A new report from Deloitte found that by the end of this year, up to 45 percent of the transportation sector’s operating profits could erode due to the economic downturn stemming from the coronavirus pandemic.
However, the outlook isn’t entirely bleak, according to the report, “Finding Opportunities in Today’s Transportation Sector.” That’s because transportation is still vital to the global economy and the sector has historically been resilient.
The report outlines how transportation companies that have the ability and willingness to challenge sector issues, many of which existed well before COVID-19, may find opportunity to thrive and potentially redefine the overall industry.
Key insights from the report include that COVID-19’s impact could accelerate long-needed transformation in the sector and facilitate stronger long-term stability. While around 25 percent of transportation companies are in difficult positions due to the current environment, most have the wherewithal to survive this crisis and invest in a stronger future.
Regardless of the pandemic’s impact, transportation companies must address several challenges, Deloitte noted. Among them are demand for last-mile capacity, efficiency, visibility, products, services and modes, and the need for new technology and data for holistic decision making and meeting customer expectations for the connected community.
In addition, companies should tackle the need for more flexible or variable cost structures; operating and service delivery models that include automation, structural assets, supply chain and cloud, and customer expectations for the connected community such as integrated data platforms, minimal-touch operations, customer experience and digital freight.
There is also the need for more supply-chain resiliency, illumination and sensing, mitigation plans, safe operations, evolving workforce and societal expectations, along with stranded real estate, digital tools, security, privacy, performance management, talent and learning, safety and brand trust.
“In almost every sector, investments in technology are becoming more and more important to compete,” the report said. “Advances in cloud, AI-based sensing, analytics and other technologies have created vast new opportunities to connect with customers, partners and suppliers; to inform decision-making in rapid and insightful ways, and to automate larger portions of work. Yet in a recent Deloitte survey, almost 50 percent of responses from transportation companies larger than $1billion indicated companies were not taking advantage of these technologies and data to address acknowledged pressures such as customer expectations, infrastructure limitations, and government or regulatory pressures.”
With low revenue multipliers compared to other sectors, transportation companies that demonstrably shift business models could also help break out of their trading range.
Overall, Deloitte said, the pandemic has added new pressure to existing opportunities with a renewed focus on meeting customer expectations, especially around fast and free delivery; managing inefficiencies, congestion and fragmented supply chains; integrating new technologies, adjusting to shifting talent models and tackling disruptive entrants.
The report concluded that “some companies will fall back on the old ways of operating, some will have the appetite and the means to incrementally improve their performance” and others “will see this crisis as an opportunity to take head-on the long-standing inefficiencies in the sector.”
