COVID-19 brought unprecedented challenges to logistics and the industry has yet to rebound. Rising fuel costs, conflict areas, supply shortages and limited capacity continue to strain the supply chains, port operations and transportation modes.
These challenges are pushing logistics providers to adapt with new technology, improved processes and business innovations that can improve the overall land logistics process. Here are the challenges still putting a strain on the land transportation industry.
Labor ShortagesThe pandemic caused an unprecedented shift in the logistics industry. Despite economic shifts, ecommerce sales exploded – putting strain on labor and delivery infrastructure. In the U.S., the shortage in the road freight industry is about 64,000 truck drivers, which is expected to grow to 160,000 by 2030, according to the American Trucking Associations.
Labor shortages are impacting every industry, but combined with the ongoing challenges in logistics, the lack of workers is compounding the existing issues. Companies are tasked with addressing the high demand while also filling vacancies.
Rising Shipping CostsShipping costs have increased across the freight sector, including the costs for land, air and sea. High costs affect each level of the supply chain and are due to a combination of factors, including the high cost of fuel, global inflation, increased consumer demand and the lasting effects of the pandemic.
For ground transport, in particular, the shipping costs have increased about 23 percent since 2020. This is compounded by the high competition for skilled labor, which forces companies to increase salaries and benefits to attract and retain workers. Raised rates are expected to stay the same until well into 2024.
Widespread InflationThe unpredictable U.S. economic situation is a concern for logistics providers. The U.S. economy is still struggling to rebound from the disruptions caused by COVID-19, global conflict and prolonged supply chain bottlenecks.
As of July, the annual inflation rate in the U.S. was 3.2 percent for the previous year, which is an increase over the previous period. The last time the U.S. economy was in a similar state was the 1980s, which was followed by high unemployment and a severe recession. Fortunately, current employment levels are much stronger than they were then.
Transportation providers have had to navigate this looming recession, just like any other business working through trying economic conditions.
Rail Car ShortageThe rail industry is currently facing a major train car shortage, which has a ripple effect into the rest of the supply chain. The automotive industry has mostly rebounded from the widespread vehicle chip shortage, of the past two years, but now, all those vehicles have to get from production lines to showrooms.This situation was caused by several factors, including a quick rebound from the chip shortage, the booming ecommerce sector and disruptions from adverse weather and other challenges.
In addition, the industry is still trying to rebound from the shortage of semi-trucks in the past few years. Each year, the industry requires about 200,000 to 250,000 new vehicles to rotate older vehicles out and replace them with new ones. In 2020 and 2021, manufacturers missed these replacement levels, forcing companies to use older vehicles.
Parts ShortagesChips may be making their way into the market, but major automakers are pausing production on some vehicles because of parts shortages. As a result, transportation companies have to pay a premium to maintain their equipment – costs that trickle down to shippers and add to the existing labor and fuel costs.
Between the cost of parts, maintaining older fleets and rotating vehicles out, fleet maintenance costs are trending upward. Trucking companies need to pay more to maintain their fleets, meaning land shipping costs are expected to stay high.
These challenges can be navigated, or at least mitigated, through a series of actions.
- Route Optimization
Effective route planning and optimization maximizes resources and minimizes fuel usage to reduce overall costs while still delivering the fastest possible delivery speed. Advanced technologies can determine the ideal routes based on distance, traffic conditions and delivery time windows, reducing idle time and unnecessary detours.
- Intermodal Logistics
With some aspects of rail, road, ocean and air freight still recovering from major disruptions and bottlenecks, intermodal logistics, offers a solution that combines different transportation modes to ensure on-time delivery while optimizing resources. This integrated approach takes advantage of the strengths and weaknesses of different shipping options to adapt to challenges like high costs, route congestion and more.
- Shipment Consolidation
Partial shipments are common in supply chains, but consolidated shipping, also known as less-than-truckload or less-than-container-load shipping, combines multiple shipments within one full load. This not only reduces the costs to haul a partial load, but it gives shippers and end customers the benefit of bulk rates.
Land transport is not without its challenges, including the continued labor shortage and high costs that have a ripple effect in the industry. But adopting some innovative solutions can ensure that goods are delivered on time, safely and for the lowest possible cost to keep the supply chain moving.
David Buss is CEO of DB Schenker North America, a 150-year-old global freight forwarder and 3PL provider. He is responsible for all P&L aspects in the North America region, which is made up of over 7,000 employees located throughout 39 forwarding locations and 55 logistics centers.