What challenges does the logistics industry face in 2023?

Experts

There are issues to be solved, either through technology, partnerships, new customer strategies or a focus on new markets.

drone view of workers in logistics warehouse — Read the 8 challenges the logistics industry is likely to face in 2023, according to CouriersPlease CEO Richard Thame | Image source: Getty Images.

The transport and logistics industries are expected to grow to approximately $171.9bn by 2027[1] and increase its workforce by 4.6%.[2] Despite promising success and growth, external issues this year, including inflation and supply chain disruptions, have led to the emergence of several challenges that the industry will need to tackle in 2023.

In 2020 and 2021, Australia saw a shift to online purchases, with CouriersPlease delivering 28 million parcels last year, a 53% increase on 2019 volumes. This year, with the rising costs of living, cybersecurity risks and the return to in-store shopping, I believe several challenges will emerge that the industry will need to solve, either through technology, partnerships, new customer strategies or a focus on new markets.

8 challenges the logistics industry is likely to face in 2023:

Labour shortages. Australia will see a continued tight labour market in 2023, putting a strain on the logistics industry. However, in the second half of 2023, labour shortages will be offset by reduced volumes for some companies, as an economic downturn kicks in. There is likely to be a growing uptake of automation in the industry and an increase in skilled migrants will also help. Volumes will increase as businesses onboard more SME retail customers, and face the challenge of scaling up delivery capacity quickly to meet this demand.
Natural disasters. This year, flooding across NSW and Victoria impacted supply chains and delivery networks. For example, a recent train derailment caused by heavy rain in regional New South Wales impacted companies that deliver freight on the railway line from Sydney and Brisbane to Perth. Natural disasters are likely to cause disruption to the industry in 2023.
Managing new customer expectations, such as same-day delivery. New consumer behaviours and expectations have emerged in the last three years. Most significant is the expectation for faster delivery, particularly the demand for same-day delivery, which is putting additional pressure on the industry. Retailers and carriers will try to meet the demand by establishing smaller, satellite warehouses and fulfilment centres in populated metropolitan areas, a move that some retailers in the US have made. Some retail stores will also be transformed into fulfilment centres, also known as ‘dark stores.’
Rising costs of warehousing. Neither building new warehouses nor renting new warehouse space may be economically viable for many retailers as supply and materials costs and renting costs continue to surge – industrial rent has increased an average 14.9% year-on-year, nationally.[3] Retailers will need to look for more cost solutions, such as automated warehousing – the process of automating the movement of inventory into, within, and out of warehouses to customers with minimal human intervention.
Cybersecurity risks. Cybersecurity will be a prevalent challenge for many businesses, given the concerning increase in data breaches in 2022. As cargo, passenger, fare and other systems used by Australia’s transportation industry become more complex and digitised, they are increasingly targeted in high stakes cyberattacks, including ransomware and phishing. Companies will take a more rigorous approach to updating their systems and processes to prevent attacks. The Australian Cyber Security Centre will host a series of exercises from May 2023 to help transport and logistics companies prepare for potential breaches.[4]
Economic burden due to rising fuel prices. Petrol costs increased in the major capital cities from 16 and 22 cents per litre from 28 September to 16 November this year alone,[5] while experts predict costs will continue increasing well into 2023. Rising prices will lead to higher freight costs in 2023, particularly on the transport of goods that are time sensitive or require refrigeration. While carriers will absorb as much of these costs as possible, consumers may see a slight increase in delivery costs in 2023. Surcharges have already been introduced by some companies to reduce the financial burden on drivers, while others have provided additional payments to Franchise Partners to help cover increased fuel prices.
Demand for sustainable deliveries. Australian consumers increasingly want assurances from retailers and carriers that they are considering their environmental impact. The industry will need to be more agile when adopting important sustainability goals. The growth of parcel collection-point networks will help fulfil decarbonisation goals. Collection point networks in other markets, such as Parcelly in the UK, are already innovating by offering ‘dark store’ options to retailers to reduce the distance between customers, while in Australia, Hubbed’s recent acquirement of Parcelpoint will also broaden consumer accessibility to these options. Electric vehicle uptake will help carriers achieve their goals – it is estimated that collection point networks and EVs, combined, can reduce carbon emissions by 87%.[6]
Maintaining online customer loyalty. In 2022, many consumers were drawn back into stores, and through-the-year sales were down 16.9% as at September 2022.[7] As a result, the challenge for retailers in 2023 will be to attract customers to shopping sites and retain them. This may be a formidable challenge as more eCommerce stores emerged during the pandemic, leading to increased competition. Promotions, discounts, shopping events, such as Click Frenzy, and exclusive online stock and deals will increase, as retailers compete for the consumer dollar in a climate of inflation and rising interest rates impacting consumer spending.