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Freight Companies - Challenges

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Challenges faced by Freight companies in Australia

Challenges for the freight companies are present all around the world in different regions ranging from legislation and transportation to demographic issues and weather phenomena. Hurdles faced by logistics and freight companies result in additional loss of time, money and resources. A unique logistics atmosphere is observed in Australia that results in unique challenges faced by the Australian freight companies. Several researches have been conducted in order to identify variety of problems currently being faced by shipping companies in Australia. The aim of most of these researches was to identify the present logistics conditions in Australia, uncover the existing challenges and provide viable solutions for them. Different interviews have been conducted with various freight companies to gain some insight regarding the issues faced by a regular Australian working within logistics industry.

Consequently, the challenges that have been identified range from long distances and presence of wild animals on the route to stress of sustainable growth and increased security risk. Therefore, some solutions have been identified that include options like enhanced training provided to the drivers, improved planning and better forecasting, considering diverse production schemes, improving the infrastructure and transportation networks.

According to the Australian Government, “freight and logistics industry is an essential component of the national economy and it supports the nation’s “quality of life aspirations”.

Although the transportation sector contributes 10% of its share to the Gross Domestic Product (GDP), and the revenue is expected to increase at the rate of 2.2% over the five subsequent years; the overall contribution of freight companies to the economy is decreasing rapidly.

So what kind of challenges are actually being faced by the freight companies in Australia and how can the growth of this industry be supported by the insurance companies? In this article, 3 major challenges being faced by the Australian freight companies will be highlighted as well as the role of insurance companies in provision of support.

  1. Technology

Freight and logistics industry has been revolutionized by technology, usually for the better. Digital technology like automation and tracking programs and software has made it possible to achieve larger economical benefits for the stakeholders. This has been and will remain a major factor of growth for the industry. Nevertheless, advent of technology like sophisticated telemetric system, self-directed vehicles and drones are sure to have a negative impact on freight companies. Although these technological tools have their benefits, they are a huge threat for workforce and labors working in the logistics industry as it will leave many of them unemployed.

With all the benefits and advantages, lack of technology poses a significant risk for the freight companies as well. In the trend report of commercial transportation of PwC in 2017, commercial freight companies pinned down the number of challenges that are classified as the major barriers for further digitization:

  • Lack of digital training and culture is the top challenge for 50% of the shipping companies
  • Uncertainty regarding data privacy and security comes at second place as a challenge faced by 38% of the companies
  • Finally insufficient talent and shortage of skills is a challenge for 28% of the freight companies.

Undoubtedly, technology is a massive source of opportunities for the shipping and logistics industry, but it is not without its drawbacks. Cyber security is an immensely serious and recent issue in the industry. The threats are progressing over time such as the global cyber attack that targeted Molar-Maersk, TNT, AP and others as its victims. Therefore, the risk exposure needs to be assessed and prevented with the help of cyber insurance by the freight companies.

  1.  Skill shortage and the ageing workforce

Although productivity of the workforce has improved and wages have remained stable across this part of the industry; freight companies are still struggling to attract skilled workforce. The unavailability of the skilled labor is not a new challenge but shortage of skilled labor in different regions and the ageing workforce has aggravated the damage.

Highly skilled staff with essential assortment of soft skills and technical skills has become a scarce resource. Moreover, when it comes to aptitude and recruitment, logistics and transportation companies are lagging behind other divisions. At the bottom of this issue is perhaps a ‘perceived’ lack of availability of competent candidates, struggle for resources and the issue of image (that is the industry is not quite popular among the individuals looking for the job opportunities).

The ageing labor force is another factor contributing to these challenges, especially considering the fact that a quarter of workforce in shipping companies of Australia consists of individuals aged between 50 to 64 years. This also has a profound impact on road freight service which is experiencing a shortage of drivers. To help the older workers remain productive, their needs have to be incorporated into risk management strategies of the workplace, while young candidates can be attracted with the help of packages and employee benefit offers.

3) Infrastructure

The freight companies heavily rely on the government to arrange and fund main infrastructure such as roads, airports, railways and ports.  Federal Australian Government has currently resolved to spend over 70 billion AUD on infrastructure with further allocation of funds for railway system and roads in the next 10 years. This is an excellent solution for the issues presently being faced due to the inadequacy of infrastructure.

The improvement of infrastructure will promote efficiency of the industry but the advantages will not be uniformly distributed across the industry. The expansion and upgrade of ports will make the freight companies more competent, expenditure will be reduced and productivity will be enhanced but ports have always been known as the ‘obstruction points’ during the period of infrastructure growth.

Supporting the freight and logistics industry

Insurance industry can play a role in supporting logistics industry. Insurance brokers and freight companies mainly collaborate by making the technological adjustments according to the cyber risks. Consequently, managing the risk at workplace being faced due to ageing labor and talent crises.



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