What challenges are the logistics industry now facing?

Logistics and Supply Chain News

The last few years have had a major impact on logistics, making customer demands and expectations difficult to meet. Technological advances, sustainability and the pandemic have all added to this very challenging time for the logistics industry. The most significant challenge that logistics are currently facing can be divided into three categories, all of which influence each other.

Advancing globalisation inevitably leads to an increase in transport volume. This means that thanks to the increase in cross-border business transactions, there will be therefore also an increase in the flow of goods. For example, the DHL Global Connectedness Index, which DHL collects annually, clearly shows that although the Coronavirus pandemic led to a slowdown in the globalisation process, it is now clearly picking up speed again and will also accelerate in the future.

This naturally requires an expansion of transport capacities or the number of vessels. It is likely that we will be confronted with a grow of traffic volume by land, sea and air.

In order to deliver goods according to customers’ needs (six R’s of logistics – right product, right quality, right time, right place, right quantity and right cost), new capacities such as the expansion of sea-harbours/airports or additional warehouses/intermediate storage facilities must be considered.

Digitization is also a challenge for logistics. The internet has not only ensured that digital business in the B2C sector has continued to grow, but it has also grown in the B2B area. Digitization enables companies to introduce and to take advantage of e-sourcing with various suppliers (worldwide) or even to use the upcoming Industry 4.0 for themselves. In connection with Industry 4.0, companies have the opportunity to collaborate more closely with other companies in order to achieve a better utilisation of production capacities as just one example among others. However, this possibility can only be successfully implemented if the corresponding logistics is planned or integrated.

In the future, logistics service providers will probably have to deal more with small lot sizes instead of a large load of one good. Due to this fragmentation/atomisation of freight logistics service providers will be forced to deal more with artificial intelligence and autonomous logistics (e.g. warehouse robots, self-driving delivery vehicles, drone transport) in order to be able to meet customers’ needs in the future.

Sustainability is the final challenge for logistics. At the latest, through the Fridays for Future movement, it has become clear to everyone that the earth’s resources are limited and that we should pay more attention to our environment. However, the growth in logistics services inevitably leads to an increase in pollutant emissions.

To counteract this, logistics service providers such as UPS, DHL or Amazon have already converted their vehicles to gas or electric operation.

In shipping, too, research is increasingly being conducted into using alternative energies for transport in order to protect the environment as much as possible and save energy simultaneously.

Adapting to the new normal

The Coronavirus pandemic has clearly shown us how cross-linked we all are and how globally we have planned our supply chains. The pandemic has also shown how dependent we are as soon as a flow of goods is interrupted. Good evidences for this are the shutdown of the port in Shanghai or the accident of the MV Ever Given in the Suez Canal. The aforementioned examples and the current shift in the geopolitical situation, as well as trade wars between nations, are ultimately drivers for maritime transport companies to rethink their processes in terms of being able to react faster and more flexibly to such developments in the future without incurring significantly higher costs and/or time.

Accordingly, it may be a matter of new sea routes that require the bit more time, but at the same cost due to new propulsion technologies, or faster conversions of tankers that previously had to transport oil and now LNG. ✷

Professor Dr Werner Frese, Lecturer and Programme leader for Dual Study Programmes & MBA Programmes at University of Europe for Applied Sciences (UE)

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