Key Challenges in the transportation and logistics industry in 2021

Understanding and responding to the drivers of challenge and opportunity in transportation and logistics, particularly technology and consumer demand, will be critical for businesses in the sector. 2021 is set to be another transformational year driven by the impacts of the COVID-19 pandemic. The companies that use these challenges to optimize their businesses and capitalize on new opportunities will have the competitive edge they need now and into the future.  

Challenges in the transportation and logistics industry 

The key challenges the industry will face in 2021 are primarily centred around technology and changing consumer behaviour. While these were present before the pandemic, like other industries, the impacts have highlighted the need to innovate and update old systems and processes.  

Digital transformation

Although many in the industry are talking about artificial intelligence (AI) and big data, from a supply chain risk perspective, it’s still arguably not a key priority given the relatively low use of these developments in the industry. It’s important to remember with these technologies that change can be implemented iteratively, improving one area of the business before rolling it out for other uses. 

The slow uptake of technological advancement presents one of the biggest challenges for the transportation and logistics industry. IoT, AI and data analytics can revolutionize how supply chains operate. IoT plays a critical role in developing automated warehouses along with tracking couriers and deliveries. Similarly, AI can learn repetitive manual processes so these can be automated.  

Supply chain integration

The globalized nature of modern trade means trade flows and geopolitics play a larger role than ever before on supply and demand impacts. Further, it highlights the importance of integrated data across the supply chain to adapt quickly to changes, make the chain of custody reliable, and avoid data silos. 

Data and analytics

In an industry with large assets such as ships, trains, planes, trucks, vans, and real estate, having the right systems to manage, integrate and analyze your data effectively provides the business intelligence required for prudent decision making.

For example, using data analytics tools to monitor factors such as weather and fleet schedules allows transportation and logistics companies to better plan their routes and optimize business operations. 

Economy

With high fuel prices comes a greater credit crisis and rising inflationary demands that take a greater toll on the economy. This industry is then pressured by increasing compliance regulations, declining demand, additional capacity with additional increases in key cost centers. 

Last-mile delivery.

The pandemic not only impacted the first steps in the supply chain as global lockdowns saw factories and ports operating at low capacity or not at all but last-mile delivery too. The final steps of the supply chain where goods travel from the warehouse or distribution center to the customer were under intense pressure in 2020. This will continue, albeit to a lesser extent, throughout 2021. 

Companies are also looking at ways to locate distribution centers closer to cities to meet increasing demand, using drones for last-mile delivery and smart lockers to address the problem of returned deliveries if customers aren’t home for the delivery. 

Improved Customer Service. 

Customers want full transparency into where their delivery is at all times. These days, the location of a package is as interconnected as your social network. As customer expectations have increased, their willingness to pay for fast shipping has decreased with just about 64 percent of consumers unwilling to pay anything extra for less than two-day shipping. 

Driver Shortage & Retention. 

Hiring and retention remain an issue despite the lower demand mentioned above. 

Environmental Issues.

The anti-idling and other emission reduction regulations brought about by state and local governments have created concern that the compliance costs could exceed benefits.

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