5 Reasons Fueling Logistics Industry Complexity
The current logistics model is so complex and evolves at such a rapid pace that the solutions proposed for implementation often become obsolete as soon as they hit the ground.
This could directly arise from a number of factors that call for a more comprehensive solution that any of the current attempts can offer. Take a look at some of the most prominent ones:
Fragmented Channels
The most frustrating aspect for those who attempt to optimize the supply chain has to do with the fragmented nature of existing market channels. Taking data as an example, industry players who wish to get information have a hard time getting the big picture. This is because data sources in various arms of the logistics industry are disparate. It is impossible to make informed decisions without an end-to-end analytics system to offer an aerial view.
The reason behind this fragmentation is the fact that some companies make the misinformed assumption that they are independent entities in the economy. This view is faulty because the current economy is networked and existing stakeholders have to cooperate to optimize their systems and processes.
However, intermediaries taking note of this loophole have created a billion-dollar industry that seeks to bridge the stakeholders. In order to secure their position, they get hold of industry data and secure it, charging outrageous fees for any party wishing to gain access.
Rising Operational Costs
This is partly a result of the existence of third-party intermediaries between industry stakeholders and partly due to changing trends. Having brokerage companies act as go-betweens comes at a price, and unfortunately, the fees associated with brokers in the logistics industry at times go as high as 30% of operational costs.
Another reason for rising costs has to do with reliance on an inefficient and subsequently wasteful industry model. American truckers drive billions of miles on empty or partially full trucks, wasting fuel and taking a toll on the environment due to unnecessary carbon emissions.
Globalization
Even though globalization comes with merits such as extending the market size and reach of the industry, it also poses significant challenges. One of the most outstanding issues that stakeholders in the logistics industry have to contend with has to do with disparities in infrastructure.
Poor transportation networks are a characteristic feature of emerging economies. This negatively influences the logistics capability of participating companies. It is also a key factor in rising operational costs.
Sourcing and distribution have also been deemed a problem to globalizing logistics. The nature of the global market means that at any given time logistics companies have to connect thousands of suppliers and customers across the world. These also operate on fragmented channels with differing standards, cultures and expectations.
Labor Shortages
This is a mounting problem in many sectors of the economy and the logistics industry is no exception. The current workforce falls way short of market demands. These shortage affects operations as well as management and planning, making it extremely difficult to propel the industry forward.
Given the ever-expanding global market, this problem can only get worse with every passing day. Currently, the transport industry has a shortfall of about 50,000 drivers. This figure is expected to rise to more than 170,000 by the year 2026.
Traditional Approaches
With a world that is continually leaning toward digitalization, the logistics industry which has stubbornly held on to a traditional model is ill at ease. This industry is characterized by extensive paper-based documentation that complicates compliance and verification processes. This means that simple procedures that should take minutes at times extend into days creating a highly inefficient model. Apart from delays in the supply chain, this model is also prone to errors, manipulation, and poor public perception.
Blockchain Technology — The Solution to Logistics Complexity
The dynamic nature of the current global logistics model calls for more dynamic planning that turns optimization into a continuous effort. The Fr8 Network has realized the potential in this technology to devise a sustainable solution for the freight industry.
Our system offers a decentralized model that removes costly third-party intermediaries from the supply chain and acts as a bridge between stakeholders. This system builds a reliable global network of participants based on the distributed ledger technology.
Industry players will have to access pertinent data, creating a more efficient operational framework and drastically reducing costs.
A decentralized system — The Fr8 Network — will help to put an end to many of the complexities that the logistics industry faces today.
