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Top 7 Logistics Challenges in the Supply Chain and How Shippers Can Overcome Them

by Sifted Team

Oct 27, 2022

8 min read

Top 7 Supply Chain Challenges for Shippers

Shippers worldwide have been struggling with logistics disruption since the pandemic, and as a result, they have to deal with a great deal of uncertainty. The increasing variability of customer demand, labor and equipment shortages, and shrinking carrier capacity are some of the issues responsible for the ongoing supply chain disruptions.

To overcome supply chain challenges, brands and shippers are adopting modern approaches, tools, and strategies.

In this article, we’ll discuss the logistics issues shippers face and share some ways to help you respond to them more effectively.

1. Lowering Transportation Costs and Potential Shortages

The logistics industry has many problems, including rising transportation costs and capacity shortages.

According to the 2020 ARTS (Annual Retail Trade Survey) study, U.S. eCommerce sales increased from $571.2 billion in 2020 to $815.4 billion in 2020 during the COVID-19 lockdown era—and this trend is showing no signs of slowing down. The eCommerce boom triggered by the pandemic has strong implications for all shippers, from small retail businesses to giants like Walmart and Amazon.

The surging demand has met inevitable global supply chain disruptions, increased shipping costs, and extended lead times. Despite supply chain bottlenecks affecting manufacturing and logistics, demand is constantly increasing. This means shippers are finding it difficult to have enough available stock.

Limited inventory, widespread labor shortage, and equipment unavailability have further exacerbated the situation for manufacturers and shippers.

Moreover, many companies are spending money to resolve equipment and driver shortages. This strategy leads to even higher transport costs which are then passed on to the customer.

To deal with shortages, start by implementing demand forecasting for order volume using historical sales. Tap into your warehouse management system to learn how certain products perform. You can share this information with your suppliers to ensure the timely procurement of raw materials and supplies.

Your WMS can also help you improve labor utilization by suggesting shorter walking routes and saving labor tasks by automating warehouse activities.

You can control your transport costs by improving transportation management and building strong relationships with logistics partners. Start by exploring and capturing all potential transportation opportunities. Carrier network diversification can help control logistics costs by allowing shippers to choose a carrier that meets their current budget.

2. Staying in Line with Customer and Industry Demands

Keeping up with customer demand is essential in today’s supply chains. Consumers demand production-on-demand, faster delivery times, and real-time order status updates. Same-day, next-day, and two-day shipping are all normal for eCommerce customers. And any trend in the logistics industry quickly becomes synonymous with the customers’ demand.

In short, the more people know, the more their demands are, so the supply chain has to be agile and fluid to make a change when needed.

Make sure that your business is equipped to rapidly adopt new technologies. If your competitor offers multiple shipping options, alerts customers about delivery delays, and allows them to communicate directly with customer service, your customers are likely to buy from them if you don’t offer these services.

Another way you can respond to consumer demand in a timely manner is by leveraging demand forecasting technology. It uses artificial intelligence, past sales data, and the customer’s purchase journey to predict changes in consumer demand as accurately as possible.

3. Keeping Consistent and Reliable Carrier Capacity

The logistics industry has faced a truck driver shortage in recent years, forcing carrier companies to close their doors to less profitable shippers. In 2021, FedEx dropped 1,400 customers that were unable to offer consistent loads, forcing them to look for alternative options to ship their products.

On the other end, customers’ demand for faster delivery times and unexpected order volumes creates an imbalance between the demand and supply of carrier capacity.

As a result, logistics managers are left struggling to find capacity and meet customer expectations by paying higher transport costs. Even then, the risk of unaccepted transport orders from the carrier and delivery delays is ever-present.

Hiring a third-party logistics provider is a great way to resolve carrier capacity issues and enhance your existing logistics operations, such as warehousing and order fulfillment. They have access to a large carrier pool so you can identify carriers that meet your particular load and efficiency requirements.

Moreover, third-party logistics companies can access new technology solutions like transportation management software (TMS) to help you with available carrier capacities.

4. Timely Pickup and Delivery Performance

Late pickup and deliveries are a problem for both the shipper and the customers. Customers don’t want to wait longer than they need to receive their packages, and your business bears the expenses related to storing and holding goods by delaying pickup and delivery. Furthermore, when you don’t deliver customer orders on schedule, it can frustrate them because they have to make arrangements to collect the package at their doorstep.

