The Transport and Logistics Industry is the back bone of any economy, and the driving force behind all sectors, be it agriculture, manufacturing or services.
However, like all industries, it is confronting tremendous change in present times – driven by tech innovations, changing consumer expectations and stringent regulations.
Although the global outlook for the industry is optimistic (estimated at about US$ 4 trillion in 2018, It is slated to grow to US$ 6.3 trillion, at a CAGR of 4.9%), the road ahead is challenging, especially for small and medium enterprises.
Here is a look at some key challenges facing logistics companies in 2019:
1.Reducing Transportation Costs:
This is the single biggest challenge for the industry, since transportation constitutes a major chunk, about 30% of total expenses. But with rising fuel prices, this can go up to 50%.
Reducing Carriers: Companies can redistribute their business among fewer carriers and negotiate for lower rates. However, this increases the risk of over dependency on few carriers.
Consolidating Shipments: They could consolidate shipments and get bulk rates, but this could be at the risk of delayed deliveries which would impact consumer satisfaction.
Reducing Fuel Expenses: Logistics companies may not be able to control the fuel prices, but controlling fuel expenses is definitely within their reach.
Fleet management routing software can help to ensure that freight carriers ply on the shortest, most efficient routes – avoiding traffic congestions, taking into account road restrictions by vehicle type and time of day.
This not only reduces the total miles driven, wear and tear and maintenance costs, but also lowers violations and safety risks, which can result in reduced insurance premiums.
2.Improving Business Processes:
A research by Inboundlogistics.com cited that 36% of the enterprises polled strongly agreed that they relied on their 3PL partners to drive cost reductions and business process improvements.
This means logistics partners are expected to have the knowledge and experience to look beyond supply chain and logistics operations to drive changes within the overall operations framework.
They also need to be financially stable, flexible and open to taking reasonable risks for long term gains.
At the end of the day, the logistics business is highly competitive; hence industry benchmarking plays a key role in business process improvements. It’s like the proverbial rat race – to be the best and the fastest.
3.Enhancing Customer Service:
Nowadays, the markets are dynamic, supply chains have become longer and more complex, and customer expectations have changed, both in terms of delivery times and service quality. Now customers also expect their logistics partners to solve problems and help them grow in a competitive environment.
This means logistics partners must recruit the right people with the right skills and attitude. They must also focus on enhancing and standardizing the customer experience across all geographies, channels and touch-points, be it in-person interactions, phones, online chats, emails or social media.
4.Improving Supply Chain Visibility:
In order to have accurate, on time deliveries every time, logistic companies need to have full visibility on all aspects of the supply chain:
Shipments ought to be tracked, to ensure they are following the prescribed route and schedule, and in case of disruptions, notifications and alerts be activated so that prompt action can be taken. Customers need to get updates, viz., shipping notifications, ETAs, as well as be able to track shipments on a web portal.
Logistics companies need to have visibility on the entire work flow in a warehouse – receipt of inventory, storage, order management and completion, and shipment. Plus – visibility on what is headed towards them, so that they can plan their workforce accordingly.
5.Supply Chain Finance:
Access to supply chain finance is critical for shippers / logistic companies to ensure smooth business operations and optimization of cash flow, especially in today’s uncertain times of geopolitical tensions, unexpected custom duties, exchange rate fluctuations, natural disasters etc.
Typically, finance is required for letters of credit, open accounts, freight audit payments etc. While there are many more options for finance now than before, checking freight invoices has never been easy – rates are diverse and complicated, and carrier references may not always be correct.
Moreover, transportation is a cash intensive business. Delays in payment could adversely affect the shippers.
6.Impact of the Economy:
Political instability, decline in manufacturing sector performance, increase in consumer price index, inflation etc. adversely impacts demands for products and services, which also impacts freight demand. Conversely, government investments in infrastructure projects increases wages and demand for products.
Anywhere in the world, truck drivers have difficult and demanding jobs. With increased government regulations, companies tend to be more selective in recruitment.
Candidate’s driving records are scrutinized for traffic violations or inspection discrepancies, lest it have a negative impact on the company’s Compliance Safety and Accountability (CSA) score.
In the US, the average age of drivers is pretty high – 49, which means after 10-20 years the labor crunch will be more severe. Also, there is an unconscious bias against women and minorities.
Governments wield a tremendous power over global shipments. According to Wall Street Journal, in the US, more than 40 agencies are involved in trade shipments, and more than a dozen have release and hold authority.
Even after the shipments clear the ports, the US Consumer Product and Safety Commission, FDA, EPA and Dept of Agriculture need to give their approval.
In addition, zoning permit laws and taxation on international and domestic shipping also impact logistics.
There is a considerable focus on reducing emissions, primarily due to anti idling and emission reduction regulations by governments, but also on account of public perceptions and cost savings.
Companies can comply by adopting route and load optimization, tracking and reporting emissions, upgrading engines and choosing alternative fuels.
The latest truck models come with the best engine performance, emission compliance and much better mileage. These offer great savings in the long run, but require steep upfront costs.
Adopting new and innovative technology solutions has become imperative for logistics companies. Given that labor is scarce, competition is intense and customers have become more demanding, technology advancements can increase productivity by minimizing time, cost and errors.
Automation systems / data driven software solutions such as advance packaging labelling, warehouse sorting etc. have become the need of the hour.
Shipment tracking systems enable companies to monitor their shipments round the clock, get alerts and notifications, and set up customized reporting.
Data Analytics can help with Improving customer experience, operational efficiency and safety.
Robotics and autonomous machinery have been adopted by many key players in the logistics industry. These help in drastically cutting down time taken for order completion and delivery.
IOT can play a key role in reducing risks and ensuring safe delivery of goods. The best fleet management system connects with specialized sensors built into new generation trucks. This software provides real time in-transit visibility of trucks, shipments on board, and key vehicle parameters.
Thanks to cloud computing, many of the above software solutions are relatively inexpensive. However, many companies lack trained manpower resources to actually derive insights from them.
Given the above challenges, can logistics companies meet rising customer expectations, and still generate profits and growth? The answer is yes, provided they remain flexible, and committed to upgrading technology, people and processes. Constant evolution is the name of the game.