A truck should be treated like an airplane, where any minute of idle capacity is unrecoverable.
Since the mid-2000s and more strongly after the recovery from the 2008 crisis, Brazil has experienced what can be called a revitalization of the road freight transport sector. There was a large increase in demand, at a speed greater than the possibility of growth in the service offer.
The imbalance between transport demand and supply, in turn, drives a new development cycle in the segment. In addition to GDP growth, factors such as the expansion of the agricultural frontier, more demanding consumer markets far from large urban centers, the interiorization of economic activity and the strong capacity restrictions of other modes of transport placed even more weight and pressure on the demand side. in the road sector.
The restriction on increasing the supply of this service is due to the limited installed capacity of truck assemblers and manufacturers, the high degree of dependence on self-employed drivers in this sector and their aging and scrapped fleet, the difficulties and lack of investment in highways, the new and ever stricter legal restrictions on operating the segment and, finally, from the implementation of income distribution programs, to a lower exit barrier for the self-employed who begin to pursue other opportunities to “live life”.
On the other hand, it is also worth highlighting the strong process of professionalization in the logistics sector, in which transport activities are inserted. When looking at the last five years, we notice the large amount of market changes in the composition of capital and shareholding control of logistics operators and cargo transporters.
In the not-too-distant past, there were no logistics companies listed on the Brazilian stock exchange; currently, there are several representatives, such as ALL; Tegma; Wilson, Sons; JSL, among others. At the same time, the presence in the country of international players (TNT, DHL, Fedex, UPS, among others) is already relevant and several mergers and acquisitions of companies are underway. There is also the presence and focus of some investment funds also attracted by the sector and making contributions in privately held companies or in “start ups”, such as Veloce, Acqes, Rapidão Cometa, Gafor, to name a few.
Finally, and not least, there is a strong movement towards training and attracting great executives, which brings even more vigor and freshness to this special and interesting moment we are going through.
CURRENT CHALLENGES
Last year, the Institute of Logistics and Supply Chain (ILOS) carried out a survey of the main carriers in Brazil and compared it with a similar survey carried out in 2008 by Coppead/UFRJ. In this comparison, the supply restriction issue is manifested in several data collected and its evolution in the last two years is shown in the table below:
Based on this scenario of increased demand and the difficulty in matching supply, as well as the reorganization and greater professionalization of transporters, it is relatively simple to predict strong pressure for an increase in transport prices. Deep down, this prediction is already being fulfilled and its materialization makes up a relevant variable of inflationary pressure. It is important to note that, if this pressure is not addressed in a holistic and purposeful manner by all actors in the distribution chain, it tends to get worse and bring important impacts in the short term. In short, the first and biggest challenge for the sector is to seek, if not a reduction, at least the maintenance of relative cost levels (% cost/revenue) of the shippers (who contracts the freight).
It is also worth remembering the growing issue of rules and restrictions on cargo movement in large urban centers. This is a controversial topic and undoubtedly tops the list of challenges and cost pressures for cargo transport operations. In a recent and still unpublished ILOS survey carried out on the subject, we obtained an estimated average increase of 20% in costs in the urban distribution chain, as a result of these new, varied and growing restrictions on the movement of freight vehicles.
At the other end of the challenges, it is necessary to analyze the issue of service. In this regard, there is a clear tendency towards an increase in the levels of demand from customers, together with a great difficulty in renewing, hiring and training drivers and cargo delivery operators. Not only are regulations and formalization in the industry increasing, but the amount of technology embedded in vehicles and the technical requirements demanded of drivers are increasingly high barriers to overcome. Large carriers that have the capacity to invest and renew their fleet are unable to grow in line with the demand for the service, due to an absolute lack of manpower.
Another dimension that negatively affects the service is the poor national road infrastructure. Brazil has around 212 kilometers of paved roads for a total area of 8,5 million square kilometers. To compare, the US has 4,21 million kilometers of paved highways for an area of 9,1 million square kilometers; in China the ratio is 1,6 million kilometers to 9,3 million square kilometers and in India, 1,5 million kilometers to 3 million square kilometers. In other words, even with all the private investment and great managerial effort in companies in the sector, it will become increasingly difficult to achieve good service provision for a growing economy, better distributed and increasingly capillarized.
