The Effect of Digitization on Shipping and Logistics Home > Blog > The effect of digitization on shipping and logistics Table of Contents The shipping
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The challenges that plague freight transportation today are many and varied. Some of these obstacles include inadequate funding and coordination between the public and private sectors. Others include a lack of data on transportation issues, insufficient multistate coordination, and limited public recognition of the role of transportation in economic development.
Among the most common challenges in transportation today are the rising costs of fuel, a lack of visibility, and increasing congestion and carbon emissions. Addressing these issues requires a multifaceted approach and innovative technologies. In addition, the process is likely to take years.
So, how can we address these challenges? And what can we do in the short term?
In this article, we’ll take a look at three of the biggest challenges facing transportation today. We’ll also explore the solutions in more detail.
Cost of Fuel
The rising cost of fuel forces carriers to increase prices or incur losses. This affects the entire transportation industry, including the shipper, the receiver, and the carrier. Mounting fuel costs affect both the suppliers and the manufacturers because the costs of freight transportation are higher. Higher fuel costs also affect the price of goods and increase inflation rates. That’s why addressing the rising cost of fuel is a crucial issue for the transportation industry.
In order to control fuel costs, many companies are looking for alternative fuels such as biodiesel and electric trucks. The latter is becoming more affordable as an alternative to traditional transport. In addition, many large logistics firms are turning away from diesel fuels in favor of more fuel-efficient options. CSR, for example, has doubled the size of its natural gas rental fleet in the past five years. FedEx has cut down fuel consumption by 47% and improved fuel efficiency by 14% since 2005.
The larger logistics industry has felt the consequences of increasing fuel costs since the early 2000s, but the rise in costs has had an especially adversarial impact on the industry’s performance in the last decade. While fuel costs have boosted profit margins, they also increase competition. Many trucking companies do not have an acute understanding of the overarching impact fuel prices have on the transportation industry.
By embracing FPO (Freight Process Outsourcing) solutions, these transport operators can combat rising fuel costs and achieve a reduction in indirect costs linked to logistics activities. This is why FPO is becoming so popular in the logistics industry today, with many third-party logistics companies providing economical transportation and order fulfillment services.
As diesel prices continue to rise, the cost of shipping products is also increasing. According to the U.S. Energy Information Administration, the average price for diesel reached a record high price of $5.70 a gallon in June, a spike of nearly 75 cents from the beginning of the year. Trucking companies are forced to apply fuel surcharges to their loads to make ends meet.
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Lack of Visibility
Today, 75% of shippers consider freight visibility as one of the most important issues in the supply chain, behind cost reduction and speed. With real-time visibility, businesses can respond quickly to potential disruptions in the supply chain. In the past, tracking and monitoring cargo were only possible when it reached a milestone. But today, visibility is a must for a supply chain to be effective.
Without visibility, companies suffer from inefficiencies and incur unnecessary costs. Without real-time data, shippers are unable to manage the status of their shipments. The inability to control and track their freight spending has a direct impact on the bottom line.
A lack of visibility can affect the entire supply chain, including the distribution operations. A late shipment, for example, may result in the need to idle production lines in a factory, an inventory shortage, or adjustments to staffing on loading docks. It can have a negative impact on the productivity of other parts of the supply chain as well. As a result, 54% of 3PLs reported losing business as a result of their lack of visibility.
Lack of visibility is also a major obstacle for shippers and carriers in the ocean. While the supply chain has always been subject to disruption, recent pandemic effects have been felt most strongly in ocean cargo shipments. Lack of visibility has made the importance of transparency more critical than ever before.
The lack of visibility can make it nearly impossible for shippers to procure reliable transportation services, which ultimately leads to increased transportation costs. And because transparency is the key to a successful supply chain, it is essential to improve visibility.
There are ways to overcome these problems and make your supply chain run more efficiently. Today’s shippers need visibility at the SKU and purchase order level, and traditional methods of tracking freight are inadequate. Technology is the key to raising service levels, enabling companies to track freight at any moment, and connecting the various parts of the organization.
