With the disruptions of the COVID-19 pandemic and global shortages and conflict, the worldwide land transport sector has undergone substantial transformation in recent years. While some sectors have struggled to recover, land transport has emerged as an innovator, with an expected growth of over $130 billion over the next five years.
This transition creates opportunities for freight and logistics companies to enhance their operations and explore new avenues for growth. A staggering amount of goods move across the Americas each day, making logistics a key player in trade in North, Central and South America.
While there are opportunities in the Americas, moving goods across the diverse landscapes also comes with challenges, like navigating customs and regulations or adapting to different infrastructure. To capitalize on the opportunities, logistics professionals must be prepared to adapt.
Factors Fueling Market Growth
The land transport industry has experienced incredible growth since the dark days of the pandemic. The ecommerce boom has led to increased demand from overseas and local warehouses, putting more strain on transportation networks.
Advertisement
Parcel companies, LTL carriers and independent couriers have had to adapt to the increased demand with advanced technologies and web-based solutions. These investments improved communication and provided data-driven insights to streamline operations and help companies deliver rapid, cost-effective services.
Understanding the Challenges for Land Transport in the Americas
North America: Regulations, congestion and aging infrastructure.
North America has sophisticated infrastructure with an extensive network of roads and railways that can facilitate efficient movement of freight. But as populations grow, urban and road congestion presents growing challenges for logistics providers. There are also separate taxes and regulations for each state – as well as on the federal level – that can hamper seamless transportation of goods from one area to another.
Another issue in North American transport is that transport systems, such as roads, bridges and railways, are aging and may need upgrades or replacements. This is particularly true in the U.S. The funding in different regions, states or municipalities can also vary, leading to hazardous conditions along the transport route.
Central and South America: Remote regions, rugged terrain and varying regulations.
In Central and South America, the circumstances for land transport are vastly different than North America. Central America has areas with limited public transportation and remote areas with dangerous roads. There are also varying regulations and poor infrastructure in some areas.
That said, some developed companies have sophisticated transport systems, such as Chile and Brazil, but different challenges. Rugged terrain and environmental difficulties can make road safety a primary concern.
Navigating Complex Regulatory Frameworks
Aside from the challenges in the environment, navigating regulatory requirements in the Americas presents unique barriers. The U.S.’s red tape can significantly slow infrastructure development, leaving projects stalled for the better part of a decade.
The situation in Central and South America is dramatically different. The insufficient enforcement of traffic rules that lead to high accident rates can negatively impact land transport. In addition, some tax regulations or unstable political environments can leave investors concerned about corruption or uncertainty.
Industry Challenges
Aside from the challenges unique to each country or region, land transport is facing its own industry barriers. Some of the key challenges include:
Fuel cost surge: Rising fuel prices strain freight businesses’ profit margins, which aren’t likely to let up soon. Some of the solutions may include transitioning to greener vehicles and route optimization for more efficient travel.
Global pricing instability: Inflation and the surge in the costs of goods – compounded by unpredictable supply and demand cycles — makes it more difficult for transportation companies to anticipate industry trends and forecast accurately. Logistics companies have to stay agile to adapt to unpredictable market dynamics.
Evolving customer demands: Customers have become accustomed to free or low-cost deliveries that arrive within a day or two, even from small companies. This forces businesses to innovate to provide exceptional service without high prices.
Challenges Become Opportunities: Innovative Solutions for Land Transport in the Americas
The complexities of land transport in the Americas – combined with the industry barriers and setbacks – require innovative thinking to tackle current issues and prepare for future shifts in the industry.
Nearshoring
Manufacturers are relying on nearshoring more and more, which involves shifting production from overseas locations to closer regions in order to combat delays. This is becoming more common among U.S. manufacturers to shrink lead times, cut transportation costs and improve supply chain adaptability.
Relocating product to areas closer to the end consumer helps to address delays and disruptions that can occur with overseas production. In the U.S., nearshoring may be in Mexico or Canada, keeping production in the Americas.
Customs Brokerage Services
Nearshoring optimizes costs, but that still leaves the challenges of cross-border logistics – a challenge that’s more pressing with land transport in the Americas. Manufacturers can simplify the intricate task of cross-border transfers by employing customs brokers with knowledge of local regulations, making border crossing more compliant and efficient.
Real-Time Freight Rates
Using emerging technology, shippers can find shipping rates from a range of carriers from one centralized platform in order to make real-time comparisons. This offers transparency into supply chain expenses, to help businesses budget better and plan transportation more efficiently. During peak seasons, this option helps to enhance client satisfaction and improve profit margins while securing reliable shipment options.
4PL Logistics Models
Businesses are increasingly turning to fourth-party logistics (4PL) models to have a comprehensive process for the entire supply chain, beginning from procurement and ending in delivering. Using specialized experts, companies can outsource their logistics operations and shift their focus to mission-critical aspects of their business.
4PL is particularly advantageous for the infrastructure challenges that come with land transport in the Americas. The expertise of local providers offers real-world insights into infrastructure bottlenecks and optimization of existing transport networks with trusted partners and suppliers for better supply chain flexibility.
On-Demand, Short-Term Warehousing
Some parts of the Americas lack traditional warehousing methods with cost-effective or practical leases. Short-term warehousing can offer businesses the flexibility to adjust their storage requirements according to current demands. Using short-term warehousing reduces the risk of product shortages or surplus and provides some buffer against unexpected disruptions.
The on-demand nature of short-term warehousing offers another layer of protection. Companies can secure storage space as needed, minimizing the impact of disruptions to their supply chain. This is ideal for businesses that have seasonal fluctuations in demand or big product launches that would otherwise lead to bottlenecks, but don’t require warehousing year-round when sales periods are slow.
Intermodal Freight
Intermodal freight refers to the transportation of goods using multiple modes of transport, such as combining land, rail, ocean and air freight. This can help companies navigate the complexities of the changing logistics landscape without increasing costs.
Using different modes of transport allows businesses to optimize operations according to their needs for cost and speed. For example, high-value shipments with a short ship time can use air, while rail transport can be used for long-distance freight. Trucking companies can take on the last-mile delivery.
Intermodal freight provides contingency plans instead of relying on one type of transportation, but it’s also more environmentally friendly. Shifting part of the transport route to more energy-efficient options, such as ocean or rail, can significantly reduce carbon emissions for land transport.
Capitalize on Growth Opportunities in the Americas
The land transport industry is growing and innovating, but it’s not without challenges. Businesses that can optimize their processes and adopt more agile solutions can maximize the potential of the dramatic shift in the landscape of North, Central and South America.
Joe Jaska is the Head of Land Product for Region Americas at DB Schenker, a role he has held since early 2020. He has full P&L responsibilities for 24 countries in North, Central and South America, leading land transport to ensure quick and reliable delivery to all major destinations across the continent. Jaska ensures full or partial truckloads move across the continent or across borders without delay.
