Common Logistics Problems and How to Solve Them

The retail industry concludes numerous segments that spread across distinct vertices. Some of the standard segments within the industry are– supply chain, manufacturing, packaging, handling, shipping, and delivering. Logistics is one umbrella term for putting each of these components together.

E-commerce is the modified version of the retail industry, which functions the same except that it took a digital transformation turn. It is estimated that the global e-commerce market is expected to grow at a CAGR of 27.43% from 2023-2028. This drastic rise indicates the higher demand among consumers.

However, there are certain possibilities of emerging challenges as the industry grows. These challenges are sometimes predictable and, most of the time, unpredictable. But what should you do if you come across any? In this article, we will take you through some of the most common challenges entrepreneurs face while managing logistics and how you can tackle them smartly. 

Definition of Logistics

Logistics term first came from military services, where it was frequently used for transporting equipment and arms from one troop to another. Now the term Logistics is more frequently used in businesses. In the e-commerce industry, logistics include purchasing and delivering raw materials, packaging, shipments, and transporting items to distributors. 

Other main components of logistics are:

• Inventory management
• Warehousing and storage
• Order fulfillment

By now, you must clearly understand how many components depend on Logistics. This makes it crucial for business owners to handle carefully and avoid as many problems in logistics as possible. However, no matter how careful you are with your processing, problems must come along the way.

Challenges within the path originate an abundance of opportunities to learn and grow. It opens the door to trying new things and experimenting with the resources around us. This article will examine some of the most frequent problems entrepreneurs face while handling logistics. By the end of this, you will be able to discover loopholes in your logistics if you have any and ways to fill them up. Before that, let’s look at the types of logistics in the system. 

Types of Logistics

There are three main types of logistics management involved. These are:-

1. Inbound logistics

Refers to the inward movement of raw materials from a supplier to the factory to produce a desirable product. Inbound logistics involve transportation, costs involved, inventory, and management. The primary purpose of inbound logistics is to make the perfect product from raw materials. The core of this logistics is procurement, which includes sourcing and transporting resources from the supplier to the owner’s factory. 

2. Outbound logistics

Refers to the outward movement of products from the factory to the rightful customers at a desirable cost. Outbound logistics involve handling, shipping, and delivering items to the end user. The primary purpose of outbound logistics is to enhance customer satisfaction. 

3. Reverse logistics

It is the reverse of outbound marketing, where the customer returns the product to the factory. It happens in case of a return, refurbishment, and recycling of products. The primary purpose of this logistic system is to give the customer their product back, which sometimes doesn’t happen in the case of a refund. 

Overview of the Challenges in the Logistics Industry

Being in the retail industry, it is hard to dodge the challenges on the path. Online sellers have to look out for plenty of segments, and the chances of missing out on any of them are pretty high. You start with manufacturing and go all the way to shipment.

In between the processing, there are certain obstacles that you would face. We have listed six major logistics problems you may face as a business owner and how to tackle them. 

Supply Chain Disruption

The supply chain transports goods from the supplier to the end customer. Disruption is the obstacle in the supply chain in which the movement of goods, sales, manufacturing, or even distribution is disrupted. A well-organized or near to perfect supply chain is hard to achieve, and disruption in the process has become common. Let’s have a look at the reasons why the supply chain is disrupted. 

Causes of Supply Chain Disruption

Some common causes could be:

• Pandemics– We saw in 2020 how the COVID-19 pandemic wreaked the global supply chain mechanism across different sectors. The effect of the pandemic at the global level could cause you a fortune. Moreover, it penetrates each segment of your business, making it weak from the core.
  
• Natural disasters– Calamities such as earthquakes, landslides, tsunamis, hurricanes, and so on can cause temporary suspension of supply chain management at that specific region until everything returns to normal. Even if you are not based in that region, you would still face some trouble connecting with people from where you may source your raw materials, share your route, or have your end customer.
  
• Logistics delays and failures– Globalization has caused more frequent supply chains, which have increased customer expectations and demand. This results in congestion, delays, and sometimes failure.
  
• Price fluctuations– Sometimes frequent changes in prices like transportation, shipping, and many more can also disrupt your supply chain management. This could cause an increase in the product’s price that can upset your customers.

Strategies to Overcome Supply Chain Disruption

A thoughtful action at the perfect time can turn miseries into miracles. Long-term resilience should create valuable chains which require holistic approaches. 

There are four ways by which you can respond to supply chain disruption. These are– 

• Mobilize the command center and response plan
• Sense possible risks and implications to your supply chain management
• Analyze potential scenarios and protocols for plans, sources, and services
• Configure and tailor the network and product flows. 

The top five priorities of your supply chain should be– customers, data, segmentation, sales & OPS SWAT team, and supply chain scenarios. 

Transportation Costs

This has been a key element in any industry, occupying 40 to 50% of the total logistics cost. It involves bringing raw materials, transporting them within the warehouse, shipping, handling, and delivering the item to the right customer. 

The transportation segment sheds multiple layers which decide the movement of the entire supply chain. The rising fuel prices, shipping rates, and so on could collectively increase transportation costs. Let’s look at the reason behind its high prices. 

