Top Six Challenges Global Logistics Service Providers Need to Solve in 2023

The global logistics services and management space is becoming increasingly riddled with complexities and challenges that go beyond the expertise of basic automation, let alone manual management. While 76% of supply chain professionals are struggling with the availability of transportation and logistics, 80% of 3PL service providers point to ‘capacity’ as their biggest challenge.

Further, stats suggest that 32% of logistics service providers across the globe face challenges from compliance management, risk management, and supply chain disruptions. Also, 70% of them find it hard to find, retain and manage skilled labor, and 63% are grappling with rising operational costs.

However, with rapidly evolving customer demands, surging cross-border commerce, sustainability, growing reliance on 3PLs, and increasing costs – supply chains will look completely different five years from now. Studies suggest that the total addressable target market potential by 2030 for logistics SaaS will be $100 Billion+.

This creates a huge divide between ‘what is expected’ and ‘what is available’ for the supply chain stakeholders and service providers. Consequently, global logistics service providers need to adjust their focus for operational challenges and service offerings. 

Here are our top 6 picks that are going to have a big impact on the logistics services industry landscape in 2023 and offer a lucrative problem set to tap into.

Top 6 Challenges for Global Logistics Service Providers: Agenda 2023

Growing Delivery Failures

Delivery failures are a major contributor to increasing logistics costs, especially in the last mile. This, in turn, creates massive friction between 3PLs and retailers. According to research, as much as 8% of domestic first-time deliveries fail, costing retailers an average of USD 17.20 per order or USD 197,730 per year.

Leveraging smart automation for trapping fake delivery attempts, validating NDRs, RTOs, and delivery failure reasons by customer validation, and enforcing geofence-based checks for on-field operations are some ways to curb the rising failure volume.

Increasing Middle and Last Mile Costs

$17.78 is the average cost of failed deliveries, and 5% of all last-mile deliveries fail.

Inefficient capacity planning, poor route planning between distribution centers, and lack of real-time visibility significantly increase the middle costs. The last mile tends to be more complex and cost-intensive. It’s knee-deep in inefficiencies with manual routing, allocation, and scheduling processes, lack of delivery transparency, and growing delivery failures, among others. 

AI-based routing engines that consider multiple custom routing constraints, ensuring highly optimal hub-to-hub and hub-to-customer movements and real-time tracking & control of order movements – this is how agile the LSPs need to be.

Lack of Analytics and Actionable Data

While 99% of 3PLs agree that analytics is a necessary element of 3PL expertise, only 27% of 3PLs are satisfied with their current analytic capabilities. It’s a major issue that impacts logistics planning, SLA adherence, identifying cost leakages, benchmarking rider KPIs, analyzing delivery failure reasons, and more. 

Investing in smart logistics management and orchestration platforms that offer highly advanced data analytics and reporting capabilities and deliver highly actionable data visualizations is going to become a business imperative.

Poor Customer Experience

Logistics service providers need to move beyond the standard 4-5 day delivery window and ensure same-day, next-day and slotted deliveries. A study revealed that delivery services receive a Net Promoter Score (NPS) of negative nine across geographies. The top causes of dissatisfaction are high delivery prices, unavailability of same-day delivery, and late deliveries.

Ensuring seamless customer communication, proactive alerts, and automated real-time tracking are some ways to boost CX.

Inaccurate Customer Address

It’s a problem that impacts customer experience and delivery costs due to delivery re-attempts. For instance, in the Middle East, incorrect addresses could affect more than USD 7.42 billion in eCommerce revenue.

Automated address conversion into Latitude and Longitude and improving address accuracy is another valuable business proposition for global LSPs to offer in 2023.

Limitations of Static Route Planning

Static route planning makes it difficult for logistics service providers to optimize routes based on real-time factors like traffic, weather, road closures, etc. It makes accurately estimating ETAs a challenge. Also, owing to fixed routes for every rider, it becomes difficult to increase or decrease the utilization of freelance riders, thereby increasing costs.

Leveraging smart routing engines stemming from AI/ML and real-time road conditions analysis is definitely the way forward for routing efficiencies and on-the-go optimization capabilities.

While the logistics and supply chain ecosystem moves towards aggressive and deeper technology integration and advanced computing, digitization across the First, Middle, and Last Mile is inevitable. This means partnering with the right service providers for the right technology at the right time, which is now, is extremely essential for the LSPs.

Further, the global agendas for supply chain excellence and logistics management are changing, with 51% of supply chain officers willing to sacrifice profits for sustainability.

How fast and how well the logistics service providers deliver across these challenges is definitely going to change the logistics landscape of 2023 and the overall perception of excellence as we know it.