The logistics industry is a vital cog in the wheel of every industry in any country or economy. It plays a critical role in the promotion of smooth operations, always ensuring that goods reach their intended destinations at the right time.
Recently, however, the industry has been plagued with a multitude of challenges. These have forced the industry players to adapt and adjust so that they can continue meeting the needs and expectations of their clients.
As a partaker in this sector, it pays to have a clear picture of some of the challenges that you are likely to encounter in the course of your operations.
Knowing these challenges will put you in a better position to understand how to deal with them should they present themselves in the future. Here is a brief look at some of them.
The rising cost of fuel
One of the greatest challenges that the logistics industry continually grapples with is the rising costs of fuel. Higher fuel prices imply higher transportation costs, leading to the overall costs of moving goods from one destination to another.
With an increase in fuel charges, there is always an increase in the surcharges applied to the freight rates, with the customers having to pay more to cover the additional rates.
There are various ways through which the players in this sector are trying to combat this problem.
Some have resorted to reducing carriers by redistributing their business among fewer carriers and then negotiating for better rates. Others have also resorted to consolidating shipments so that they can take advantage of bulk rates.
However, these two approaches also have their downsides. For example, redistributing cargo may lead to overdependence on a few carriers while consolidating shipments may lead to delayed deliveries which may, in turn, impact consumer satisfaction.
Labor shortage is not a new challenge in the logistics industry. For a very long time, the industry has relied on temp workers in an attempt to plug in the deficit in their labor force. However, this hasn’t been entirely successful and the industry is always hiring different kinds of professionals.
As far as professions within the industry go, the industry is always in need of drivers. Truck driving is a demanding job, and whereas there are many openings at any given time, it seems as if there aren’t enough drivers to fill the positions.
This has been further compounded by the fact that there are some government departments that compel companies to be very strict when hiring logistics drivers. This drastically reduces the number of potential drivers, further adding to the labor shortage problems in the industry.
Enhancing the supply chain visibility
To encourage accurate and timely deliveries, it is vital for logistics companies to ensure full visibility in every aspect of the supply chain.
Companies such as Amazon and Walmart have made it easy for their customers to track their deliveries and know precisely where their goods are.
Consumers within the logistics industry are beginning to expect a similar level of visibility with their shipments.
They want to know where their goods are, and desire the ability to track them from the comfort of their homes.
This, then, calls for the tracking companies to have advanced tracking systems in place. It is important to ensure that the customers know the route and the schedule of their shipment, including receiving notifications in case of any delays or disruptions during the process.
Ideally, logistics companies should ensure visibility of the entire flow, starting from the warehouse right through to the point of delivery.
Controlling increasingly complex networks
With the onboarding of new players and the creation of new markets, the supply chain networks are always expanding.
With a complex network, you can expect complex challenges. It implies that there will be an increase in costs without a corresponding increase in visibility.
This makes it difficult for most of the logistics companies to build resilience and agility, effectively hampering their ability to operate smoothly.
One of the best remedies for logistics companies to deal with disjointed networks is to use digital solutions for end-to-end transportation management.
With such solutions, the companies can transform broken networks into smoothly-run operations. The implementation of such solutions may be expensive initially, but will prove extremely beneficial to the success of the company.
Governments usually have a strong grip over global shipments. Take a country like the United States, for example. There are over 40 agencies that are directly concerned with global shipment and more than half of these agencies have the authority to hold and release.
This implies that there is a lot of red tape in having goods cleared. Additionally, taxation, as well as zoning permit laws on both domestic and international shipping, impacts logistics in a big way.
The expansive growth that is being witnessed in the transportation and logistics infrastructure has necessitated the need for more space. Consequently, there has been an increase in carbon emissions and the environment has been the victim.
Many logistics businesses are prioritizing the reduction of greenhouse gas emissions owing to the negative impacts of these gases on the environment. Companies are, therefore, compelled to adapt and reduce their carbon footprints.
Since the logistics of reducing greenhouse gas emissions have not been adopted by many, this is a challenge that many players in the logistic industry are still dealing with.
Supply chain finance
Quick and easy access to supply chain finance is vital for logistics and shipping companies in optimizing cash flow and ensuring smooth operations.
It is even more important now since the world continues to experience uncertain geopolitical tensions, fluctuations in foreign exchange rates, an increase in natural disasters, and an unexpected increase in customs duties and other related tariffs.
In this industry, finance is necessary for opening accounts, making freight audit payments, and issuing letters of credit among others.
Though there are multiple financing options at the moment, dealing with freight invoices still remains a huge challenge.
This is because the freight rates remain complicated and diverse, and it is also not guaranteed that carrier references will always be correct.
It is also worth remembering that the logistics business is a cash-intensive business and any delays in payments can lead to costly ripple effects down the supply chain.