Running a successful logistics business is not as easy as it seems from afar. If there is one thing all logistics companies can agree on, it is that a logistics business can quickly become overwhelming if not properly handled. From inventory to managing stock to shipping, delivery, and warehousing, there are numerous things to put in order and keep track of, so challenges are inevitable in such a business.
Therefore, if you own a logistics business, it is essential to identify the challenges that may occur and learn how to overcome them so you can be prepared for anything. Hence this guide aims to discuss the top 5 challenges of running a logistics business, amongst many others.
Logistics Business Challenges and Solutions
Labor Shortage
The recent health challenges that have affected many countries, like the Covid-19 pandemic, have made the health and safety of staff a priority for every government. There are now numerous health guidelines that can lead to a shortage of labor for logistics companies.
For example, China now has a mandatory 7 days quarantine for all returning cargo crews. Issues like this will leave other workers overworked, and with time there will be a reduction in the number of qualified staff in the logistics industry.
Aside from health challenges, there are so many other factors that can lead to a shortage of labor for logistics businesses. An increase in the cost of hiring qualified workers, the cost of living, lack of skilled workers and so on, can all also lead to labor shortages in logistics companies.
Solution
While this is a known challenge for logistics companies, what can be done to overcome this? First, it is important to know that this challenge did not begin overnight, so the solutions may not be instant. Logistics companies can invest in more labor force by increasing their budget for hiring staff.
As the company grows, it is expected that more staff will be needed, so the logistics company should develop a better strategy with a higher budget for labor. Another effective way to deal with labor shortage may be to organize internships for staff whereby inexperienced workers can be trained to make them experts before allowing them to handle important tasks.
Planning and Risk Management
There is a need to plan and develop effective strategies for risk management when running a logistics business because a common challenge you will face is unpredictable changes in the market. For example, these changes could be due to political agendas, launching new products, customer demand, global sourcing, etc.
Unfortunately, you can hardly tell when these changes will occur and how much impact they will have on the logistics industry, so it is best to seek solutions before the challenges come.
Solution
The best way to overcome the challenges of planning and risk management is through periodic assessments and redesigns. This will help your business stay relevant and efficient regardless of market conditions. To mitigate and control these risks is to identify and quantify them beforehand so there will be no room for surprises in your business.
Creating a risk management plan on how your logistics business will handle and overcome possible obstacles and interruptions to its supply chain will allow you to run your business operations smoothly at all times.
Digitalization of the Supply Chain
The need for supply chain visibility is one of the most common challenges in logistics businesses. The ability of a logistics company to locate or track each product in real-time from the starting point to the final destination is called supply chain visibility.
This is the only way to ensure the safety of products and give your customers accurate information and feedback on their goods. However, many logistics companies still face challenges trying to enhance supply chain visibility in most parts of the world.
Solution
Some logistics companies can easily track goods within warehouses but lack visibility on their operations. This is where the digitalization of the supply chain plays an important role in the effective running of every logistics business.
These companies should use modern-day technology to digitalize their supply chain so they can analyze, collect and share insights on their products in real time. Digitalization will ensure your logistics business can get an accurate picture of your entire supply chain working on the operation ground and allow you to respond to identified problems quickly.
It is also essential to know that the successful digitalization of your supply chain can go a long way in helping you detect and handle other logistics problems on time before they get out of hand.
Cost Control
The challenge of controlling costs in the logistics business is always recurring because the cost of running a logistics company is dependent on a country’s economy, so it is not always stable. Hence, your company must devise a solution that can handle the problem once and for all or repeatedly.
With rising freight and energy/fuel cost, increasing labor rates, new technology and regulations, a higher number of global customers, and an increase in prices of commodities, operation costs for logistics companies will be under a lot of pressure and if not properly managed, can result in many other problems.
Solution
The cost of transportation is a major challenge for many logistics companies, especially with supply chain globalization, so reducing transportation costs will be the major objective for these companies.
Again supply chain visibility is the most valuable and relevant solution to this challenge. Logistics businesses should invest in technologies that can give them the necessary visibility and allow them to see the parts of their supply chain that are notorious for waste. There are platforms like YMS (Yard Management Systems) and TMS (Transportation Management System).
Of course, you should also know that improving cost control in your logistics business is way more than technology and visibility. You also need to apply business intelligence by using every single piece of information available to you to make informed decisions and sound judgments. You must have a plan, execute it, and constantly adjust it when necessary to ensure your business can adapt to any new situations in the industry.
Customer Service
You cannot run a successful logistics business with poor and unsatisfactory customer service, so this remains the core of every supply chain management. In addition, your logistics company must provide the right quantity of the correct product to the right place and at the right time. This may seem simple, but a lot is involved, and it can quickly become a challenge for many logistics businesses.
We now live in an era of consumer customization, and every customer has different needs that the logistics company is expected to satisfy. This shift already has a huge impact on manufacturing and is fast becoming a challenge for logistics companies.
Solution
If you run a logistics business, you need to understand that excellent customer service does not only depend on the availability of information but also the visibility of this information. Therefore, logistics businesses must develop effective ways of providing their clients with as much data as possible. This will help communicate changes and shifts in the supply chain before they cause any misunderstandings.
You should invest in essential technology like API integration or online portals; as long as you can provide information and communicate with your clients effectively, your logistics business will excel tremendously, and you will have satisfied customers.
Other Logistics Business Challenges
Managing Complex Systems
A logistics business involves many fragmented systems that require expert management. Unfortunately, many logistics businesses find it difficult to manage the complexity of the business as it grows, which becomes a challenge for them.
Solution
It is essential to create flexible plans when starting your logistics business, stick to the plans and from time to time revisit them to make adjustments. This is the best way to ensure things don’t get overwhelming and provisions for managing all complex systems are provided on time.
Revival Plans
The recent Covid-19 pandemic brought a lot of chaos to the world, but it also taught logistics and other businesses a crucial lesson. Coming up with a revival plan after such an experience can be too late and very difficult for many businesses. Some companies couldn’t even get back to business as usual after the pandemic because they didn’t expect it and never made plans for it.
Solution
If you run a logistics business, it is vital to have a revival plan for unexpected situations like disease outbreaks, shifts in demand, recession, etc., that can cause a significant negative impact on your business operations. Your plan should include how your business would survive during periods like this and how you would bounce back when it is all over.
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The logistics business challenges discussed in this guide are just a few compared to what logistics companies actually face in this complex and ever-changing industry. However, the most important thing is to be able to identify what challenges your logistics business is facing so as to proffer an effective solution.
The most successful logistics businesses are those that have armed themselves with plans and solutions to various situations and challenges even before they occur. This way, your logistics business will experience smooth operations and tremendous growth in a shorter time.
