Our predictions for freight in 2021
As we emerge into a post pandemic world and begin to rebuild economies. Shipping and transportation is one of the biggest parts of international business. Confidence in shipping leads to an increase in business interests, investments and consumer confidence, and we are still seeing strong inventory demand.
Looking ahead at the freight forwarding and logistics industry for 2021. The pandemic has accelerated a digital wave in the shipping industry, and this together with new technologies and software has accelerated the landing speed.
TECHNOLOGY
Technology is playing an increasing role in both the logistics and e-commerce industries. COVID-19 forced the traditional and analog logistics industry to adopt technology as its primary way of doing business.
With everyone working from home, switches have been made from in-person and paper processes to digital transactions and signatures. The advances made in freight forwarding technology and inventory management can help businesses ease this transition from offline to online. Providing intuitive tools for a digital way of managing their cargo and supply chains.
Easy to use booking and tracking software and the data provided to customers from shipping lines and freight forwarders are playing more of a role than ever, as companies wish to get goods delivered faster and more efficiently to their online customers.
Data security will also be a focus of this year, with more shippers asking forwarders about how they will protect shipment data during and after the transaction.
There is so much potential for what blockchain technology could bring to the international shipping industry.
BLOCKCHAIN
Blockchain is an encrypted, distributed computer filing system designed to allow the creation of tamper-proof, real-time records. Blockchain brings transparency to the entire logistics process and enables the use of smart contracts to automate commercial processes.
Combined with digital solutions, blockchain will enable even smarter logistics contracts for the future. For example, on delivery a connected pallet will automatically be able to transmit confirmation and the time of delivery, as well as the condition of the goods. The blockchain-based system can then automatically verify whether the goods were delivered as per agreed conditions (e.g., temperature, humidity, tilt) and release payment, greatly increasing efficiency as well as integrity).
There is so much potential, that there’s a race for who can successfully bring blockchain to the industry. Which creates the possibility of multiple blockchain platforms, instead of competing with each other, they’ll network with each other. This would be the best outcome for shippers, bringing a level of transparency to the industry never before seen.
FREIGHT FORWARDERS AND E-COMMERCE
In a socially-distanced world, we expect to see increased reliance and investment in both warehouse automation and artificial intelligence. Warehouse automation (e.g. pick and place technologies such as automatically guided vehicles) increases efficiency, speed and productivity by reducing human error. AI can be used for route planning and prediction, as well as playing a key role in warehouse management through the prediction of rotation of supplies.
SHIPPING RATES
For the entire shipping industry, the biggest impact of the pandemic on the market has been the continuous surge in freight rates.
At the beginning of 2020, a large number of sailings were withdrawn from shipping lanes based on the pessimistic forecast of the market. However, after China gained control of the spread of the pandemic from within it’s borders, freight volume began a rapid recovery, driving up rates on main routes. Later in the year with the global pandemic out of control and frequent problems such as port congestion, freight rates soared, trans-Pacific routes’ freight rates rose by more than 200% year-on-year.
Traders want freight rates to fall quickly, but so far, the possibility of this is still far off.
With the introduction of economic stimulus measures, we are seeing signs of a strong market emerging after the Chinese Spring Festival, and this looks set to continue into the second quarter of 2021. But the chaotic market, the lack of berths and the shortage of containers will continue for some time.
The transportation of COVID-19 vaccinations has created more demand and we expect to see an increase in shipping, especially of refrigerated cargoes and cold-chain solutions. The safe and rapid transportation of the coronavirus disease (COVID-19) vaccine will be by land and air.
As a result, the role and responsibility of freight forwarders is likely to increase as the complexity of vaccine distribution increases. Freight forwarders’ role as the “connective tissue” of logistics will be key and will take the pressure of managing the logistics of pharmaceutical companies.
As seen with PPE in early 2020, we expect the prioritisation of vaccines means that some non-essential cargo will get bumped, increasing rates and affecting businesses that are have been unable to prepare for this unprecedented scenario.
SUSTAINABILITY
The shipping industry’s enthusiasm for energy conservation and emission reduction remains unchanged. Sustainability and environmental regulation are key factors in the future of the industry.
The drive towards carbon-zero will play a significant role in the future of logistics, both in the construction of warehouses and for freight forwarding.
In terms of construction, the sector can adhere to the “green building” recommendations of the World Green Building Council. Developers and contractors need to integrate renewable and low-carbon technologies to supply buildings’ energy needs, such as purchasing renewable energy directly from the grid, on-site generation or direct purchase arrangements with wind, hydro and geothermal installations. And additional features might include solar panels and charging points for electric vehicles.
The sustainability drive is particularly integral to future transport developments, including vehicle pollution. In central London, for example, 2019 saw the introduction of the world’s first Ultra Low Emission Zone (ULEZ) and Clean Air Zones (CAZs) and these are being rolled out across the UK, Bath launched CAZ in March 2021 and Birmingham due June 2021.
With further CAZs planned, in the short term, this might mean fitting abatement technology to purify emissions or upgrading transport methods to fully electric.
At the same time, the goal of total decarbonisation of the global shipping industry by 2050 has been put on the agenda again. Some international and regional organisations are also considering supporting corresponding technology research and development by imposing additional carbon emission fees.
In recent years, the research and development of environmental protection projects invested by the shipping industry concluded that compared with the huge investment in research and development of “zero carbon ship,” the practice of protecting forests and increasing global forest coverage is more practical for improving the environment.
Certainly interesting times ahead. We follow developments closely and look out for the best solutions for our clients.
