
The 2024 Problems and the Need for Raising Freight Rates
Hello, I’m Ichiki of Sync Logistics.
In this issue, I’d like to talk about the “2024 problems” of the logistics industry, and their accompanying need for raising transport rates.
■ A shortage of drivers spurred by the 2024 problems
For many years in the logistics industry, long working hours for drivers have been common, but since this April, work reforms, including regulating drivers’ overtime hours, have been implemented. Meanwhile, with the reduction of working hours, the following “2024 problems” have begun to manifest themselves:
- Insufficient transport capacity
- Logistics and transport companies’ decreased sales and profits
- Decreased income for drivers
- Difficulties in recruiting drivers
Moreover, it’s predicted that the shortage of drivers will worsen due to declining birth rates and an aging population.
If countermeasures for the 2024 problems are not taken, government calculations indicate a 14.2% shortfall in transport capacity this fiscal year, and a 34% shortfall in 2030. Simply put, more than 30% of cargo may not be transported in 6 years’ time. For this reason, the government is undertaking urgent initiatives, announcing a “Logistics Reform Emergency Package,” which is a compilation of measures with immediate impact such as logistics DX and the promotion of modal shifts, and the standard raising of freight rates.
■ The need for raising transport rates
Raising transport rates is an effective way for transport companies to stabilize their operations. But generally speaking, logistics costs are easily treated as variable costs, and the reality is many transport companies cater to shippers’ price reduction requests while accepting work at low rates. While rates have gradually been rising since the beginning of the year, this industry has been supported by low driver wages and long working hours, and I constantly feel how difficult it is to change deeply rooted business practices.
The most important thing for the used car industry’s development is to maximize shippers’ profits. While this idea hasn’t changed, if shippers make too many requests for price reductions in logistics fees, it will be difficult for transport companies to continue their operations, and their businesses face a higher risk of stagnating. To avoid this, I believe shippers and transport companies must have the mindset of understanding each other’s business and situation. Realistically speaking, I feel the hurdle is still too high, but as a forwarder connecting both parties, we will seriously face these issues, and continue to strive to build reasonable and highly transparent logistics structures for all stakeholders.
■ Creating highly transparent logistics structures
As a countermeasure to the 2024 problems, our company is considering bringing our land transport and cargo handling operations in-house. The reason for this is we want to secure resources in a stable manner in preparation for future situational changes, and I believe we will not be able to completely understand the pain and situation of those working on the ground if we purely outsource. If we bring work in-house, our perspectives will align, which I believe will make it easier to build more reasonable and highly transparent structures. This is not outsourcing unprofitable work, rather, the goal is to maximize profits for all stakeholders including partner companies.
However, this does not necessarily mean that we will stop doing business with our current partner companies. While I think there may be companies that will feel uneasy about us bringing work in-house, I humbly ask that this point will not be misunderstood.
Thank you for your time.