Logistics industry: The most significant challenges in the coming years

Logistics is the most important and complex industry in the global economy. However, it faces some profound challenges that need to be solved – not only in Germany.

No, the global logistics industry certainly cannot complain about a lack of work and importance. On the contrary, never has this gigantic, extremely powerful machine been as important as it is today. However, there is much that could be done better. Especially under the impression of current and medium-term challenges, this becomes abundantly clear. In the further course of the 2020s, therefore, it is not only German logistics that will have to face some very serious challenges.

A possible post-Corona plateau

Logistikbranche
Parts of the industry could benefit from Corona. Even without the Ukraine conflict, however, growth would most likely be inhibited thereafter.
(stock.adobe.com © SkyLine)

The pandemic brought a boom to the logistics industry in many countries and sectors that could not have been foreseen. This is particularly true for those parts of the industry that are linked to Internet trade – exceptions confirm this rule. The problem here is that many booms anticipate longer-term growth, which means that there is at least sufficient, and in some cases even overcapacity for a long time afterwards.

Although the pandemic is not really over yet, it has largely lost its horror in many parts of the world. US President Biden, for example, recently declared the pandemic over. For parts of the industry, this could mean remaining on a plateau in the coming years, because demand will not increase strongly for the time being. The effects of the war in Ukraine on global trade are also causing further difficulties.

Facts and indicators

Annual sales in the German sector show quite clearly the impact of the pandemic (values in billions of euros):

  • 2012  >  91,1
  • 2014 > 102,3
  • 2016 > 104,6
  • 2018 > 115,7
  • 2020 >117,5
  • 2021 > 135,0

 

This dramatic jump between 2020 and 2021 is largely due to the effects of the pandemic. Now that this is at least subsiding – to put it mildly – key ingredients for a plateau have already been put in place. However, what has to be added is the Ukraine war with its effects:

  • In general, energy prices and general inflation are on a dramatic rise, which is cutting into the profits of many logistics companies.
  • For European logistics in particular, Russia and parts of Ukraine are currently two quite significant trading nations and thus orders are being lost – even though neither state is extremely relevant for global trade.

 

The credit insurer Euler Hermes summarized the figures in a study published in spring 2022. Thus, the originally forecast global trade growth is reduced from six to four percent. Further difficulties arise from an avoidance of the Black Sea as a sea transport route and high energy prices. As a result, the study fears, insolvency figures in Europe could rise to 23 percent.

Possible solutions

There is little the logistics industry can do at present. This is because both energy prices and the further impact (and duration) of the war are entirely beyond their control. A great many companies and private individuals have already noticeably reduced their trading and consumption behavior in order to be financially prepared for the near future.
A really severe slump seems unlikely at this point in time (end of September 2022). However, growth in the coming years is likely to be significantly lower than before Corona – and especially during it.

An increase in the resilience of global logistics networks

Logistikbranche
A move away from just-in-time with significantly increased warehousing is one of the few ways to make logistics networks more crisis-proof again.
(stock.adobe.com © tiero)

The current energy price shock shows, especially for transport logistics, how great the dependencies on raw materials are in this respect. And the pandemic was an abundantly clear indicator of how vulnerable a chain of logistical and production processes spanning many countries and half the globe can be.

The big challenge here is to make ourselves less vulnerable to such disruptions as quickly as possible.

Facts and indicators

The metal industry alone, as an extremely large global player, shows how many sources of disruption there can be here. They range from unavoidable detours for political reasons (such as port closures or the aforementioned Black Sea), through personnel failures (for example, due to Corona or, in the case of Russia and Ukraine, due to the consequences of war), and by no means end with such exceptions as the “Ever Given” being stuck in the Suez Canal.

The Hans Böckler Foundation, for example, estimates that the share of global trade in the world’s gross domestic product increased by 21 percent between 1990 and 2011 alone. As a result, the global economy is becoming increasingly dependent on chains that function perfectly all the time.

But recently, the costs of supply chain disruptions have been running at around 184 million euros a year – on average and for every company. In German industry, 84 percent were recently affected by medium to severe delivery problems.

