Changing business outlook

The latest KPMG Transport Tracker on the global transport and logistics sector provides insight into the key trends driving the sector worldwide. Lionel Alva...

The KPMG report highlights the market drivers shaping the aviation, shipping and sea freight as well as the parcel and logistics sectors. The report highlights that volatile fuel prices have made planning the operations of transport companies like capacity planning, network and route management, modal shifts far more difficult. Furthermore, the remaining overcapacity in many transport sub-sectors, continued global economic uncertainty, and significant geo-political impacts on oil prices (which have, in recent times, dominated the longer-term upward demand led trend experienced over the last decade) mean that businesses will continue to require flexibility in their business models to adapt. Here are the key takeaways:

1. Crowdsourcing has paved the way for unique and innovative organizations that work on a micro-level in the logistics sector. IT start-ups like Uber, which is seen as having disrupted taxi businesses around the world depicts the potential of crowdsourced start-ups.
2. While logistics companies are using data and analytics, there is no best practice that has been developed for predictive shipping and capacity planning.
3. Justin Zatouroff, Global Head of Post & Express, KPMG, avers “Next to data & analytics, further collaboration will be a way to better deal with unexpected peak seasons and capacity constraints in the future ”. There is a clear need for logistics companies to shake off the sector focused view and collaborate not only with subcontracted transport companies but also with e-retailers, IT companies and telecommunication service providers in order to optimize route and capacity planning.
4. Dry bulk shipping can be expected to be negatively affected by slowing economic growth in China this year (with Chinese demand for iron ore being the biggest driver of dry bulk volume growth). BIMCO expects demand growth to slow to 4-5 percent in 2015. We are seeing examples of dry bulkers being converted to tankers and previous orders switching out of the dry bulk sector. For container liners, growth of the container ship fleet (7-8 percent) is expected tog outpace world trade (3.5 percent) and container demand growth (5.5 percent) this year, hence excess capacity will again last through 2015.
5. Air freight markets continued to recover in 2014, with air cargo traffic demand (FTKs) up 4.5 percent compared to 2013. Growth was noticeable in all regions except Latin America but strongest in the Middle East (11 percent) and ASPAC (5.4 percent). Overall, the ASPAC and Middle East regions contributed to 46 percent and 29 percent of the expansion in air cargo traffic. North American airlines increased cargo traffic by 2.4 percent while Europe still recorded a plus of two percent on the back of a slow and fragile market recovery.
6. John Luke, Global Head of Shipping, KPMG, observes, “Trends such as re- and near- shoring of production and increasing intra-regional trades, have lead to a new consensus estimate of future shipping demand “ The new consensus estimate of future shipping demand is expected to be in the mid-single digit range.
7. Issues with port congestion at US container ports provided some tailwind for the growth of air freight volumes at the end of 2014 and the market is expected to return to solid growth rates in the near future. Global air freight demand is expected to grow by 4.5 percent in 2015 and by a CAGR of 4.1 percent over the next five years according to IATA.
8. A new trend of M&A strategies in transport & logistics has emerged over the past years, partly caused by the effect of rising e-commerce.
9. It is expected that M&A activity in the sector to remain on a high level, comparable or higher to the level we have seen in 2014. The first quarter of 2015 has already seen completed global transactions worth US$ 10.0bn, and further acquisitions valued at US$ 13.6bn have already been announced.