Road freight transport is the most widely used transport infrastructure globally and is vital to the economic development of various countries. Road freight is a mode of shipping used widely across Europe, Africa, North America, and even the Middle East. With a single customs document, one can transport material across various states and countries, making it wholly cost effective and flexible. Even in modes involving sea and air, the last mile delivery usually constitutes of truck deliveries.
THE ROLE OF OIL
The recent drop in oil prices is a resounding advantage for the trucking industry. According to a report, The Future of Trucks: Implications for energy and the environment, by the International Energy Agency (IEA), trucks are the second-largest source of all global oil demand. Today, trucks account for almost a fifth of global oil demand, or around 17 million barrels per day, equivalent to the combined oil production of the United States and Canada.
According to Vinit Malhotra, general manager of the Middle East Road Network (MERN) with ATS Shipping, the lowered oil prices have been quite profitable for transportation companies.
“Lower fuel pricing really benefits truckers. It narrows the price gap with rail and makes it (the market) more competitive. In fact, it’s helping trucking companies recapture customers they lost. In longer term, lower fuel costs mean truckers can adjust their networks and routes to better serve their customers. And it allows trucking companies to keep older, less fuel efficient vehicles on the road for longer.
“We, in fact, expect to see more and more opportunities for us as a result of the lower oil prices. As oil prices go down, you can refuel your trucks and run your assets in a less expensive way.”
Lower fuel costs allow trucking companies to streamline operations around demand rather than fuel savings. In particular, these companies can adjust their networks and routes to better serve their customers on the basis of speed and convenience.
“The entire logistics industry is having to contend with rising energy costs and seasonality of customer volumes,” says Bassel El Dabbagh, CEO of Agility Abu Dhabi. “Customers are increasingly demanding turnarounds of large cargo volumes at short notice, adding to cost pressures. The solution is to incorporate more innovation, especially in terms of developing efficient customer supply chains.”
TRUCKING AND GCC
Malhotra comments on ATS’s growth in the region, a direct result of a burgeoning logistics industry. “In recent years, governments within the GCC have launched major initiatives to shift to a knowledge-based economy, digitise industries, and create technology-based jobs for nationals. As per a recent report, trucking is the predominant mode of freight transportation in the GCC. We receive a majority of our business from across the GCC countries, some from around the world too, but our major business hubs are KSA, Oman, and Kuwait. Domestically we move 2,500 containers per month and an average of 13,000 full truckload (FTL) approximately across GCC.
“Having said this, there will be various roles in documentation, customer services, operations etc which will be needed in the coming months and years to enhance the services within the industry.”
Dabbagh believes that rampant road freight requirement is a driving force for logistics companies in the region. “In the coming years, a lot of projects are slated to come online, as the region undergoes a wave of initiatives geared towards economic diversification. This bodes well for the Middle East as far as the generation of jobs is concerned. Agility has maintained a strong track record in making the right investments to build logistics capabilities in the region.
“In the GCC, the huge infrastructure pipeline means that the transport and logistics sectors can be expected to play an increasingly important role for the region’s economies, generating significant value in the form of efficient supply chains, delivery of goods and personnel across borders, and supporting the activities of the travel and tourism industries.”
STRIDES IN TECHNOLOGY
Technology is a vital factor in driving growth in this sector. Innovations in the field play a big role in cost optimisation and operational efficiency. Dabbagh says: “Technological innovations mitigate the impact of recent fuel prices and ensure positive cash flows. The sector is also focusing on refitting fleets with technologies that consume less fuel and generate more productive outcome due to their lower carbon emissions. New engine technologies are providing more power at a lower carbon footprint, with renewable energy resources playing a bigger role in the industry and providing improved returns.
“The effective usage of communication technology is also helping the industry make savings on manpower, local travel, and financial transactions, along with higher levels of transparency. Smart technologies and applications are also enabling logistics service provider and customers to improve day-to-day transactions and operations.”
Another important technological development in the road freight sector is truck platooning. It involves trucks driving one after the other, with minimal distance between consecutive vehicles, enhanced by automatic braking, reduced fuel consumption and emissions as the trucks drive close together at the same speed, with less overall space taken up on the road.
The UAE is a major logistics hub in the region and in line with its smart initiatives in cities such as Dubai, platooning would be a welcome addition to the region’s push towards smart services. According to Agility’s data, autonomous platoon driving will increase productivity by around 30%, with fuel efficiency for the trucks rising by a rate of around 15% to 20%.
The technology, however, is still in the nascent stages of development and is yet to be fully developed. It will require regulatory framework as well as new road infrastructure to be used by commercial vehicles.
According to a study by Lucintel, a global management consulting and market research firm, retaining drivers, shortage of drivers, high cost of truck downtime, and highway funding are among the biggest challenges for the industry. Asia-Pacific markets are expected to grow rapidly over the next 10 years due to the presence of high growth potential markets such as China, India, Vietnam, and others. However, investment in transport infrastructure, increasing global trade activity, high demand for import and export of goods, increase in consumer demand for goods, and expanded mining activities can boost the industry in the future.
Dr Fatih Birol, IEA’s executive director, is pressing for reforms in the trucking industry. IEA’s road freight report highlights the negative impact of road freight on the environment, accusing it to be a major contributor to global carbon dioxide and air pollutant emissions.
“For far too long there has been a lack of policy focus on truck fuel efficiency. Given they are now the dominant driver of global oil demand, the issue can no longer be ignored if we are to meet our energy and environmental objectives,” says Birol, in the above report.
IEA suggests moves such as global positioning systems to improve logistics efficiency, aerodynamic retrofits, and alternative fuels such as natural gas and electricity, to reduce the strain that global road freight puts on the world’s resources. But it seems like autonomous vehicles is the way to go, combating several problems in one move, and improving the industry efficiency as a whole.