The transportation and logistics industry is the backbone of every economy and the driving force behind all sectors, whether they be agricultural, manufacturing, or service-oriented.
Yet, like many businesses, it is currently undergoing considerable change as a result of technological advancements, shifting customer expectations, and severe regulations.
Although the worldwide prognosis for the sector is positive (estimated at over US$ 4 trillion in 2018, with a CAGR of 4.9%), the road ahead is difficult, particularly for small and medium-sized businesses.
Here are some of the major difficulties that logistics firms will face in 2019:
1. Reduction of transport costs:
This is the single biggest challenge for the industry, as transportation accounts for a significant portion of total spending, around 30%. But with rising fuel prices, this can be as much as 50%.
Carrier Reduction: Companies can distribute their business to fewer carriers and negotiate lower tariffs. However, this increases the risk of over-reliance on a few operators.
Shipment Consolidation: You could consolidate shipments and get bulk rates, but doing so could risk delivery delays and affect customer satisfaction.
Reducing Fuel Costs: Logistics companies may not be able to control fuel prices, but controlling fuel costs is definitely within their reach.
Fleet management routing software can help ensure carriers navigate the shortest and most efficient routes, avoiding traffic congestion and accommodating road restrictions by vehicle type and time of day.
Not only does this reduce mileage, wear and tear, and maintenance costs, but it also reduces violations and safety risks, which can result in lower insurance premiums.
Improvement of business processes:
According to a study by InboundLogistics.com, 36% of companies surveyed strongly agreed that they trust their 3PL partners to drive cost reductions and business process improvements.
This means that logistics partners need to have the knowledge and experience to look beyond the supply chain and logistics operations to drive change across the operational framework.
They must also be financially stable, flexible, and willing to take appropriate risks to achieve long-term profitability.
Finally, the logistics business is highly competitive; therefore, industry benchmarking plays a key role in improving business processes. It’s like the proverbial hamster wheel: be the best and be the fastest.
3. Improving customer service:
Today’s markets are dynamic; supply chains have become longer and more complex, and customer expectations have changed, both in terms of delivery times and quality of service. Now, customers also expect their logistics partners to solve problems and help them grow in a highly competitive environment.
This means logistics partners need to hire the right people with the right skills and attitude. They also need to focus on improving and standardizing the customer experience across geographies, channels, and touchpoints, be it in person, by phone, online chat, email, or social media.
4. Improving supply chain visibility:
To have accurate and timely deliveries at all times, logistics companies need to have a complete view of all aspects of the supply chain, including:
Shipments must be tracked to ensure they follow the prescribed route and schedule, and notifications and alerts must be triggered in the event of disruptions so that immediate action can be taken. Customers must receive updates, i.e., shipment notifications and ETAs, as well as the ability to track shipments on a web portal.
Logistics companies need visibility into the entire workflow in a warehouse: receiving, putting away, managing and fulfilling orders, and shipping. plus insight into what’s to come so they can plan their workforce accordingly.
5. Supply chain financing:
Access to supply chain finance is crucial for shippers/logistics companies to ensure smooth business operations and cash flow optimization, especially in uncertain times of geopolitical tensions, unexpected tariffs, exchange rate fluctuations, changes, natural disasters, etc.
Funding is generally required for letters of credit, open accounts, freight audit payments, etc. Although there are many more financing options today than ever before, verifying freight invoices has never been easy: rates are varied and complicated, and carrier credentials may not be. always be right.
In addition, transportation is a cash-intensive business. Payment delays could adversely affect shippers.
6. Effects of the economy:
Political instability, a decline in manufacturing output, an increase in the CPI, inflation, etc. negatively affect the demand for products and services, which also affects freight demand. On the contrary, government investment in infrastructure projects increases wages and demand for products.
7. Driver shortage:
In all parts of the world, truckers have difficult and demanding jobs. With increased government regulation, companies tend to be more selective when hiring employees.
The candidate’s driving records will be reviewed for removal violations or inspection discrepancies so that this does not negatively impact the company’s Compliance, Safety, and Accountability (CSA) score.
In the US, the average age of drivers is quite high at 49, which means that the labor shortage will be even greater after 10 to 20 years. There is also an unconscious bias towards women and minorities.
8. Government Regulations:
Governments wield tremendous power over global shipping. According to the Wall Street Journal, more than 40 agencies are involved in commercial broadcasts in the US, and more than a dozen have release and retention powers.
Even after shipments leave ports, the US Consumer Products and Safety Commission, the FDA, the EPA, and the Department of Agriculture must issue approvals.
In addition, building permit laws and taxes on domestic and international shipping also affect logistics.
9. Sustainability:
There is considerable focus on reducing emissions, mainly due to government anti-idling and emission reduction regulations but also due to public perception and cost savings.
Companies can meet the requirements by undertaking route and load optimization, tracking and reporting emissions, upgrading engines, and choosing alternative fuels.
The latest truck models offer the best engine performance, compliance with emissions regulations, and much better mileage. These offer great savings over the long term but require high upfront costs.
10. Technological advances:
The introduction of new and innovative technological solutions has become a must for logistics companies. With a tight labor force, intense competition, and increasingly demanding customers, advances in technology can increase productivity by minimizing time, cost, and errors.
automation systems and data-driven software solutions such as advanced pack labeling, warehouse sorting, etc. They have become the order of the day.
Shipment tracking systems allow businesses to monitor their shipments 24/7, receive alerts and notifications, and set up custom reports.
Data analytics can help improve customer experience, operational efficiency, and security.
Robotics and autonomous machines have been adopted by many major players in the logistics industry. This help drastically reduces the time it takes to complete and deliver the order.
IOT can play a key role in reducing risk and ensuring the safe delivery of goods. The best fleet management system connects to specialized sensors built into new-generation trucks. This software provides real-time visibility into trucks, onboard shipments, and key vehicle parameters during transit.
Thanks to cloud computing, many of the above software solutions are relatively inexpensive. However, many companies lack the trained personnel to receive information from them.
conclusion:
Faced with the above challenges, can logistics companies meet rising customer expectations and still achieve profit and growth? The answer is yes, as long as they remain flexible and committed to improving technology, people, and processes. Constant evolution is the name of the game.
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