Sven Kukemelk, head of the international business unit at the Estonian state-owned postal service and logistics company Omniva, said that the past year was challenging in the logistics sector, and the current year promises more challenges, indicating that consolidation in the market is likely.
2023 was marked by several challenges and changes, according to Kukemelk, especially due to restrictions arising from military conflicts, significantly affecting transportation and supply chains. Trade with China, which constitutes 65 percent of all of Estonia’s e-commerce, was hit particularly hard.
“Western aircraft could no longer fly directly from China to Europe, as the airspace there has been closed since the start of Russia’s aggression. This, in turn, meant longer flight time by two to three hours for aircraft departing from our region to Asia. Due to the extended journey, cargo planes carried less cargo, which in turn increased delivery costs and the environmental footprint of logistics companies,” he said in a press release.
Alternative solutions to air transport included trains, road transport, and shipping. However, shipping has been and continues to be affected by the activities of Yemeni rebels, which prolong delivery times by up to two weeks and make it impossible to fulfill promises to customers.
“In rail traffic and road transport, one has to take into account the unpredictability of Russia, which can restrict traffic or halt certain goods at any time. Such unpredictability has extended delivery times, increased costs, but due to tough economic conditions and strong competition, kept prices low. In summary, 2023 was economically very challenging for international logistics companies. This year is likely to be quite similar,” Kukemelk said.
One of Omniva’s greatest achievements, in Kukemelk’s opinion, was the launch of a postal train on the Slovakia-Ukraine route during a blockade by Polish truck drivers when all transport was halted, and goods were not crossing the border.
In 2024, Lithuanian Post will enter the parcel locker market in the Baltics. In light of this move, Kukemelk believes that companies with smaller market shares in this field will likely face even more difficulties in the local market, and there will likely be preparations for consolidation or withdrawal from the market this year.
“In most European countries, there are two to three, in some cases, four nationwide last-mile service providers. Currently, there are five in Lithuania, soon to be six in Latvia, and five in Estonia. In such competition, niche companies focusing solely on specific segments, such as courier services, are likely to emerge. The primary focus should continue to be on increasing efficiency and investments in the main network to get even closer to the customer. Automation and innovation in the logistics sector, offered by robotics and artificial intelligence, are definitely of interest,” he said.
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