Closing the list of major challenges, it is necessary to mention the increasing pressure for environmental responsibility initiatives, a strong trend in all markets and which also affects the transport segment. There are already shippers adopting the carbon footprint as one of the relevant metrics in defining their transport strategy, with the road modal being a less competitive emitter when compared to modes such as waterway, pipeline and rail.
OPPORTUNITIES AND INITIATIVES
Faced with this scenario, the great motivation of executives is to overcome the great challenges and use road transport to bring competitive advantages and sustainability to their businesses. Good initiatives are sprouting in the sector, both in the business environment and in government areas, proving that it is always in times of great challenges that the cycles of greater development and the breaking of paradigms happen.
In the official area, we find some investment plans covered by the PAC 1 and PAC 2 programs that aim to increase the geographic coverage of paved highways, as well as improve the road conditions and safety of transporters. Unfortunately, most of the PAC is still in the “letter of intent” phase, but some investments in road duplication and road extensions already in progress cannot be ignored. A good example of an important work (although not part of the PAC) that has already been delivered is the southern section of the São Paulo Ring Road.
A second front of the government, as important as investments in infrastructure, is the increase in the formalization of the sector and the search for greater regulation. The extinction of the “freight letter” is dated for the end of October and, although not many people are aware of the fact, it is a significant milestone that will bring better results and freedom of operation to the self-employed, in addition to being a way of inspect the sector and create proof of a formal source of income that can be used by the self-employed in the event of a search for credit to renew their truck, for example.
On the side of companies, there is a trend towards the intensive use of information technology with a view to gaining greater operational efficiency and productivity of assets. Regardless of direct or indirect ownership (service contracting) of transport assets, efficient and monitored vehicle management has become essential. Not only because of lower prices and greater access to new technologies, but also because of the importance of improving flows and saturating freight vehicles as much as possible. Greater visibility throughout the entire distribution chain and perfect integration between its stages generate greater synchrony in the application of vehicles, helping to reduce cost pressure components and bringing operational efficiency to transport circuits. The maximum point of this trend materializes in traffic centers or operational control centers, previously only common in carriers and currently part of the business of several shippers.
Another initiative in the area of investments in technology worth highlighting is the resumption of studies and development of new types of vehicles and fleet profiles. Both automakers and transport companies have returned to investing in the development of more agile, flexible, lighter, “green” transport assets. Also in this area, loading and unloading equipment and activities have also been the subject of innovation, mainly due to time reductions and greater demands on delivery windows. As confirmation of this opportunity, there are operators who are specializing in designing dedicated assets and operations by type of industry and even customer, depending on the size of these operations.
A third and major initiative adopted to seek greater efficiency in the distribution chain is the practice of collaborative transport. Whenever the market is faced with transport supply restrictions, shippers become partners with service providers in the search for operational efficiency, and this makes it easier to share transport capacity for different companies' cargo circuits. Good examples of this have been the back haul work carried out by retailers with their largest suppliers. Simplifying the concept: the truck that takes cargo from the retailer's distribution center to its stores, after performing this service, passes through the factories of some of the retailer's suppliers and returns loaded to the distribution center.
There is also load sharing in the same direction or distribution channel. This has been noted, for example, in urban distribution operations where the same vehicle delivers loads from different customers to the same point of sale. This is a concept that is widely practiced abroad and is even the origin of some of the world-class fractional transport operators.
Finally, and not least, I would like to highlight the importance of applying a mix of the concepts and business practices described, remembering that all of this will only stand if there is a focus on operational management and management of the routine of the transport operation . A truck should be treated like an airplane, where any minute of idle capacity is unrecoverable. It is worth remembering that a competitive transport operation presupposes clear, measurable monitoring indicators, real monitoring and good management of exceptions. This is the basic and irreplaceable path for a good highway cargo distribution operation, regardless of external changes or scenario variations.
*Article published in the October issue of HARVARD BUSINESS REVIEW BRAZIL
