The research was presented by Marco Melacini, Damiano Frosi and Emilio Moretti at the conference “Investments and collaboration: Logistics leads the challenge of capacity” held last week at MiCo – Milano Congressi.
According to the research, the sector nonetheless faces sharp increases in operating costs, shortages of operational capacity in transport and warehouses, slowdowns in international supply chains and critical issues in finding energy and fuel, with a consequent sharp increase in the operating costs of the supply chains. Inflation has also led to a negative change in turnover in real terms (-5.2%).
On the plus side, the report finds that the growth of outsourcing in Italy has continued. In 2020, (the last year with final data available), the value of the 3PL market (i.e. direct turnover to customers only) was €50.7 billion euros, which equates to 43.6% of the total value of the Italian logistics sector (€116.4 billion euros).
However, there has been a reduction in the number of operators in the sector (-2.1%). There are 84,500 3PL companies registered, which is 30,000 fewer than in 2009. There has been consolidation mainly in road haulage, exacerbating problems related to a lack of capacity.
Marco Melacini, Scientific Director of the Contract Logistics Observatory, who co-authored the research, said:
“Logistics today is the sector driving the ‘capacity challenge’. In 2022, in fact, strong changes in the sector were accentuated and accompanied by a real shortage of operational capacity. To get out of this situation, the intangible skills of managers are needed to find new balances in evaluating the investments necessary to introduce Logistics 4.0 or energy efficiency solutions, and in the transformation of processes and logistics networks, as well as in the strengthening of collaboration between the players in the supply chain.”
Melacini added:
“The world of Logistics is aware of the difficulties, which will be a further stimulus for investments and process optimization. But companies must not be left alone. Their efforts must be accompanied by regulations and incentives to support the transformation, as was done in the past for the Transition 4.0 plan.”
Damiano Frosi, Director of the Contract Logistics Observatory, also commented on the findings. He said:
“If Logistics demonstrated resilience during the covid crisis, becoming a crucial element for the correct functioning and continuity of business, today the market offers positive signals in terms of stabilising turnover in the second half of 2022, after the strong recovery in 2021.”
Frosi added:
“However, the sharp increase in the costs of production factors should be highlighted, not only those of labour, but above all for road transport, which is affected by the fuel effect and the lack of supply-demand balance. The challenges of LSPs are reflected in the numerous M&A operations, which in the international panorama see the emergence of large players characterized by a high level of vertical integration and an expansion of services. For the Top Players, the value of investments and fixed assets increases, the CAPEX values increase with respect to turnover and the incidence of direct labor costs onrevenue”.
The authors of the report highlight the rising costs in Italy faced by the logistics sector. There was a sharp increase in the costs of production factors in 2021, which accentuated during 2022, in particular for energy and fuel, while the long-awaited decline for international freight rates began in the second half of the year.
In 2021, the cost of diesel increased by 13%, while electricity rose +13.5% and rental fees went up 3%), while continued the labour cost adjustments envisaged by the CCNL (approximately +1.5% per year). But the real “emergency” arrived in 2022 as result of electricity more than doubling in cost (117%), putting the most energy-intensive supply chains in difficulty.
The new “Transport Index” created by the Observatory to monitor the monthly trend of the market, differentiated according to purchase methods (Contract or Spot) also highlights a large increase in transport costs for the sector throughout 2022, with two surges in March (+5.1% compared to January) and June (+8.7%), and the peak in July (+9.2%).
The increases are mainly due to the fuel component, but also market conditions and the lack of balance between supply and demand. The trend of the spot purchase curve has even higher values.
Transport
Transportation was the area where the issue of lack of capacity was probably most significantly felt. During 2022, almost all companies (96%) changed their approach, working on the sender-recipient-logistics service provider relationship in four areas – contracts, planning, visibility and processes.
As regards flow planning, awareness of the “finite capacity” of transport and of the need to introduce the tactical level of planning (for 59% of companies) has increased, with the extension of the constraints linked to the “finite capacity” of Logistics in Sales and Operations Planning (S&OP).
Logistics 4.0
In the field of Logistics 4.0, Italian companies are mainly focusing on digital solutions, i.e. technologies for the collection and management of digital information. 72% of companies have carried out at least one project in this area, including tablets at access gates, RFId systems or sensors that collect data automatically and send them to an information system, APIs for exchanging data between different information systems, as well as blockchain for notarizing the collected data and allowing the certification of information.
The authors of the report also note good diffusion of automation projects (32%). This has made it possible to automate logistical activities, such as automated warehouses equipped with advanced sensors or solutions based on fleets of mobile robots for handling materials.
Finally, 14% of companies have launched analytics projects (especially pilot cases) for data analysis, such as big data software which, in the most advanced cases, allows one to aggregate and organise masses of data, produce forecasts with artificial intelligence, conduct simulations based on real-time data, and apply digital twin concepts to logistics process to evaluate different scenarios.