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Long Story Short: Discover the Potential Value of Transportation and Logistics
How Can Innovations in Transportation and Logistics Provide Value to Investors?
The transportation and logistics industry covers a broad range of sectors, such as shipping, freight, railroad, and truck transport, so investing in it provides opportunity for a diversified portfolio. Private, public, and governmental investing all help supply the necessary funding for the industry and improve the supply chain. Investment in new and public transportation systems, such as highways, streets, and airports, can provide value to both the investor and the community.
Innovation: Transportation and logistics companies need to be innovative to create value for investors and consumers using new strategies to efficiently use capital and increase revenue. Air delivery services may develop new aircraft carriers to move larger quantities of cargo at an increased rate. Companies that devise new innovative strategies will be able to continuously create value and growth through increased productivity and reducing overall costs.
Demand: The consistently growing population and the emergence of new cities and infrastructure will increase the demand for transportation and logistics companies. Newer forms of shared transportation and technological advances will help generate new markets. Transportation and logistics companies who capitalize on these new advances will be able to transform their supply chains and business models as well as garner increased investment.
Diversification: The transportation and logistics industry covers many services, such as air delivery, freight, shipping and truck transport, allowing for plenty of portfolio diversification. From logistic services and air delivery to freight and trucking transport, the options in this industry are numerous.
Underperforming: Transportation and logistics companies have a high cost of capital and may underperform the market, generating lower returns to shareholders. Transportation and logistics companies tend to produce average overall annual growth, with the return on capital invested underperforming other sectors on average. These companies will need to address lower growth expectations and return on investment to secure investor confidence and increase future valuations. The growth of transportation and logistics companies tends to shift relative to economic growth and can perform poorly during times of recession.
Regulation: Constantly changing geopolitical regulations can cause pressure on trade routes and make delivering goods in a timely manner difficult. A transportation and logistics company can lose its current transportation strategy and trade route if regulation shifts, causing a decrease in overall growth and valuation. These companies need to efficiently maintain the flow of goods, and discrepancies in the management of the supply chain can increase costs and reduce revenue.
The transportation and logistics industry is highly competitive. Investors can benefit by taking a position in one of the largest consumer markets, helping to further enhance the flow of goods. Transportation and logistics companies maintain low costs and an experienced workforce. In 2018, the cost for transportation and logistics amassed to $1.6 trillion. Industry growth and investment are correlated with the state of the U.S. economy. Transportation varies through shipping, air delivery, freights, and truck transport, providing a vast supply chain linking both consumers and producers.
https://www.mckinsey.com/industries/travel-transport-and-logistics/our-insights/creating-value-in-transportation-and-logistics, Ludwig Hausmann, Ishaan Nangia, Werner Rehm, and Maximilian Rothkopf, November 2015