Using a data-driven approach to visibility improves the speed of decision-making and allows shipping companies to get a clearer understanding of what’s happening at any given time. Another way to improve visibility is to build an API to exchange data with carriers. Using an API (Application Programming Interface) will allow a shipper to query carrier systems and subscribe to receive automatic updates on status updates. This way, shippers can learn about delays as they occur and take appropriate steps to mitigate them.
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Congestion and Carbon Emissions
The Congressional Budget Office notes that traffic congestion is among the biggest problems facing the freight transportation industry today. Compared to the situation a decade ago, the total amount of time it takes for trains to run at full capacity is now five times higher than it was in 1982. Several factors have contributed to this increased delay, including dramatic growth in international trade, a resulting shortage of trucks, and increasing levels of passenger traffic.
For one, congestion affects everyone – it reduces the productivity of workers and is bad for the environment. In addition to being a drag on productivity, congestion also leads to increased pollution. Despite being an obvious problem, it has not received the kind of attention it warrants from authorities and the public alike.
A problem as grave as congestion is carbon emissions in the transport sector, which is also a major environmental issue today. Currently, environmental regulations have placed an emphasis on the reduction of truck particulate emissions, locomotive NOx emissions, and GHG emissions. In the future, however, GHG emissions will likely rise as energy intensity increases and new transportation modes emerge.
Increasingly, freight is moving from a traditional mode to a cleaner one, and reducing carbon emissions will be an important aspect of a sustainable climate policy. Other areas of focus will be modal shifts and addressing highway congestion. By reducing the energy intensity of freight transportation and passing the savings on to consumers, carbon emissions can be greatly reduced.
In addition to carbon emissions, shipping is the largest contributor to anthropogenic carbon dioxide emissions. The International Maritime Organization (IMO) had estimated the shipping emissions to rise to 1.48 billion metric tons by 2020 – the equivalent of 65 million new cars.
Reducing shipping speeds is one way to drastically reduce emissions, and with oil prices on the rise, it makes sense. In the meantime, shipping companies should improve the efficiency of their fleets and consider alternative fuel sources.
In the maritime sector, the role of the IMO is crucial to curb pollution in shipping. It introduced the Carbon Intensity Indicator in January 2019. The IMO has previously proposed the implementation of a global carbon emissions standard for cargo ships 5,000 gross tons and above.
The Paris Agreement did not include the freight industry, but the IMO is now a key organization that policies pollution and raises the alarm on global warming. By implementing this new regulation, the shipping industry can lower its carbon emissions and decrease other pollutants in ocean freight.
The world has never been more concerned about climate change and its impact on freight transport. The development of alternative energy sources is an important strategy to reduce carbon emissions. Besides shipping, we can see positive changes being introduced in road transport as well. Electric vehicles, for instance, have proven a useful option for reducing road transport emissions and have been a focus of the COP26 program. However, depending on battery technology and materials, it will take at least 15-20 years before electric vehicles can replace fossil fuel vehicles.
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The Bottom Line
Transport facilitates the movement of goods and services to new markets. It has also helped to reduce costs of consumer goods and increased purchasing power.
Modern transportation and communication have made the world smaller. Transportation systems contribute to the economic development of a country by facilitating the movement of people, goods, and services. Improved transportation systems improve access to markets and boost investments. In addition, transportation has a positive multiplier effect on the economy.
Improved freight transportation will benefit the entire economy. Improving service levels will also benefit the environment, reducing costs of transportation and fostering productivity growth. 3PL logistics companies can play a key role in transportation management. Equipped with valable transport logistics insights, they can prove to be major players in overcoming the various challenges plaguing the transportation industry today.
As the leading 3PL service provider in the Midwest, Logos Logistics is driven by technology. With premium logistics, distribution, transport, and order fulfillment solutions, we store, pick, pack, and ship your global consignments quickly and economically.
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What is the Difference Between 3PL and 2PL Logistics Services? Home > Blog > Intermodal and import strategies that will improve your supply chain management
Intermodal and Import Strategies that Will Improve Your Supply Chain Management Home > Blog > Intermodal and import strategies that will improve your supply chain
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