Reasons for High Transportation Costs

Here are some common reasons for high transportation costs:

• Increased fuel prices: The fuel cost of cargo trucks, delivery trucks, and delivery vehicles could disrupt the overall transportation cost. This majorly affects business owners as they are responsible for fulfilling each cost. As a result, this also affects the delivery charges taken from the customers, thereby reducing their satisfaction.
  
• Demand for freight: The overall transportation pricing depends on the cargo volume to be shipped by the operators. Here lies the competition among firms with faster shipping options as well as the ones that operate at reasonable prices.
  
• Out-of-area shipping: This implies that the delivery address is too far from the dock. When this happens, it leads to – high transportation costs and longer transit times, whereas neither benefits your business.
  
• Poor compliance with prescribed routings: Prescribed routings mean when you are aware of the mode of transportation and carrier size while delivering the item to a specific region. A routing guide has to be customizable, which, if not followed, could charge you some bucks.
  

Ways to Reduce Transportation Costs

Navigate our list of various actions that can help you reduce your transportation costs. 

• Be creative: By creativity, we mean becoming more flexible and adaptable in your transportation mode. Don’t rely on single mode. Instead, find out multiple ways by which you can ship items without affecting the cost.
  
• Explore shipping consolidation opportunities: The less-than-truckload or LTL is affordable for smaller weights. You can even consolidate large and different cargo into one shipment to cut-down costs.
  
• Utilize delivering services: If you ship items from point A to B, you can carry different products that fall under the same path to reach out to more customers simultaneously.
  
• Focus on logistics cost reduction: This would work well with the suppliers as sometimes they can cover some of the direct logistics costs. You can build a consortium of buyers to purchase necessary logistics supplies. 

Delivery Times

Delivery times nowadays have become customizable. Earlier, it used to take 2-3 days to deliver the items. After the Covid-19 outbreak, since many customers have started to rely on the e-commerce industry more, services like same-day or next-day delivery have continued to rise. 

Factors Affecting Delivery Times

Here are some factors affecting delivery times:-

• Inadequate technology: Outdated software leads to severe troubles in the delivery system. It limits the ability to incorporate new technologies into the old systems, restricting business owners from using new features.
  
• Motor vehicle troubles: What will happen if the delivery vehicle suddenly stops working? It would likely delay the item’s delivery to the end user. The company should always take the vehicle seriously as it can cause difficulties at the end of minutes.
  
• Lost packages: This is probably one of the nightmares for entrepreneurs. A lost package overwhelms you with multiple questions from the end customer that could damage your company’s reputation. Lost packages can easily occur when frequently dealing with large volumes; therefore, it continues to be one of the biggest reasons for affecting revenue and delivery times.
  
• Weather conditions: Fluctuating weather conditions can often be the reason behind a delayed delivery. As a savvy entrepreneur, you can always devise innovative and preventive measures to save yourself and your customers some time.
  
• Traffic congestion: Another common problem that each delivery person faces is traffic congestion. Activities like construction, accidents, roadblocks, more vehicles, and so on are the primary reasons for heavy traffic congestion leading to delayed deliveries.
  

Optimizing Delivery Times

Here are some of the top ways you can optimize delivery times:- 

• Visualizing delivery routes: Using GPS-enabled routes has become a go-to for many enterprises. This software visualizes the entire route in front of the delivery person, which saves time in finding the end destination. Moreover, the logistic teams, including the drivers, can see what’s ahead, such as stops, traffic, and weather conditions. Every update is received in real-time, which acts as a savior.
  
• Automating dispatch: This means integrating the delivery system with AI, robust data-crunching abilities, and keeping you ahead of everyone. It requires data migration from an old system to the new one, which allows logistics teams to set delivery goals before the time comes.
  
• Delivery software: As mentioned, many enterprises use AI and GPS, while others develop their own software to automate logistics from head to toe. This app updates the items dispatched, shipped, and delivered to the end-user application. It also gives more clarity to customers as to where and when they can receive their product.
  
• Beware of precautionary measures in handy: Prevention is better than cure and is well-suited in logistics as it helps enterprises greatly. Have a thorough understanding of the possible security measures to keep the delivery items safe and delivered at the right time. 

Customer Service and Satisfaction

Customer service includes all the possible components you follow to satisfy customers and exceed their expectations. In the era where every other company is fighting to provide the best service to its customers, there are some common challenges while handling them. Let’s look at the obstacles you may face while dealing with customers. 

Challenges in Meeting Customer Service Expectations

• Demanding customers: This is one of the most prominently faced challenges by businesses. You may have prepared a customer service training menu, but you would still face trouble handling difficult and angry customers.
  
• Understanding their needs: If you fail to understand what they want, you will most likely create an unsatisfactory customer experience. Depending on the products and services you offer, every customer may come up with a different set of demands that have to be understood by enterprises.
  
