Optimizing delivery logistics in an economic downturn

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From the COVID-19 pandemic to the blockade of the Suez Canal and the Russian invasion of Ukraine, the global supply chain has taken a hit over the past two years. Now, with a recession on the horizon, it looks like a major blow is on the way.

However, during the pandemic, the trucking industry exploded. Consumer spending soared as the population sat at home. The pandemic has seen a dramatic increase in startups and ecommerce spending, with established online-only stores like Shopify up 347%. Not only have large online retailers like Amazon benefited from the boom in digital shopping, but also many small businesses, leading them to improve their shipping options. Smaller companies have relied on truckers in the spot market – one-time non-contractual shipping agreements at market value – leading to 195,000 new trucking carriers entering the market from July 2020 to date.

However, with people reverting to their previous shopping habits and online consumer spending decreasing, the market is now saturated with drivers for an insufficient amount of goods. This is driving down spot fare prices and causing many small freight companies to go out of business, a phenomenon called the “Great Purge”.

Even with a looming recession, businesses shouldn’t panic. Instead, by revolutionizing their logistics with the help of machine learning (ML) technology, they can choose to optimize rather than reduce and increase their customer satisfaction. With the help of artificial intelligence (AI), businesses can weather the storm and win.

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Optimization vs. cost reduction

In times of economic downturn, the automatic reaction of the general public is to reduce. People can get rid of those expensive take-out dishes, cancel their subscription services, and even deny themselves a much-needed vacation. While cutting is often the best idea for many consumers, this isn’t always the wisest move for businesses. Avoiding the gut response of major cuts is essential to your business.

Recessions are a natural part of life, and the ability to bear them separates the wheat from the chaff. By focusing your attention on optimization, you will not only future-proof your business, but you will provide a better experience for your customers. Focusing on customer loyalty and providing current customers with reliable, good quality service will ensure loyalty, which will survive a recession. Since word of mouth translates into five times more sales than paid marketing, investing in quality customer service will support much needed cash flow.

Fritz Holzgrefe, president and CEO of Saia Inc, a trucking company with customers including Home Depot, said, “Maybe things have slowed down a bit, but customers continue to rearrange their position in the supply chain to reach more effective their goals in their respective businesses “. Many industry leaders have realized that the benefits of optimization far outweigh the need to reduce; smaller companies should take note of this advice. So what solutions are available to optimize logistics?

Last mile delivery optimization

Implementing AI in a company’s logistics operations can revolutionize a company’s day-to-day functions while saving money. AI is almost becoming a business necessity: A recent McKinsey report said companies that don’t adopt AI could experience a 20% drop in cash flow, prompting them to make reductions.

Last mile planning is important for both customers and shippers, as it can make or break a business. A study showed that 69% of customers would no longer place orders from a business if the package was not delivered within two days of the promised delivery date. Additionally, last mile delivery costs amount to 53% of the total shipping cost. Therefore, ensuring this is flawlessly optimized will save the business money and provide consumers with excellent customer service that is worth returning for.

AI-based technology with algorithms that track traffic, weather, origins and destinations gives drivers the most efficient route to minimize travel time and fuel waste. This optimizes the use of resources, improves working conditions and reduces costs. And with real-time updates, logistics service providers can share up-to-date information with their customers.

An easy way to access these AI benefits is through a digital broker like Uber Freight, Convoy, or Doft. Digital brokerage firms provide a tracking service for the benefit of shippers and customers, providing both parties with the path of the package and an estimated arrival time. Plus, shippers can choose drivers with excellent ratings over previous jobs, so they know their shipment is in good hands.

Integration with stakeholders: a digital freight network

Spot rates fell 11% year-over-year, encouraging more retailers to use digital intermediation than contract freight transport. Using a digital broker can be beneficial, regardless of the size of your business. Small businesses that do not have large volumes of goods or have an irregular shipping pattern can use a brokerage to save a significant amount of money compared to binding on expensive and rigid transportation contracts. In addition, larger companies with extra drivers and post-pandemic resources can broker their services at spot rates to take advantage of this trend and optimize vehicle utilization.

Many digital broker apps have ML capabilities to monitor business performance and make logistical and savings recommendations. Depending on the quantity of goods, AI technology can automatically make decisions in real time and allocate vehicles based on the size of the order. Automating these decisions eliminates the risk of human error and makes complex decisions in seconds, providing a fast and optimized system for customers.

Working for 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 doesn’t care about climate change, it’s clear that companies need to start making greener choices to satisfy customers.

Electric vehicles (EVs) are becoming an increasingly popular choice among logistics companies due to their low running costs. A study by the U.S. Department of Energy’s National Renewable Energy Laboratory estimated that in the 15-year average life of an electric vehicle, the total savings would be $ 14,480 compared to a vehicle with a standard combustion engine.

The disadvantage of electric vehicles comes from the high initial investment. However, with upfront costs declining over time and publicly available charging stations more than doubled over the past five years, the widespread use of electric logistic vehicles doesn’t seem too far off.

Another less expensive way to run green practices in logistics companies is to implement AI-based chatbots. These are fast becoming a buyer’s best friend, as 62% of consumers would rather use an AI chatbot than wait for a human agent. With the help of AI chatbots, businesses can streamline their customer service departments and reduce office space. Coupled with the digitization of office systems, this would significantly reduce a company’s carbon footprint as offices use 12.1 trillion sheets of paper per year.

Because economic downturns are a normal part of the financial cycle (no matter how much we wish they weren’t), companies don’t have to make quick, hasty, cost-cutting decisions. To future-proof your business, you need to prioritize optimization, particularly within your supply chain. By using digital intermediation and AI-based technology, businesses can continue to thrive while earning high customer satisfaction.

Dmitri Fedorchenko is the founder and CEO of Doft.

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