The transport and logistics sector plays a vital role in economic growth in the world today. The industry faces management challenges due to the high cost of operations and other risks for a viable business. For practical, low-cost serviced delivery, public-private partnerships to create a level playing field in the sector. Increased operating and administration costs reduce profits, making the industry nonviable business to start-ups and even other companies. Therefore, stakeholders must find ways to make the venture profitable. Challenges and solutions vary due to geographical location and other artificial factors created by illegal or governmental agencies. The research paper will discuss the challenges and solutions thereof in detail. Below are some of the challenges that these companies face during service delivery.
Infrastructure is critical in the transport sector as it determines the costs of warehousing, freight handling, and other external services related to the industry. Unworthy transport infrastructure increases transportation costs due to frequent equipment maintenance and insurance of both cargo and equipment (Badassa & Qiao, 2020). Developing countries are mostly affected by poor development infrastructure due to limited financial resources and skilled workforce. Land transport lags because of poor road and railway networks that connect significant airports and seaports. Because of this, internal container deports are few and underutilized to sustain businesses.
Public-private partnerships are welcome at this point. The private sector is encouraged to enhance help fund government expenditures on infrastructure networks to facilitate the smooth running of business operations in any given nation. Government policies should address issues across the entire sector and other related sectors such as banking, ICT Customs, security immigration, and tracking systems.
Warehousing has become a crucial tool in the transportation sector to keep business at the top. However, this becomes a costly venture if the firm does not achieve the set goals as forecasted by the company. Unpredictable market trends may keep goods in warehouses for long, which may translate to increased storage charges. The overstayed cargo denies transport firms business. It forces the firms to charge highly for services rendered whenever opportunity crops to caution the losses faced; thus, the consumer suffers at the receiving end. It calls for tact and knowledge to run warehousing in the transport sector (Karim & Shah, 2018). For proper forecasting, the firm should stick strictly to the policies for profitability. Again, warehousing exposes goods to risks of theft, fire, and other natural disasters. The risks attract high insurance premiums during insuring of the goods both on transit and in warehouses.
To achieve reduced high monitoring costs, companies should develop accurate inventory levels and customized stock-keeping units. The companies should develop master plans based on facts and not on ideologies. Documented procedures are designed appropriately to achieve desired results as projected in the master plan. The achievement is reached through a master plan document detailing economic costs, implementing the program, and justifiable data. Forecast strategy must be action-oriented and time conscience to meet customer requests and demands. The master plan should also contain production volumes, inventory levels, and technology and labor skill requirements (Wang & Evans, 2015).
Secure transportation of people and cargo is required to make the transport sector thrive. Goods worth Millions of dollars are involved that command appropriate security during transit and storage. Terrorism threatens life and loss business in the industry, affecting majorly maritime, road and air transport (Goodrich & Edwards, 2020).
The 11th Sep 2001 attack on Pentagon is an example of terrorism that affected the transport sector (Thissen, 2004). According to records in the early 19th century, pirates in the Northern African states captured merchant ships and terrorized the crews holding the ships in exchange for huge ransoms.
Businesses have lost millions of dollars through these ransoms in favor of private activities. Samho Dream, South Korean Tanker, in November 2010, paid a whopping $9.5 million to pirates along the Somalian coast as a ransom to release its ships and crews. It is a significant loss considering that these are profit-oriented entities. Import business is hampered by pirate activities along affected coasts forcing shippers to charge highly to remain relevant in the industry. Below is a table showing how the countries lost huge amount of money through ransom by pirates.
|Country||Amount Per Year ($Million)|
Pirate activity is a complicated issue affecting the world that the private sector cannot handle alone. Public-private partnerships in security matters should be a talk of the day for stakeholders to provide required security services during transit and at the destination of the cargo. Governments’ security agencies must beef security along the affected coastal lines that act as pirate zones.
Merchant ships should be encouraged to sail in convoys to counter-check pirate attacks, which could have been easier for one sailing ship. Though shippers complain of maintaining uniform speeds being costly to venture. Shippers can also vary sailing routes to avoid pirates. However, it becomes impractical when trying to beat strict deadlines. Time and dates of sailing can be removed from the public domain so that pirates cannot access the information.