• Customer requests outside your offerings: Stretching the previous point, suppose one of your customers has demanded something you don’t currently offer. What would you do in those situations? It depends on how you have trained your customer support team to respond to those requests so that it doesn’t backfire on you and leaves the customer satisfied with the answer.
  
• Choosing the right tool: Sometimes, you receive overwhelming customer requests, especially during the festive seasons. You may need help using outdated software that fails to keep up with responses. Or you also have to be careful while choosing tools for your customer service. It must align with the offerings and type of customers you have onboard.
  
• Service ticket overload: Managing customer tickets could be daunting following the introduction of new technologies in the business model. The main purpose of tickets is to resolve queries as quickly as possible. However, overload responses could hinder operations for a while, creating hindrances in customer service. 

How to Improve Customer Service and Satisfaction

Here are some of the best ways to handle the challenges mentioned above.

• Treating difficult customers smartly: Try to navigate through customers’ queries and see what started the trouble. Buy some time from them and develop a rigid solution to satisfy their queries.
  
• Discover pain points: On a big scale, you can either roll out one survey for all or target a small chunk of your customers and survey them in-depth. Ask what they expect from your company. Are they satisfied with the services you provide? Do they need any changes? If yes, then what changes would they recommend? Practicing this often makes your customers feel valued and helps you understand deeply.
  
• Work things out: Determine if their demand is achievable before turning them down. If they pay you the appropriate amount required to complete things, you can fulfill it. Otherwise, politely refuse their request by presenting relevant facts. Moreover, you should always be careful about the company’s protocol and be fact-oriented at all times.
  
• The right tool: As discussed, your tool should align with your sales, marketing, and customer support which would enhance the productivity of your business. You should consider live chat support, community support, guidance, new customer features, and so on. 

Fuel Prices and Natural Disasters

Fuel prices and natural disasters are a few challenges you cannot control. It can disrupt the whole supply chain and takes days to be replenished. We have listed some case studies and the effects of natural disasters and fuel prices on logistics. 

Impact of Changing Fuel Prices on Logistics Companies

• The increased cost of transport logistics: The most common effect observed in the whole supply chain is the increased cost of overall logistics. The rise in fuel prices acts as a domino effect that starts with high costs, followed by high vehicle costs, transportation costs, and ultimately increased delivery costs taken from the customers.
  
• Product inflation: It also leads to increased costs of products. This happens because the company faces high logistics costs to distribute goods that must be compensated from somewhere. Therefore, many business owners increase their product prices to balance everything out.

• Less frequent transport service: Within this phase of soaring fuel prices, companies might cut down some transportation services to reduce costs from their end as much as possible. They may decide to only cater to necessary transportation services and optimize the supply chain accordingly.

How do Natural Disasters Affect Logistics Operations?

Let’s understand the effect of natural disasters with the help of case studies.

• Japan Earthquake and Tsunami: This incident happened in 2011, which resulted in $210 billion in costs for Japan and heavily disrupted the supply chain worldwide. This earthquake happened in Tohuku, and firms like Toyota, G.M., and Nissan were temporarily shut down in the United States and Japan.
  
• Hurricane Sandy vs. New York: This hurricane occurred in New York on October 29, 2012, and heavily affected many firms, including New York Harbor. The entire link of the firm was broken– foreign oil tankers got blocked by water debris, closed refiners, pipelines, halted depots, significant power cuts, and various other mishaps. Many companies were unprepared for this natural disaster, which led to more destruction in the logistics system.
  
• Puerto Rico and Hurricane Maria: This incident significantly affected two major industries on the island- pharmaceuticals and medical devices. Medical facilities faced great trouble locating medical goods and saline bags as a result of this calamity. 

How to tackle the effect?

The above examples perfectly demonstrate how badly a natural disaster affects the supply chain. This is the biggest challenge for any enterprise and industry. However, there are some preparedness measures that you can follow to be saved from these calamities. 

• Make a disaster response and recovery plan: The first thing to do is to plan the detailed guidelines when it happens. Prepare a separate team and make sure everyone is aware of the guidelines. Find out backup suppliers and keep on updating the plan.
  
• Engage with suppliers: Contact suppliers with their own plans and see what they entail. You can also create a supplier scorecard that would help you avoid potential risks.
  
• Understand the risk: Consider your company’s impact in front of customers during a natural disaster. Will you be looked upon as a responsible supplier by putting customers first? Understand how risk could affect your business and make a well-established CTA.
  
• If it happens, undergo thorough investigation: If, unfortunately, any disaster happens, learn about the mistakes you made, which would help you in the future. Investigate the loopholes in your logistics and rectify them later. 

Conclusion

With diverse processes working under the great umbrella of logistics, businesses are likely to face varying problems in the logistics industry. Challenges such as delayed delivery time, malfunctioning software, improper customer service, and so on are common and can be rectified in no time. However, if firms face a natural catastrophe or soaring fuel prices, it takes days to recover from it.

Whatever the challenge may be, the one thing that retailers can hold on to is to– bring the supply chain back to normal. No industry is absolutely free from all the troubles. As an intelligent business owner, you must make a well-versed plan to join all the bits and pieces to make the entire operation normal. 

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