Transport and logistics firms are no stranger to navigating economic challenges and employing cost and efficiency strategies in response to a wide range of headwinds. These include fluctuating fuel costs, regulatory pressures and supply chain disruptions; the current difficulties in Red Sea shipping lanes being a prime example.
According to our UK Energy Survey, high and volatile energy prices have been yet another headwind to profitable growth over the last two years. Over a third of businesses say high energy costs have significantly impacted their profits and margins over this period. Nearly three quarters are passing these costs on to consumers and suppliers and 70% are reviewing their third-party costs in a bid to ease the financial burden. And, with almost 90% of businesses acknowledging that Government energy support schemes have been essential for survival, this raises questions for how the sector will fare when support is removed.
With energy-intensive warehouse, logistics, freight and fleet operations to manage, what steps can the sector take to drive efficiency, cut costs and reduce its carbon footprint?
Tackling costs in a volatile period
To counter the impact of high energy costs, 80% of businesses are pursuing digital transformation with 68% improving data and analytics on energy usage. Technology investment will be critical for success here. For example, the right cloud infrastructure provides the foundational platform to collect data across the entire organisation. Once this data is visible it can be analysed to inform smarter and more consistent decision making.
Operational and maintenance-related measures, such as maximising trailer carrying capacity, retrofitting smart controls to industrial fridges, or using cloud-based technology to maximise yields and reduce waste, can be a major source of efficiency gains. Some have the potential to generate a swift return on investment.
Yet, despite this, 72% of companies in the sector say the high up-front cost of introducing energy-efficiency measures is a major barrier to alleviating costs over the longer term. This could pose a problem for a sector that is highly attuned to the synergy between energy cost-efficiencies and environmental gains, with almost half of firms surveyed reporting delays in decarbonisation efforts as they tackle high energy bills.
Bringing carbon and cost together
With regulation and pressure from investors being important drivers of decarbonisation for three in five firms, it’s unlikely the foot will come off the net-zero accelerator entirely.
Reducing energy consumption is the most important objective of energy strategy for businesses in this sector with 56% also incorporating efficiency targets. And, where energy consumption can’t be reduced, businesses are increasingly considering greener options. Almost 70% are considering investing in on-site renewable generation, such as solar panels and three in five are considering a Power Purchase Agreement with an off-site renewable generator. With some existing assets not fit for purpose, firms are also considering how they can retrofit energy efficiency measures to cut costs and meet net zero emission targets.
Logistics providers are also looking to more sustainable supply chain solutions, from route optimisation to electrification of fleets. The UK has ambitious targets to phase out sales of non-zero emission HGVs weighing 26 tonnes or less by 2035, heightening the need for an effective electric vehicle charging infrastructure.
Businesses that can successfully drive energy efficiencies alongside environmental gains, will be in a strong position to not only grow market share but withstand future headwinds. And those that are slow to act risk being left behind.
Download our UK Energy Survey 2024 for more of our findings.