For this reason, supply chain leaders often inflate their lead times (the time between a customer placing an order until the package is delivered to the customer) to avoid the risk of not meeting their delivery promises. They do this to factor in vendor delays, shipping disruptions, delays due to picking errors, and late pickup and deliveries.

Longer lead times result in increased logistics costs, negatively affecting your bottom line. They result from inefficiencies and lack of visibility in a company’s supply chain operations.

You can improve the performance of your pickup and delivery processes by gaining visibility across your supply chain. This will help you identify bottlenecks and underperforming carriers, suppliers, and distributors.

Similarly, you can use track and tracing tools to collect data about your pickup and deliveries to find and optimize areas responsible for inflated lead times.

5. Better Understanding of Your Own Supply Chain

Many small and medium-sized businesses wrongly assume that they have little control over their supply chain issues as they lack the financial resources and deep supplier networks available to large corporations.

In reality, smaller companies enjoy immense flexibility when it comes to the suppliers, carriers, and distributors they partner with. In contrast, large businesses often operate in specific geographies and are locked into multi-year contracts.

Businesses and shippers can leverage this advantage to make their supply chains more secure and resilient. Carefully examine your supply chains to understand where potential risks lie and figure out ways to hedge against those vulnerabilities.

For example, if you come to know that your supply chain is susceptible to rising fuel prices, raw material shortages, and carrier disruptions, you can start to identify new partners to build supply chain diversity and resilience.

6. Lack of Visibility into Shipping Statuses

According to a 2017 study, only 6% of companies reported that they achieved full supply chain visibility, while 69% of companies did not have total visibility.

Global logistics and supply chain management are complex, increasing the need for real-time visibility of shipment networks. Shipment visibility aims to create transparency in the supply chain so that logistics partners, customers, and other stakeholders can know about the status, estimated time of arrival (ETA) of the shipment, the exact location of shipments, and any potential disruptions that can affect the status of the shipment.

Customers demand that businesses provide them with the ability to track their packages in real-time, and a lack of shipment visibility is a deal-breaker for many consumers. Similarly, businesses need track and trace features to improve logistics processes, including inbound and outbound transportation, fleet management, order fulfillment, and demand planning. These upgrades could translate into competitive advantages for forward-thinking companies.

To improve shipment visibility, start by centralizing your logistics data in one location to allow supply chain managers and executives to better understand their shipping and delivery operations.

Secondly, provide automated notifications to your customers as it directly impacts their experience. These real-time notifications can be sent when their order is confirmed, shipped, when there are possible delivery delays, and when they can expect to receive their package.

7. Staying Up-to-date with the Latest Technology

Shippers and companies understand how difficult it can be to run and manage supply chain operations. The eCommerce explosion has opened new avenues for same-day delivery and on-demand pickup, but businesses need more to bridge the gap between demand and supply.

Many businesses are already leveraging the latest technologies like automation, robots, and machine learning to improve the efficiency of their logistics operations. In addition, there are other logistics tools, including:

  • Shipment tracking systems
  • RFID tags
  • IoT sensor technology
  • Autonomous vehicles
  • Artificial and augmented intelligence
  • Data standard and advanced analytics
  • Warehouse robotics

Keeping up with the latest technology is a must for shippers and businesses alike. These tools can enable you to overcome many logistics challenges and help in:

  • Mitigating supply chain risks and comparing your performance against your competitors
  • Improving productivity and controlling transportation costs
  • Automating the carrier selection process by comparing rates and service levels in real-time
  • Relaying order tracking information directly to your customers
  • Planning optimal routes for your deliveries

Gain Better Visibility into Your Supply Chain with Sifted

Logistics challenges will not go away on their own anytime soon. You need the right tools, techniques, and approaches to effectively deal with widespread supply chain problems.

Sifted Logistics Intelligence helps shippers keep track of relevant metrics to make informed logistics decisions.

Ready to gain complete visibility into your shipping operations? Get a free demo from Sifted!

Topics: Logistics, Logistics Intelligence, Parcel Logistics, Supply Chain, Supply Chain Operations

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