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Transport, distribution and logistics are changing – what are the implications for business?

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Businesses and insurers are in a race against time to respond to climate change, urbanisation and innovations in technology. The transport, distribution and logistics industry is under pressure to become more efficient, and insurers are scrutinising both the possibilities and implications of an ever-changing world. 

Reducing emissions and offsetting energy 

Business are already looking at a variety of ways to reduce emissions and offset their energy consumption. When it comes to supply chain design, minimising energy use will become key. 

Some suggest slowing down supply chains. This is already taking place in the shipping industry, although not on a grand scale, as some of the world’s shipping routes have imposed speed limits. 

“Slow steaming” is being discussed as a viable option for transoceanic cargo ships and is already being used by Maersk, who find it allows flexible voyage and schedule planning, as well as vessel savings amounting to 10-30 per cent for fuel and CO2 emissions. There are drawbacks, however, when it comes to shipping fresh or time-sensitive goods. 

Airlines are slowing down, too, and many parcel delivery companies are offering consumers slightly slower delivery options with reduced emissions. 

It’s expected that most companies will try to reduce their energy consumption, and its cost, however other variables will inevitably play their part – access to raw materials and labour, for instance. 

Insurers can also play an active role in mitigating emissions by providing financial incentives, and sustainable insurance has built huge momentum. 

Responding to urbanisation 

More and more people are expected to adopt urban lifestyles – an approximate increase of 75% by 2050. 

Population density poses challenges and offers solutions at the same time. While a closer proximity of the supply chain could reduce some risks, assets and infrastructure being highly concentrated within one area increases the risks posed by pandemic or natural disaster. Some even believe that climate change risks could render entire swathes of the world uninsurable. 

Urbanisation is also fuelling a global movement towards lowering emissions. Around two per cent of the world’s surface is covered by cities, yet they account for 75 per cent of its energy consumption. Cities are responding - new megacities are powerful global actors and often lead the way in environmental policymaking. 

Populations are becoming denser, infrastructure more complicated, and tolerance for emissions is decreasing. All of this poses huge questions for logistics.

Adopting innovation 
Data

A range of technologies designed to utilise data at every stage of the supply chain are offering opportunities for the transport and distribution industry to intelligently meet its challenges. Entirely self-orchestrated supply chains could be just around the corner. 

Amazon attracted attention when it announced its plans to begin using drones to fulfil online orders. It has even been working on drones that can deliver directly from the warehouse to the customer’s home in order to compete with the instant gratification offered by shopping in person. 

Drones are certainly enjoying a ‘moment’ in the public conscience, however other fleets could become autonomous, too. New forklifts called “vision-guided fully autonomous mobile robots” can process orders four times faster than a human and decrease unproductive ‘man travel’ within a warehouse. Rolls Royce even plans to launch autonomous cargo ships by 2030. 

All this automation and technology provides opportunities to unlock real insight from big data, and use it to transform logistics. 

Amazon also has plans to pre-empt its customers’ purchasing decisions. In 2014 it obtained a patent for what it calls ‘anticipatory shipping.’ The strategy the patent set out involves shipping products to partial street addresses or zip codes to get them as close to the customer as possible, before they have even placed the order. This could be introduced for new product launches, such as the latest smartphone.  

Developments around the use of data could have positive implications, such as smaller warehouses. As the logistics industry transforms, insurers will need to take into account other implications around security - especially cyber security - and also GDPR. 

Fabbing

A fabber, or digital fabricator, is a 3D printer. It’s like a ‘factory in a box’. They manufacture three-dimensional objects, for instance a model, prototype or even a delivered product. Sectors where spare parts are often required – for instance automotive and aerospace – could make great use of fabbing. 

While 3D printers are out of the average consumer’s price range, efforts are already being made to ‘democratise’ fabbing. In the future, as close as 2030, consumers may be able to produce simple items such as spare parts in their own homes. 

Intelligent materials and high-performance synthetics such as polyetheretherketone (PEEK) could help fabbing technology expand into other applications. The on-demand manufacturing offered by fabbing technology is highly attractive – it could be used to cheaply and quickly produce spare parts for vehicles and consumer electronics, as well as high-quality customised products. 

For the logistics industry, fabbing could mean the emergence of new supply chains with less transportation of raw materials, parts and finished goods, as well as the reverse logistics of fabbed products.  In short, it could transform the global flow of goods. 

This innovation could affect the insurance industry in a variety of ways; there could be a decline in insurance of physical goods in transit, while sharing blueprints for fabbing online could have implications for cyber insurance. 

What’s around the corner?

As businesses tune in to a variety of key developments in the transport, distribution and logistics sector, insurance brokers are responding. Whether businesses are slowing down their supply chain, bringing it closer together, or using innovation to bring goods to consumers faster than ever before, specialist insurance is keeping pace and will continue to provide peace of mind. 

Our Corporate team are experts in specialist insurance for the transport and logistics sector. Speak to a team member today. 
 

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Specialist insurance for the transport and logistics sector