Recently, Capgemini Consulting has published the thirty-first edition of the Transport Market Monitor in collaboration with TRANSPOREON, a logistics platform that connects shippers from industry and trading companies with carriers, drivers and consignees. This latest edition of our joint initiative outlines a strong decrease in transport prices which is remarkable given the fact that the diesel index displayed growth for the fourth quarter in a row. Again, I would like to highlight a few aspects that are linked to the current situation.
Transport prices decreased in Q1 2017 to an index of 86.0, a decrease of 9.0% compared to Q4 2016 (index 94.5). Of course, one could argue that this is a usual seasonal effect. However, compared to the price index of Q1 2016, the price index showed a decrease of 6.0%. As if that was not enough, we had a closer look at the historic data and discovered that this is the lowest price index since the first quarter of 2009. Just by looking at this effect, it becomes obvious that transport companies are fighting intensively to retain market shares.
Showing a trend in the opposite direction, the diesel index displayed growth for the fourth quarter in a row. In addition, within our analysis we have identified an increase in available transport capacity when we compared the average number of bids by transport companies in response to the transport requests by potential customers. Particularly in February this year, we saw a major gap between low prices and high available capacity. As already indicated within my last blog entry, this is a strong indication for a highly competitive environment which, combined with high diesel prices, puts further pressure on transport companies.
Finally, I would like to draw your attention to the European Trade Flow Index, which tracks the quarterly trade of goods and services based on an analysis of a number of trade- and market related parameters. In Q1 2017, trade volumes are expected to decrease by 1.5% to €2.166 bln in Europe compared to Q4 2016 (€2.199 bln). Compared to the same period a year ago, in Q1 2016, the Q1 2017 volume is expected to increase by 6.3%. Even though the index remains on a high level compared to the previous years, the expected drop leads to further challenges for transport companies. All players are forced to execute any shipment they can get, knowing that current parameters such as price and capacity only allow minimal profit margins.
In all, transport companies continue to face difficult times, entailing strong rivalry among competitors and unfavorable market conditions. As competing on price is currently getting less realistic, transport companies have to increase the efficiency of their processes in order to improve profitability. The exchange of relevant data between vehicles, suppliers, customers and forwarders for instance is a major trend within the transport industry that helps all parties involved to improve their business. The digitalization of business processes therefore once again is becoming more important, while companies which are not able to transform will see their business model being challenged. Smart forwarding is the name of the game. Implementing more analytics features in freight allocation in order to improve utilization and avoid empty runs has become a must-do in the industry. Capgemini is offering analytics solutions for these challenges. Feel free to contact me and discuss ongoing challenges further!