An industry used to discussing the shortage of capacity was told at this week’s Automotive Logistics Europe conference held in Bonn, Germany, that while demand was growing, albeit at a single digit pace, there was, if anything too much capacity in most markets, which was leading to falling prices for transport services.
Underlying demand is muted across most markets and there is an oversupply of services that is damping down prices, a situation that is good for customers but not so good for logistics service providers, according to Thomas Cullen, chief analyst at Transport Intelligence, the logistics research and analyst firm.
The container shipping side of the business is a prime example according to Cullen. While the number of TEUs being moved is up 27% on 2008, when the global economic crisis hit, the rate of increase is not huge but the container shipping companies have bought too many vessels and, on the whole, the business is riddled with overcapacity, with a few exceptions, notably Maersk.
In the air frieght business it is the same story according to Cullen with so called ‘belly freight’ oversupplied, which is again leading to a decline in prices for air cargo and the consequent decline in the charges made for air charter services.
On the roads, meanwhile, freight has gone nowhere in Europe according to figures provided by FreightEx.
Over the past decade there has been only a 16% increase in freight numbers, which is “miserable”, especially when the peaks of volatility are factored in said Cullen. Prices for international road freight movements in Europe have gone nowhere over the past years, demand is poor and there is too much volatility, he said.
Looking at the broader picture, the industry could do well to take on lessons from the ecommerce sector according to Cullen. While the automotive industry does fare well on operational quality, it is much poorer on using information as a strategic resource to solve such issues as overcapacity and a range of others that are being put on the LSPs as OEMs outsource more responsibilities to them. Global economies of scale are still better managed by the ecommerce providers such as Amazon, something from which the automotive logistics sector could take note.
What the automotive industry also has to address is the overhaul that is on the horizon when the technology of car production changes.
“OEMs are metal bashers and that determines the nature of the supply chain,” said Cullen. “They dictate their problems downward but when the technology behind car manufacturing changes that will determine a new supply chain and the LSPs can adapt to that will be the ones that survive.”
There were four trends influencing that change in manufacturing discussed, including downsizing and forced aspiration in the engine; alternative drivetrain technology, including hybrid and electric vehicles; light-weighting and performance density, which includes new materials; and modular strategies.
A full conference report and further news coverage from the Automotive Logistics Europe conference will be posted online this week.