The transportation and logistics industries have a crucial role in keeping the global economy going. Just imagine what would happen to manufacturers, retailers, service providers, and farmers if there were no one to transport their goods to customers!
But like in all other industries, transportation logistics players are facing tremendous challenges due to shifting consumer expectations, technological changes, and new and stricter regulations. It also doesn't help that the COVID-19 pandemic is causing major disruptions everywhere and across industries.
Of course, there’s tremendous opportunity for evolution and growth within the industry—but you’ll have to overcome some serious challenges before you can truly capitalize on these opportunities. Below are some of the the key challenges logistics firms will have to face in 2021:
Cutting Transportation Logistics Costs
The single biggest challenge of the industry is cutting down transportation costs. Logistics costs can easily reach 50% of total costs in some industries, and rising fuel prices only exacerbate this problem.
Companies have several ways of reducing transportation costs, but most of them come with tradeoffs: They can choose to reduce their number of carriers and instead redistribute their load among fewer carriers or negotiate for lower rates. This option, however, comes with a risk as the company will be depending on so few carriers. Consolidating shipments to get bulk rates may also help. But consolidation can also delay deliveries, impacting customer satisfaction negatively.
Businesses can also reduce their fuel expenses. While they are unable to control fuel prices, logistics companies can control their fuel expenses by optimizing their routes to reduce the total distance traveled over the course of a given day.
Meeting Consumer Expectations for Visibility
Consumer expectations have changed significantly over the last few years. Thanks to giants like Amazon and Walmart, customers now demand fast and accurate shipping. Plus, consumers also expect better visibility over their orders and the ability to communicate directly with delivery drivers.
Meeting new consumer demands requires better visibility across the supply chain. This is the only way companies can provide on-time and accurate deliveries. But what does visibility over the entire supply chain entail?
Complete visibility means having the ability to track shipments, while ensuring that carriers follow the right route plans and stick to the schedule. Visibility requires real-time alerts and notifications so that fleet managers and drivers can take prompt actions should there be delays in the deliveries.
Likewise, consumers expect to get real-time shipping notifications, updates, and accurate expected time of arrivals (ETA). Ideally, they’d even be given the ability to track shipments using a web portal.
Dealing with Driver Shortages
Truck drivers have demanding jobs, which is why the driver shortage is a major problem in the transportation and logistics industry. The government's more stringent regulations are likewise forcing companies to be more selective in recruiting and hiring truck drivers.
Recruitment and hiring are time-consuming and expensive: companies have to scrutinize the applicants’ driving records, check on inspection discrepancies and traffic violations, etc.. Screening is important as a firm's Compliance Safety and Accountability (CSA) score can be negatively affected by low-performing hires. And on top of all of this, there simply aren’t enough drivers to go around.
One potential path forward here comes in the form of finding ways to stretch capacity—e.g. by improving routes enough that each driver can complete more deliveries in any given day.
There is more attention on carbon emission reduction than ever—at least partly due to emissions and anti-idling regulations set by governments. There is more pressure on companies as well, with the public demanding environmentally-friendly and sustainable practices from the private sector.
The transportation and logistics industry players have various ways of addressing environmental and sustainability concerns. They can adopt route and load optimization, upgrade their engines, track and report emissions, and choose alternative fuels.
Upgrading fleets with better engine performance and mileage and emission compliance is an option—although it's a move that entails high upfront costs. As with any large-scale decision, the best vantage point for making a choice is one of full visibility. If you don’t have the transparency and the reporting to pinpoint your carbon footprint and its business implications, boosting visibility might be an important starting point.
Complying with Government Regulations
Speaking of regulations. Even outside of emissions management, governments have great power over global shipments. Right now there are over 40 agencies involved in trade shipments in the United States alone. Plus, companies also have to deal with other agencies such as the FDA, US Consumer Product and Safety Commission, and Department of Agriculture, to name just a few. Staying on top of these regulations can be a challenge—especially in situations where it’s hard to say exactly what’s happening on the last mile during the day of delivery.
Improving Supplier and Partner Cooperation
Creating, understanding, and following mutually agreed service level agreements is crucial for any transport and logistics company. Failing to get the cooperation of suppliers and partners will affect all stakeholders negatively. Companies must understand the current performances of suppliers and partners and identify opportunities for improvement.
Navigating New Technological Solutions
As you might be gathering from the context above, most logistics companies need to adopt new and innovative technological solutions to overcome challenges brought by new consumer demands and scarce labor. Advanced technologies can help increase productivity and reduce operational inefficiencies, and they’re quickly becoming non-negotiable.
Companies can benefit from investing in automation systems such as warehouse sorting and advanced packaging labeling for increased operational efficiency. Advanced route planning solutions also help in cutting down transportation costs and optimizing fleet capacity. Data analytics enable companies to improve both operational efficiency and customer experience.
It can be hard for companies to find the right technology with so many solutions available in the market. Logistics firms must assess their unique business operations to identify what they need in a given technology solution.
Grappling with the COVID-19 Pandemic
None of the challenges we listed above are new—and by now, this one isn’t really that new either. Logistics companies initially had to deal with the high surge in consumer orders when states implemented stay-at-home orders. Currently, fleets are now seeing sporadic volumes, which makes planning harder than usual.
Plus, COVID-19 is forcing businesses across industries to make major changes and adopt new strategies to ensure the safety of both their employees and customers. For logistics companies, contactless deliveries, implementing minimum health standards, new sick leave rules, and constant communication of safety practices are just some of the hurdles that have been brought on by the pandemic.
In the end, changing customer preferences have only been accelerated by the COVID-19 pandemic—which only makes adapting to the new landscape more urgent for logistics providers. Ensuring flexibility—while investing in processes, people, and technology—can help logistics companies survive, and even thrive, during this period of change.