the list of industries with a high demand for logistics services. On the contrary, an increase in demand in pharmaceutical and woodworking industries during the pandemic didn’t bring them larger capacity, which still remains low.

Taking into account the response of industries to the crisis and their capacities, we can distinguish the following most attractive industries for logistics providers: soft drinks, juices and water; FMCG; automotive; pulp and paper; chemical; food; machinery manufacturing.

Ranking of market sectors based on the volume and dynamics of road transport orders during the crisis

Industry (in descending order)	Dynamics during the crisis	Industry volume, transported by road in 2019, imports to the Russian Federation
Soft drinks, juices and water	29%	49 500
FMCG	20%	36 585
Pulp and paper	5%	51 659
Automotive	2%	40 043
Food	-4%	52 958
Chemical	-10%	89 994
Machinery manufacturing	-23%	102 087
Construction materials	-46%	228 555
Iron and steel	-50%	89 846
Agricultural products	-56%	31 908
Woodworking	7%	9 669
Pharmaceutical	2%	18 134
Electronics and home appliances	-14%	16 497
Furniture	-16%	8 177
Textile	-16%	6 533
Clothes, shoes, accessories	-17%	9 810
Other	-36%	10 778

P.S.: It is important to understand that each industry has its own internal growth prospects, which are unlikely to affect their capacity to a large extent but can redistribute their supply chains. For example, great changes are expected in the automotive industry due to the development of electric vehicles (this implies a new set of components). And the Forbes shares the hypothesis that Generation Z will reduce the consumption of alcohol and meat significantly.

Marketing Research and Analytics Departments of TELS Group carried out a marketing audit of the transportation industry developing in new conditions. The report presented to company’s top managers provides the results of trend analysis of transportation and logistics market, capacity assessment for different market sectors, the behaviour of the industries in crisis situations, development forecasts and the capacity of the transportation market for different modes of transport and transportation directions.

This article summarizes one part of the report on the market trends that have been developing more rapidly as a result of the pandemic and will be shaping the future of transportation and logistics.

Unfortunately, the pandemic is still in full swing bringing great changes to the whole world, and these changes are sustainable. What tasks, meanings, goals and forms of interaction does the new world have for us?

Business transformation and changes in supply chains

Transportation and logistics as many other industries is facing rapid transformation processes. The COVID-19 pandemic has brought dynamic changes to automation in workspace speeding up the digital transformation of the industry by several years. Businesses have several transformation paths:

• Modernization of interaction points in supply chains and creation of digital interaction with customers when handling the orders and transporting goods.
• An uplift in B2B online sales implying changes in the type of sales, digital transformation of service standards leading to communication anonymization, which results from its automation.
• Placing transportation orders from a mobile device. “Digital” freight forwarders become market players.
• Even when the pandemic ends, remote work will remain and e-commerce will continue to develop.
• Increase in online marketing and online activities (all the logistics events worldwide will become digital).

Logistics companies need to adapt to the changing conditions quickly. Some trends that emerged during the pandemic will remain in the post-crisis period having a significant impact on transportation and logistics worldwide. We might expect:

• Increased complexity of supply chains, changes of routes, “natural selection” of market participants, increased competition.
• Development of domestic markets and supply chains (return to domestic production during the pandemic).
• Increased demand for groupage cargo services.
• New possibilities for rail transport.
• Emerging demand for the delivery of goods to remote places within Russia.
• Growing demand for environmentally friendly solutions.
• Changes in business volumes in various industries (stably, for example, in food, retail, FMCG and pharmaceutical industries).

The world of transportation and logistics will never be the same when the pandemic is over. But the companies following the trends and quickly adapting to the changing circumstances will control the situation, create top requested services and strengthen their capabilities in business.

What should transportation companies do?

Overcoming the existing crisis is a great challenge for management teams of all the players in the logistics market. It is important to develop further strategy quickly, which requires the resources of an entire team including lawyers, financial experts and economists. Along with this, it is necessary to rethink partnership relations with contractors, review contract terms and obligations and work carefully with current assets and liquidity.

Summing up and drawing a sort of a master plan, the following four major business development strategies that should be solved at the project level can be identified:

1. Creation of an ecosystem in transportation and logistics allowing to connect innovative and popular services taking into consideration competitors’ inventions and customers’ requirements. For example, digital interaction with customers, automatic confirmation of orders, online tracking, etc.

2. Transition to customer-oriented business models in an increasingly competitive environment. Development of new skills – customer-manager = logistics architect.

3. Anti-crisis strategies – in the event of unfavorable conditions, there will be a proactive response implying instant refusal from unprofitable products, cost reduction and redistribution of resources.

4. Total automation – everything that can be automated must be automated.

Sources: DHL Radar, BCG, PwC, RBC, SeaNews

A new batch of heavy trucks consisting of 7 MAN trucks with Krone Mega Liner curtain side semi-trailers were added to TELS’s fleet in October.

This purchase allowed to expand the fleet of vehicles with Czech registration. The new trucks comply with the EURO-6D environmental standard.

TELS obtains new cars to expand and / or renew the fleet annually.

Andrey Abragimovich, Director of Transport Business at TELS CARGO: “From real experience and our estimates, we can reliably use the vehicles of foreign manufacturers on the European routes for up to 5 years. Later we sell the cars for domestic use on the territory of the Russian Federation and buy new, more advanced vehicles”.

TELS owns 350 cars with Czech and Russian registration. These include MAN and VOLVO trucks coupled with SCHMITZ, KOEGEL and KRONE semitrailers of EN 12642 Code XL standard (increased structural rigidity) as well as curtain side semi-trailers with an increased cargo volume of 100 m³ and 3 m internal height.

“This update is required not only to maintain the reliability of the equipment. Technological development allows us to reduce the costs and improve the quality of the services we offer our customers,” commented Andrey Abragimovich.

The Loadstar reports that according to Transport Intelligence (TI) the coronavirus pandemic has resulted in a 11.6% decline in air and sea freights over the previous year.

In the first half of the year, the global air cargo market shrank by 15.3%. Despite the signs of global economic recovery at the beginning of the second half, the annual decline is predicted by 13,9%. The uncertainty arises from a sharp decrease in the freight capacity on passenger aircrafts, which normally carry half of all the cargo. TI believes that passenger flights are unlikely to recover to pre-pandemic levels in the foreseeable future.

The shipping market was a little stronger with a 7.6% decrease in the first half of the year. TI forecasts a decline of 6.4% by the end of the year. Despite the growing demand all over the world, TI warns of serious risks still existing in the industry.

The overall volume of world trade decreased by 14.9%, which is more than during previous global financial crises.

At the same time, according to a survey of six global forwarders (DHL, DB Schenker, Expeditors, K&N, Agility and Damco), their profits have increased over the previous year. The traffic volumes and revenues may differ greatly for some companies. For example:

• Kuehne + Nagel – the traffic volumes decreased by 15.5%, while their revenues increased by 1.4%;
• Expeditors – -9% and + 47.2%, respectively
• Damco – -11.2% and + 63.2%, respectively.

TI notes that certain operators take advantage of order cycles during inventory management operations, while serious risks related to the second wave of the pandemic and new quarantine restrictions remain.

In the first half of 2020, TELS Group of Companies maintained a positive trend both in the number of transportation requests (+ 5%) and in the revenues (+ 6%).

Source: infranews.ru