Possible solutions

In this respect, the logistics sector can hardly be viewed in isolation from the rest of the production and value creation processes. Once again, therefore, it does not have all the strings in its hand to master these challenges on its own. However, there are certainly a few approaches:

Supply chains must be made more flexible overall. In principle, there must be at least one alternative to each link in the chain at any time, and it must be possible to switch to this alternative without great difficulty.
There must be a general move away from single sourcing in any form.
Logistics companies must return more strongly to comprehensive warehousing and communicate this option to their customers. Warehousing alone may not be a panacea, but it can cushion various disruptions well.

The low level of digitization in the logistics industry

Logistikbranche
Parts of (German) logistics are downright frighteningly analogous, thereby exacerbating the effects of the shortage of skilled workers.
(stock.adobe.com © Roman)

Many may consider logistics to be a very digital industry – for example, by referring to picking robots and similar technologies. Yes, there are indeed companies that rank among the top here. And as far as processes are concerned, the level of digitization in the industry is indeed at least “good”.

Overall, however, (German) logistics, and especially transportation, has a lot of catching up to do digitally. This needs to be addressed as soon as possible.

Facts and indicators

In fact, the industry in this country has even taken steps backward recently. A recent study found that transport and logistics deteriorated by 5.3 percentage points in terms of digitalization between 2020 and 2021. This makes the dual sector one of the least digitized in the Federal Republic.

The consequences are also devastating:

Processes are too personnel-intensive. This makes them unnecessarily expensive and also more prone to errors and disruptions of all kinds. This burdens the local industry in particular, because foreign (= digitally better positioned) companies are given an advantage.

  • The industry is viewed more critically by large sections of a digitally positive youth, which exacerbates the personnel shortage.
  • With each passing year, larger gaps are created with other industries – those that depend on “logistics at digital eye level.” This imbalance can have wide implications.
  • Likewise, the gap is widening. As a result, urgently needed catch-up processes are constantly becoming more complex, more expensive – and more daunting.

 

This is where German logistics must become aware of its importance. Although other countries are also struggling with digitization, this should by no means be an excuse, but rather an incentive to change their own situation.

Possible solutions

This challenge is completely in the hands of (German) logistics. No, this does not mean digitization for the sake of digitization. But it does mean that the industry as a whole must recognize how important a reorientation is – and how beneficial it can be.

Ultimately, every single digital transformation means medium- to long-term savings with immediate process optimization. The opportunities are huge. Ultimately, what is needed here is primarily will, not even so much investment funds – at least not as much as is assumed in many companies. Especially since digitization is the most important key to addressing another industry challenge:

An ever more pressing shortage of young talent

Logistikbranche
Particularly in the case of professions that do not require a university degree, there is a shortage of young people in logistics everywhere – but to some extent this is a problem for society as a whole.
(stock.adobe.com © pikselstock)

If you are a logistics specialist reading these lines, you are welcome to ask yourself how your company is doing in terms of average age and trainee numbers. In all likelihood, things are probably much worse than they were ten or fifteen years ago.
Of course, there are currently only a few industries that have no worries about young talent at all. In logistics, however, the situation is particularly dramatic – and has a much greater impact because the industry is so systemically important.

Facts and indicators

It was only a few years ago that various bodies were pleased to report an increase in the number of trainees in the field of forwarding and logistics services. There were 5,610 new trainees in this profession anno 2016.

Today, however, there is not much left of this former glimmer of hope. 4,302 contracts were only concluded in 2020. This means that this occupation is miles away from the top 20 of all apprenticeship occupations. In fact, a total of only 10,787 new contracts were concluded in the entire traffic and transportation industry this year, and there were only 31,096 trainees in all training years.

This is the case in an industry in which around 30,000 truck drivers retire every year and there is already a gap of 70,000 drivers. The 3,062 new training contracts for professional drivers seem almost ironic in comparison.
Accordingly, the personnel question is becoming an ever greater issue in practically all companies, in some cases even threatening their very existence.

Possible solutions

Challenges can be solved, but problems hardly ever are. In fact, the industry has in many cases passed a point beyond which the question of new recruits can hardly be solved by human means:

  • On the one hand, there are simply too few young people, because too few children have been born in this country for years and, in addition, not enough young people are coming from other countries.
  • On the other hand, the status of apprenticeships in general is deteriorating. In 2021, for example, the rate of first-year students was 55.5 percent. This means that more than half of a cohort now goes on to study at university and is therefore often lost to apprenticeship occupations. And the rest don’t necessarily go into logistics, but turn to occupations perceived as more attractive.

