How cargo market is going to develop in 2022

The year 2022 is going to be tough for the industry of logistics in Kazakhstan. In order to cope with new challenges, many companies must do their best to adapt to new conditions. What trends do companies have to know to make the right choice of strategy?

Global logistics has found itself in trouble since 2020 when the COVID-19 pandemic caused serious disruption to logistics all over the world. Huge lines on the Chinese border and difficulties with container transportation became a real headache for cargo companies and cargo shipments from Kazakhstan. However, the reality has proven that a worse scenario was looming ahead.

In February-March 2022, many companies started reporting about more challenges when the war in Ukraine affected the traditional routes to Europe. The exchange rate of the tenge has dropped and logistics companies reported higher costs. All the market participants have been forced to adjust themselves to this uncertainty.

There are three key trends that are going to define the shape of the market in 2022.

Kazakhstan is a logistics hub in Eurasia

Even though the disruption of supply chains has become a challenge for carriers in Kazakhstan, it has also opened new perspectives for business. There are no companies in Eurasia that are free from problems with logistics. However, Kazakhstan, which is located in the middle of the continent, has become the Eurasian transport and logistics hub for many cargo shippers and customers from different countries.

As soon as the crisis arose, Kazakhstan developed alternative routes and corridors for exports and transit cargo.

For instance, cargo shipments that traveled via the Western Europe-Western China transport corridor were redirected to the seaports of Aktau and Kuryk. Now both sites are used as points of cargo departure toward Azerbaijan, Georgia, Turkey and some European countries. The country now plans to create a new container hub; it might be based in the free economic zone of the seaport of Aktau. As a result, Kazakhstan contributes significantly to the continuation of trade between Central Asia and the EU.

The volume of these shipments has gradually increased, Kazakhstan’s authorities said. According to QazTrade, over the course of January-February 2022, Kazakhstan’s trade turnover with the E.U. soared by 70.9% over the same period last year. In terms of trade with China, this rate has increased by 25.1% which makes Kazakhstan a far more important trade partner in the region of Eurasia.

However, this also brings new challenges for the government. For example, the country has to allocate significant amounts of money to repair its roads or even build new ones; it must invest in developing road infrastructure. As long as the county is able to solve these problems, it will strengthen its status as an important international logistical hub.

New business processes

All those changes in the global economy require updating business processes in companies. Not only routes have been changed: businesses need new partners and new supply chains; they also need to make cargo delivery faster. In order to find a solution, all actors have to cooperate and take joint actions.

How is this possible? First of all, it is possible with the help of digital platforms that provide participants of logistic chains including cargo shippers, expeditors, carriers and drivers with the same goals and vision. It’s not efficient to stay in a vacuum and rely only on a few partners. The rules of the game are changing. A business has to adjust itself to the digital universe that offers its followers a wide range of new opportunities such as best partners, new supply chains and the possibility to control all stages of delivery.

Many companies on the market used to rely on one-year contracts, but this is too long. The situation in the market can change anytime and a company has to hold a bidding 3-5 times a year. Specialized online services make this process possible and technically easy.

Moreover, if a company relies on one partner only, it simply has no control over the price surge. Spot contracts for transportation services may be a good alternative option in urgent cases. Today, not even big companies can rely on one partner only. Small carriers account for 80% of the freight market; therefore, you have to rely on aggregators and online services to work with these small companies.

Almost every logistics company in the world is trying to go digital, and Kazakhstani businesses do this as well.

Optimization all-around

Another novelty is rising costs of transportation due to higher gas prices, changing exchange rates, salary rise, leasing payments and so on. The government is trying to keep gas prices low but, to be honest, this is a task for businesses themselves.

The synonym of optimization is automation. When a company needs to cut costs, it has to automate the entire business process: document flow, payload distribution and delivery monitoring. Moreover, if you have already automated routine operations you need fewer employees.

So far, Kazakhstani companies can’t avoid hard copies of documents in logistics even though they already have an opportunity to use electronic invoices, work acceptance requests and shipping documents within the Eurasian Economic Union. In addition to increasing the efficacy of business processes, electronic document flow allows for cutting paper costs.

Many companies are used to choosing carriers via Excel sheets and keeping in touch with them via fixed phones. However, this is not efficient and must be automated. Modern digital services can do everything from choosing a counteragent to automated cargo shipment with no involvement of human beings. Without the so-called human factor, any shipment goes faster with fewer costs.

There are more tools to raise the transparency of business processes in a company such as delivery monitoring systems, mobile apps for drivers and tools to control fuel consumption.

To sum up, the role of Kazakhstan is becoming more and more important in terms of transportation of goods in Eurasia. In order to keep this trend going, the government and businesses must cooperate. For example, the state must provide high-quality road infrastructure while businesses have to raise the efficacy of logistics in the country. And of course, this will definitely require a transition from manual control of that process to new automated systems and digital services.