Trends Shaping 2024: Evolution of the Transport and Logistics Industry

In December 2023, BDO shared its predictions for the 2024 Transport and Logistics Industry. Now that we're at the mid-year mark, we're providing an update on the current state of the industry.

Mergers and Acquisitions (M&A): Continuing Consolidation in the Transport Sector

As predicted, there has been a continuation of consolidation activity in the transport sector so far this year, with notable activities occurring in Q1 alone. These included EFS Global acquiring pallet and parcel distribution specialists Leeds Parcel Company, and ILG, part of Japanese Yusen Logistics, acquiring GFS. Additionally, the private equity firm HIG Capital took DX Group through a public-to-private transaction for an aggregate consideration of £307 million. In Q2, the Wincanton takeover deal was completed by GXO Logistics for a reported £762 million and Inchcape Shipping Services continued its international growth following its acquisition by private equity firm Epiris in May 2022. Inchcape has already acquired businesses in Belgium, New Zealand, and Norway, and in Q2, it acquired another Norwegian logistics business, Grieg Logistics, a provider of logistical services for the energy, production, and maritime industries.

Freight Costs outlook:

In May 2024, the inflation rate fell to its lowest in almost three years. However, this has not resulted in a reduction in freight and shipping rates in 2024 as expected. Heightened geopolitical tensions, such as the attacks on container vessels in the Red Sea in March 2024, exerted considerable (albeit short-lived) upward pressure on container spot rates. This pressure has eased off in Q2; however, there is still uncertainty regarding freight rates for the remainder of 2024.

Talent: Focusing on younger recruits

Whilst the constant shortage of HGV drivers remains a significant challenge, hiring for junior and middle management roles is also becoming increasingly difficult in the sector. In April 2024, the UK government explored ways to address the shortage of lorry drivers through a consultation launched by the Department for Transport. The key proposals include potentially allowing 18-20 year olds to drive HGVs on longer distances and expediting HGV driver training.

ESG is a major focus for Gen Z with companies are trying to attract young professionals who are looking to make an impact in the supply chain world by exploring alternative energy options, more diversified suppliers, and other ESG issues.

Tech-Powered Decision Making:

At the start of 2024, it was noted that the role of technology in shaping the transport and logistics industry cannot be overstated. As we have progressed through 2024, technology and the use of AI have been on the agenda at every meeting, conference and seminar. Mobile apps are now a significant part of the logistics industry, helping to drive efficiency by offering real-time tracking of shipments. This allows businesses to monitor the status of shipments and intervene more quickly when necessary, thus enhancing efficiency. According to industry statistics, companies that leverage real-time supply chain tracking have experienced an average 30% reduction in delivery lead times and a 20% decrease in logistics costs.

Returns: Will Consumers Bear even more of the Cost?

Other retailers have followed Zara and H&M by charging for returning goods. Sports Direct and Boohoo charge up to £4.99 per return, as experts warn that these ‘ruthless’ fees could push shoppers back to the high street. PrettyLittleThing became the latest outlet to announce a new charge of £1.99 for any returned items and has even started banning customers with 'unusually high returns activity’. ASOS may have to start charging for returns, as nearly 6% of its customers return almost all goods, causing significant losses for the company in 2023. Without implementing charges for returns, their business model may become unsustainable.

ESG: The Pillar of Sustainable Operations

ESG continues to be a major agenda item. There is increasing pressure from regulators, investors, and consumers for logistics companies to adopt sustainable practices, reduce carbon emissions, and minimise environmental impact across the supply chain. ESG reporting is becoming more critical as a criterion for investment decisions, requiring logistics executives to enhance transparency, disclose sustainability metrics, and demonstrate progress towards net zero goals. There is also a push to embrace circular economy principles, such as product lifecycle management, recycling, and waste reduction, to minimise resource consumption, promote reuse, and achieve sustainability targets while balancing economic viability and operational efficiency.

Conclusion:

The first half of 2024 has not been without its challenges in the transport and logistics industry. While the continuing trend of mergers and acquisitions and the move towards digitalisation and ESG could largely be predicted, the disruption in the Red Sea and ongoing global uncertainty will continue to impact consumer confidence and freight rates.

With the recent change in government, the effects on the industry are yet to be seen. Nevertheless, it is crucial for the government to recognise and address the strategic importance of the logistics and supply chain sector. By implementing forward-looking policies, the government can support the continued growth and resilience of this vital industry, ultimately benefiting the entire nation.