 

Of course, the industry still needs to increase its attractiveness. This can only be done through target group-specific recruiting and much more comprehensive image campaigns. In the medium term, however, this strategy can only delay.

The really only long-term way out of the misery is significantly increased digitization in every area. Only it can act as a “force multiplier” to boost the performance of existing employees and, at the same time, reduce dependence on additional skilled workers.

The implementation of autonomous vehicles

Logistikbranche
Autonomous trucks are both a blessing and a curse for the industry – depending on which point on a timeline you look at the technology from.(stock.adobe.com © Ondra)

There are few other challenges in logistics that highlight the differences between short-term problems on the one hand and the medium to long-term on the other as much as the topic of vehicles.

In the medium to long term, autonomous vehicles will be an invaluable aid to transportation logistics in particular, because they effectively get to the root of the driver shortage. In the short term, however, the approaching introduction is creating a situation in which young talent is being deterred. Hardly anyone enters an occupational field whose imminent end is foreseeable.

Facts and indicators

One major difficulty here is the clear difference between the overall picture presented by the broad media and the technical reality:

  • On the one hand, virtually not a week goes by without a major media outlet suggesting that self-driving vans, trucks and similar vehicles are practically a few years away at most from widespread use.
  • On the other hand, however, not only are autonomous vehicles divided into different classes, but they will need literally decades more before they can handle every aspect of a human driver’s job. The 2020s alone will pass before there is truly seamless and redundant 5G coverage across Europe – and without 5G, fully autonomous operations are not possible.

 

Of course, manufacturers are working flat out on the autonomous truck. Of course, test operations already exist. But until such vehicles can drive *anywhere* for technical and legal reasons, the 2030s will pass.

Daimler Trucks, for example, plans to put Level 4 trucks on the road from 2030 – although even then a driver will still need to be on board in many cases. That’s because such vehicles can only drive fully autonomously on certain routes, such as highways. By the time vehicles are on the market that can handle all routes autonomously, the 2040s are likely to have dawned.

One significant reason for this long time span: the large tech corporations, which are considered the most important developers of autonomous technologies, are less interested in logistics. Their business models were oriented toward subscription and rental products. As a result, passenger transportation is disproportionately more interesting. Accordingly, autonomous technologies play a secondary role for transportation – and what is developed for cars and buses is not necessarily suitable for transportation.

Possible solutions

Today, autonomous driving scares off young talent; tomorrow, it will dramatically reduce their necessity. At present, therefore, the logistics industry is in a real quandary, and there is little that can be done about it:

  • Above all, the associations must assume a communications sovereignty vis-à-vis the media. Here, potential junior staff must be provided with realistic information and serious time frames on their communication channels. Tenor: Autonomous driving will come, but certainly not in the 2020s and for all companies at the same time. Jobs are therefore still secure for some time to come.
  • Impetus must come from the industry to accelerate development. Only autonomous driving can actually end the driver shortage; everything else is merely a temporary measure.

 

When the first vehicles of this type come onto the market, there must be no holdouts. But that, in turn, presupposes “intellectual digitization” in the industry as quickly as possible, so that a more digitally positive way of thinking can become established overall.

Summary and conclusion

The logistics industry as a whole, as well as just in terms of Europe and Germany, is currently facing one of the most complex challenges of its existence, as it were, and a crossroads.

The lack of human resources as well as the extremely increased fuel prices might be the biggest difficulties for many companies at the moment. Overall, however, the entire industry is currently undergoing a transformation process. This is reflected in the slow demise of internal combustion engines as well as in the hardly faster emergence of autonomous technologies and a profound change in society.

Only one thing is certain: this transformation process will continue for a few more years and then end quite quickly. Whether logistics will be in a better position then, however, depends to a large extent on the course it sets in the present and near future.

Janine Wolff
Janine Wolff is a business economist and design enthusiast, has a passion for blogging and logistics and is our Social Media and Content Manager at Saloodo!.

This might also interest you

Featured in:
Handelsblatt Logo
SZ Logo
Gütesiegel des BME für Saloodo als effiziente Logistiklösung

We make logistics fast. smart. reliable.

© 2020 All rights reserved