Optimizing delivery logistics in an economic downturn
Even in a recession, businesses can revolutionize logistics with AI and ML, allowing them to optimize and enhance customer satisfaction. …
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From the COVID-19 pandemic to the Suez canal blockage and Russia’s invasion of Ukraine, the global supply chain has taken a beating over the past couple of years. Now, with a recession on the horizon, it looks like a major blow is on its way.
However, during the pandemic, the trucking industry exploded. Consumer spending soared while the population sat at home. The pandemic saw a considerable rise in ecommerce startups and spending, with established online-only stores like Shopify surging by 347%. Not only did big online retailers like Amazon benefit from the digital shopping boom, so did many small businesses, leading them to improve their shipping options. Smaller companies relied on truckers in the spot market — one-time uncontracted shipping arrangements at market value — leading to 195,000 new trucking carriers entering the market from July 2020 to now.
Nevertheless, with people returning to their former shopping habits and online consumer spending decreasing, the market is now saturated with drivers for an insufficient amount of freight. This is pushing spot rate prices down and causing many smaller freight companies to go out of business — a phenomenon being referred to as the ‘GreatPurge.’
Even with a recession looming, businesses need not panic. Instead, by revolutionizing their logistics with the help of machine learning (ML) technology, they can choose to optimize rather than reduce, and enhance their customers’ satisfaction. With some help from artificial intelligence (AI), companies can weather the storm and come out on top.
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Optimizing vs. cost reduction
In times of economic downturn, the general public’s automatic reaction is to cut back. People may cut out those expensive takeaways, cancel their subscription services and even deny themselves a much-needed vacation. Although cutting back is often the best idea for many consumers, this isn’t always the wisest move for businesses. Avoiding the knee-jerk response of major cutbacks is essential for your business.
Recessions are a natural part of life, and the ability to weather them separates the wheat from the chaff. By focusing your attention on optimization, not only are you future-proofing your business, you will be providing a better experience for your customer. Concentrating on customer retention and providing current customers with reliable and good-quality service will ensure loyalty, which outlasts a recession. Since word-of-mouth results in five times more sales than paid marketing, investing in quality customer service will sustain your much-needed cash flow.
Fritz Holzgrefe, president and CEO of Saia Inc, a trucking company with customers including Home Depot, stated: “Maybe things have slowed a bit, but customers are continuing to re-sort their supply chain position to more effectively achieve their goals in their respective businesses.” Many industry leaders have realized that the benefits of optimization greatly outweigh the urge to cut back; smaller companies should take note of this advice. So, what solutions are available to optimize logistics?
Last-mile delivery optimization
Implementing AI into a company’s logistical operations can revolutionize a business’s daily functions while saving money. AI is fast becoming a business necessity — a recent McKinsey report stated that firms who do not adopt AI could experience a 20% fallin their cash flow, pressuring them to make reductions.
Last-mile planning is significant to both customers and shippers, as it can make or break a company. One study showed that 69% of customers would not order from a company again if their package was not delivered within two days of the promised delivery date. In addition, last-mile delivery costs amount to 53% of the total cost of shipping. Therefore, ensuring that this is faultlessly optimized will save company money and provide consumers with excellent customer service worth returning for.
AI-powered technology with algorithms that monitor traffic, weather, origins and destinations provides drivers with the most efficient route to minimize journey time and fuel waste. This optimizes asset usage, improves working conditions and reduces costs. And with live updates, logistics providers can share up-to-date information with their customers.
One easy way to access these AI benefits is through a digital brokerage like Uber Freight, Convoy or Doft. Digital broker companies supply a tracking service that benefits shippers and customers, providing both parties with the parcel’s route and an estimated arrival time. Plus, shippers can choose drivers with excellent ratings from previous jobs, so they know their shipment is in good hands.
Integrating with stakeholders: A digital freight network
Spot rates are down 11% year over year, encouraging more retailers to use digital brokerages over contracted freight. Using a digital brokerage can be beneficial, no matter the size of your company. Small businesses that do not have large volumes of freight or have an irregular shipping pattern can use a brokerage to save themselves a substantial amount of money when compared to tying into expensive and rigid freight contracts. Also, larger companies with extra drivers and assets post-pandemic can broker their services at spot rates to take advantage of this trend and optimize their vehicle usage.
Many digital broker apps have ML capabilities to monitor business performance and make money-saving and logistical recommendations. Depending on the amount of freight, AI technology can automatically make real-time decisions and allocate vehicles to match the order size. Automating these decisions removes the risk of human error and makes complex decisions in seconds, providing a fast and optimized system for customers.
Working towards a sustainable future
Sustainability and optimization work hand in hand, especially with the help of ML technology. With 71% of Americans saying they wouldn’t buy from a company that didn’t care about climate change, it’s evident that businesses need to start making greener choices to keep customers satisfied.
Electric vehicles (EVs) are becoming an ever more popular choice among logistics companies due to their reduced running costs. One study by the U.S Department of Energy’s National Renewable Energy Laboratory estimated that in an EV’s average 15-year life span, the total savings would be $14,480 compared to a vehicle with a standard combustion engine.
The downside of EVs stems from the high initial investment. However, with the initial costs decreasing over time and publicly available charging stations having more than doubled in the last five years, widespread use of logistical EVs doesn’t look too far off.
Another less costly way of executing green practices in logistical companies is implementing AI-powered chatbots. These are quickly becoming a buyer’s best friend, as 62% of consumers would prefer to use an AI chatbot than wait for a human agent. With the help of AI chatbots, companies can optimize their customer service departments and reduce office space. Along with digitizing office systems, this would greatly reduce a business’s carbon footprint as offices use 12.1 trillion sheets of paper annually.
With economic downturns being a normal phase in the financial cycle (no matter how much we wish they weren’t), companies mustn’t make quick, rash, cost-reducing decisions. To future-proof your business you must prioritize optimization, particularly within your supply chain. By using digital brokerages and AI-powered technology, businesses can continue to prosper while earning high customer satisfaction.
Dmitri Fedorchenko is founder and CEO of Doft.
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