While a ‘hard Brexit’ may arise from negociations between Britain and the EU, several light signals are turning to red as a result of major trends or events on the european logistics market, says Director of Tokema International Pierre Liguori.
Although it is premature to anticipate what the future deal is going to be between Britain and the EU, it is well anticipated now that further trade constraints may be implemented as a result of tough negotiations between both parties. Nobody has any interest to create business disruptions when the global GDP growth is slowing down and the EU economies are not able to sustain significant growth despite a recent partial recovery. However it’s all politics here: the EU wants to make the divorce difficult to let know the EU-27 that there is a price to pay to leave the club. On the other hand, the ‘Leave’ campaign committed to British citizens that current British funding of European projects shall be transferred to British sectors such as NHS. Europe could then well experience a long period of uncertainty despite their business links: German exports to the UK achieve a 28b€ surplus per year and Britain is the second largest economy of the continent. If business is much more difficult to develop due to additional constraints it shall slow down economic growth and create significant supply chain disruptions, increase logistics costs or even make companies to reconsider their current logistics set-up.
Uncertainty seem to be the word of this century: the geopolitical landscape is changing quickly, business practices as well.
First example: the recent withdrawal of the USA from the Paris climate agreement after the TPP is adding uncertainty. A strong trend on the logistics market is now to implement green supply chain management. How are multinational firms – especially US companies – going to cope with Donald Trump’s decision? And how will European companies be competitive against US firms when environmental standards – and related extra-costs – will be different?
Second example: the shipping market completely reversed in 2 months end of 2016. Despite the arrival on the market of the last generation mega-capacity container ships, the frozen capacity has been doubled by ocean carriers in 3 months only creating major disruptions in European ports, freight rates increase, blank sailings and limited available capacity. New alliances between carriers started to be implemented during the same period adding uncertainty on transit time reliability and effective carrier services levels.
These 2 examples show how the pace – ever quicker! – and the magnitude of change require companies significant agility to adapt themselves to ever changing and more complex environments.
And this is just the beginning: digital supply chain is becoming a mega trend on the global logistics market: automation and robotics in warehousing, cloud-based solutions in freight forwarding and logistics. Big data and digitalization are changing the world and significant investments are made. Uber Freight is starting to challenge OTI’s and trucking companies in the USA by using its technology to connect directly small truckers and shippers. It would not be surprising if the next field for Uber Freight would be Europe.
These trends demonstrate how the freight forwarding and international logistics service providers market is changing quickly and how many companies are going to be at risk if they don’t reinvent themselves shortly under the pressure of permanent change and uncertainty… and shippers real expectations. Industrial companies are also facing new challenges like lead time reliability to strengthen their business integrated planning, warehouse space full flexibility requirements, inventory levels reduction, working capital optimisation, CAPEX vs. OPEX…
European manufacturers are looking for value-added solutions from logistics service providers to fulfil these requirements.
Logistics service providers and freight forwarders have now a choice to make: change – and business opportunities will be massive – or… disappear.