In the current globalized business environment, logistics play an important role in trade facilitating and has become a key element in business operations success. However, due to volatile customer demands and complex business models, it is very difficult to streamline logistics management.
According to a logistics study conducted in Capgemini, cutting transportation costs tops the list of logistics companies’ most challenging issues. Some other historical points make the list, but perhaps the biggest concern is the need for greater technology advancements and innovation without exceeding the budget.
Top 6 Challenges Facing Trucking and Logistics Companies
Fuel Costs
Unsurprisingly, fuel costs pose a big challenge to logistics companies. The industry is unable to keep up due to the recent rise in fuel costs, especially diesel. These high fuel prices are likely to affect transportation costs in the U.S. in the form of increased fuel surcharges.
After ranking 1st in 2005, 2nd in 2006, and 3rd in 2007, fuel once again attained the top ranking. Though motor carriers in 2008 aggressively sought to recoup fuel cost increases with fuel surcharges, the industry could not keep pace with the unprecedented rise in diesel fuel costs.
Economy
Along with the revolutionary increase in fuel prices, other issues such as the credit crisis and rising inflation are having an adverse impact on the U.S. economy.
This crisis has resulted in increased regulations, stringent compliance laws, decreases in demand, and, most importantly, the increase in marginal and fixed costs, further reducing the logistics industry’s profitability.
Improved Customer Service
Gone are the days when people used to wait weeks for their shipment without making any inquiry. Customers now want real-time transparency on their delivery, such as the shipment’s exact location at all times.
Courtesy of the advanced technology available, the location of shipments is as linked as social networks. Therefore, trucking and logistics companies must also bear the expense to facilitate these online services, which can be very expensive and time-consuming, especially for small and mid-sized companies.
In addition to that, surveys show that most customers are not interested in paying for express delivery services, further hampering profitability.
Environmental Issues
The majority of average corporate CO2 emissions occur in the supply chain, which has increased the requirement for more transparent and accountable practices from logistics companies. Furthermore, anti-idling laws and other environmental-related initiatives taken by the local and state governments threaten that compliance will exceed their benefits.
Onboard Truck Technology
The rapid advancement in technology, as we previously discussed, has created many challenges for trucking and logistics companies to stay up-to-date with upcoming advancements. Though these latest technologies seem attractive, their implementation can be quite challenging.
Additionally, the costs related to the ELD (Electronic Logging Device) Mandate is also a big cause of concern for the industry. It is not clear how productivity will be affected by ELD’s deployment and how the collected data will be used.
Driver Shortage
Until trucking companies implement tesla’s automated truck, the requirement of quality truck drivers remains a perennial top logistics industry issue.
The trucking industry’s recent optimistic prediction shows that truck drivers’ demand is going to surpass the supply by around 50,000 drivers. This figure can rise to 175,000 in the next five to seven years.
Conclusion
These are only some of the challenges faced by trucking and logistics companies. Issues like driver retention, HOS (Hour Of Service) regulations, and the growing scarcity of truck parking further increase problems faced by the already competitive and rapidly changing industry.
In light of these issues, cutting a few corners will not help much for logistics companies. They will need to adopt a strategic approach to eliminate the bottlenecks and improve their business processes, consequently reducing transportation costs. They may outsource their basic functions (like bookkeeping, payroll, etc.) to focus more on strategic decisions.
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