Ransoms have taught companies to strategize on transporting cargo in the form not attractive to these illegal groups. Goods are transported in their crude state, not in usable condition until gone through victorious processes of transformation. Banks have since then ceased transporting physical cash, electronic transfer systems have almost faced out pirate activity in the industry. Long-Range Acoustic (LRAD) has been implemented on ships to produce sirens to force pirates off way as the vessels speed away from the dangerous zones along their routes (Azmat & Kummer, 2020). Unmanned Aerial Vehicle (UAV), is a surveillance system developed to capture sea images and send them back to a land station for scrutiny. Other ships are fitted with a 9000-volt electric fence to deter any boarding attempts while on transit.
Increased International Shipping Costs
Market forces, fuel costs, terrorism coupled with environmental factors are the significant causes of maritime, road, and air transport. These costs are relayed to the consumers as high prices of goods and services. Technology advancement is also another determinant of deciding transport cost. Skilled labor and acquiring the equipment remain costly (Richter & Scholz, 2020). Being a factor of production, good remunerations, and equipment prices will affect transportation costs accordingly. Unfamiliarity with international transport policies has been problematic when shippers reach destination countries. Shippers have gotten on the wrong side of the law because of ignorance of these shipping laws. They pay huge fines in return.
Shippers should consider using the best economical transportation methods and avoid unnecessary freight that may increase operating costs. Again, they can assume different routines and procedures to avoid crime zones to cut expenses caused by ransoms. Outsourcing of specialized services may be another better way to cut costs.
Companies may choose low-cost modes of transportation such as railways and roads for reduced costs of operations. Technology advancement implementation may reduce the cost of tracking and monitoring railways, road, and maritime transport. Human-powered transportation is recommended where small distribution is required as an economical mode of transportation. Specialization is a vehicle that leads to efficiency. The companies may mutually agree to specialize in different narrowed lines of trade to complement each other in times of need.
These are demand and supply trends that control the pricing of goods and services in the economy. Demand and supply affect transportation because goods are transported to places they are highly needed and vice versa. However, unpredictable situations may occur in the market and temper with the demand-supply trend that may change commodities prices accordingly. In a perfect economy, the supply-demand relationship is always at equilibrium; imperfection situation occurs where either supply or demand exceeds the other, causing abnormal price responses.
Skilled labor is required to research and advice when a business can do well in an economical way possible. Companies should embrace new technologies that will reduce costs to transact during high seasons (Wang & Evans 2015). Regulatory agencies cannot be left behind in this fight to ensure the industry thrives. Monopolies should be discouraged as much as possible to avoid imperfect demand-supply relationships that seek to exploit the public through high-rocketed prices in the market.
For shippers to operate smoothly in the sector, they need to educate their crew of all dangers involved during cargo transportation to their destination and subsequent solutions thereof. International transport regulations and policies should be made simple and available to shippers. Cargo security is improved through engaging professional security experts both from private and government security agencies.
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Karim, N. H., Rahman, N. S. F. A., & Shah, S. F. S. S. J. (2018). Empirical evidence on failure factors of warehouse productivity in Malaysian logistic service sector. The Asian Journal of Shipping and Logistics, 34(2), 151-160.
Goodrich, D., & Edwards, F. (2020). Transportation, Terrorism and Crime: Deterrence, Disruption and Resilience.
Mark Thissen (2004). The indirect economic effects of a terrorist attack on transport Infrastructure.
Azmat, M., & Kummer, S. (2020). Potential applications of unmanned ground and aerial vehicles to mitigate challenges of transport and logistics-related critical success factors in the humanitarian supply chain. Asian Journal of Sustainability and Social Responsibility, 5(1), 1-22.
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Wang, Y., Rodrigues, V. S., & Evans, L. (2015). The use of ICT in road freight transport for CO2 reduction–an exploratory study of UK’s grocery retail industry. The International Journal of Logistics Management.