Logistics is the backbone of the economy and the driving force of all industries including agriculture, manufacturing or services. Currently, Logistics is facing a great change due to technological innovations, changing consumer expectations and strict government regulations.
According to the "Logistics Service Market Report - Forecast up to 2027" released by Market Research Future, global logistics service market (3PL, 4PL) revenue reached over one trillion USD in 2019 (up from 900 billion USD in 2018) and is expected to grow at a rate of 6.9% / year in the forecast period 2019-2027, reaching over 2 trillion USD in 2027.
Although the global prospect of the industry is very optimistic, challenges still exist, especially for businesses. Through this article, VILAS will introduce 10 challenges that Logistics enterprises are facing.
1. Reduce shipping costs
This is the biggest challenge for the industry because transportation costs account for a large part of about 30% of total costs. But with fuel prices rising, this could be up to 50%. Companies can limit the number of transport partners and negotiate for lower prices. However, this increases the risk of over-reliance on some partners.
Alternatively, businesses may consider consolidating shipments and receiving large volumes, but this may risk the delay in delivery that will affect consumer satisfaction.
Logistics companies may not be able to control fuel prices, but controlling fuel costs will be a feasible plan and can be applied in reducing transportation costs.
Fleet management routing software can help ensure that freight carriers travel the shortest, most efficient routes - avoiding traffic congestion, taking into account road restrictions by vehicle type and time of day. This not only reduces the total driving mileage, wear, and maintenance costs, but also reduces breaches and safety risks, which can lead to reduced insurance premiums.
2. Improve business processes
An Inboundlogistic.com study cited that 36% of businesses strongly agreed that they relied on their 3PL partners to promote cost reduction and improve business processes.
This means that logistics partners will need to have the knowledge and experience to have a broad vision of the logistics supply chain and operations to control changes in the overall operational framework. They also need financial stability, flexibility and openness to take reasonable risks to achieve long-term benefits.
3. Improve customer service
The supply chain has become more and more complex, customer expectations have also changed in terms of delivery times and service quality. Not only that, customers expect their logistics partners to solve problems and help them grow in a competitive environment.
Customer Service Logistics is one of the main competitive advantages so businesses must recruit the right people with the skills and attitude. They must also focus on improving and standardizing the customer experience across all geographic areas, channels and points of contact, be it live interaction, phone, online chat, email or social media.
4. Improve supply chain visibility
For accurate and punctual delivery, Logistics companies need to have a full view of all aspects of the supply chain:
Shipments must be monitored to ensure they follow the prescribed schedule and schedule. In case of interruption, the alert will be triggered so that action can be taken promptly. Customers need to receive the latest information as well as be able to track shipments on a real-time updated portal.
Logistics companies need a vision of the entire workflow in a warehouse - taking inventory, storing, managing orders and completing, and deliveries. Plus - the visibility of what is coming to them, so they can plan their workforce.
5. Supply chain finance
Access to supply chain finance is important for shippers and logistics companies to ensure smooth business operations and optimize cash flow, especially in times of political tensions, exchange rate movements, natural disasters,...
Generally, financial operations are required for letters of credit, open accounts, billing audits, etc. Although there are now more financial options than before, checking the shipping bill has never been easier because this is a very complicated process.
Moreover, transport businesses often use cash. Therefore, payment delays may adversely affect shippers.
6. The impact of the economy
Political instability, declining production efficiency, increasing consumer price index, inflation, ... adversely affect the demand for products and services, also affect the demand for transporting goods. chemistry. In contrast, government investment in infrastructure projects increases wages and demand for products.
7. Lack of manpower
Human resources is always a problem in Logistics. According to the PwC report, in the coming years, Transportation and Logistics companies will have to find the equivalent of 17 million human resources to meet the demand for nearly 8 billion of the world's population forecasted by the year. 2030.
In logistics, in particular, driver drivers have hard and demanding jobs. With increased government regulations, companies tend to be more selective in hiring.
The candidate's driving record is scrutinized for traffic violations or inspection discrepancies, lest it negatively impacts the company's Safety and Responsibility Compliance (CSA) scores. In the US, the average age of drivers is quite high - 49, which means that after 10-20 years the labor crisis will be more severe. In addition, there is an unconscious bias towards women and ethnic minorities.
8. Government regulations
The government holds great power over global shipments. According to the Wall Street Journal, in the US, more than 40 agencies are involved in commercial shipments.
Even after shipments pass through the gate, the US Consumer Product and Safety Commission, FDA, EPA and Dept of Agriculture are required to confirm. In addition, the laws and taxes on international and domestic shipping affect logistics.
Businesses need to focus substantially on reducing emissions, primarily not just because of government emissions reductions, but also to enhance their image to the community and save costs.
Companies can comply by applying route and load optimization, monitoring and reporting emissions, upgrading engines and selecting alternative fuels. The latest generation of trucks that come with high engine efficiency, emissions compliance, and fuel economy is an effective solution. They offer great savings over the long term, but businesses also have to accept high upfront costs.
10. Technological advances
The application of new and innovative technology solutions has become urgent for Logistics companies. In reality, human resources are scarce, fierce competition and customers become more and more rigorous. Technological advances can increase productivity by minimizing time, costs and errors.
Automation systems/data control software solutions such as prepackaged labeling, warehouse sorting, etc. have become in demand by the hour. The shipment tracking system allows companies to monitor their shipments around the clock, receive alerts and set up customized reports. Data analysis can help improve customer experience, performance, and safety.
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