Optimization of delivery logistics in an economic downturn

From the COVID-19 pandemic to the blockage of the Suez Canal and the Russian invasion of Ukraine, the global supply chain has taken a major dent in recent years. Now, with a recession on the horizon, it looks like a major blow is on the way.

However, during the pandemic, the truck industry exploded. Consumer spending rose while the population was at home. The pandemic has seen a significant surge in e-commerce startups and spending, with established online-only stores such as Shopify by means of 347%. Not only large online retailers like Amazon have benefited from the rise of digital shopping, but also many small businesses, improving their shipping options. Smaller companies relied on spot market truck drivers – one-off uncontracted shipping arrangements at market value – leading to: 195,000 new truck carriers entering the market from July 2020 to now.

Nevertheless, with people returning to their former shopping habits and online consumer spending declining, the market is now saturated with drivers for insufficient cargo. This is pushing spot price prices down and driving many smaller freight companies out of business – a phenomenon referred to as the ‘excellent purify.’

Even with a looming recession, companies need not panic. Instead, by revolutionizing their logistics using machine learning (ML) technology, they can choose to optimize rather than reduce and increase customer satisfaction. With some help from artificial intelligence (AI), companies can weather the storm and come out on top.

Optimization versus cost reduction

In times of economic downturn, the general public’s automatic response is to austere. People can ditch those expensive takeaways, cancel their subscription services, and even deprive themselves of a much-needed vacation. While cutting back is often the best idea for many consumers, it’s not always the wisest move for businesses. Avoiding the hasty reaction of major budget cuts is essential to your business.

Recessions are a natural part of life, and the ability to endure them separates the wheat from the chaff. By focusing on optimization, you not only future-proof your business, but also provide a better experience for your customer. By focusing on customer retention and providing existing customers with reliable and quality service, loyalty is guaranteed that survive a recession. Because word of mouth results in five times Selling more than paid marketing, investing in quality customer service will support your much needed cash flow.

Fritz Holzgrefe, president and CEO of Saia Inc, a transportation company with customers like Home Depot, stated:“Maybe things have slowed down a bit, but customers continue to realign their supply chain position to more effectively reach their goals in their respective businesses.” Many industry leaders have realized that the benefits of optimization far outweigh the drive to economize; smaller companies should take note of this advice. So what solutions are there 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 fast becoming a business necessity – a recent McKinsey report stated that companies that don’t use AI have a 20% fall in their cash flowpressure them to cut spending.

Last mile planning is important for both customers and shippers because it can make or break a business. A 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, the last-mile delivery costs are 53% of the total shipping costs. Ensuring this is flawlessly optimized will save the company money and provide excellent customer service that is worth returning for.

AI-powered technology with algorithms that track traffic, weather, origin and destinations provides drivers with the most efficient route to minimize travel time and fuel waste. This optimizes the use of assets, improves working conditions and reduces costs. And with live updates, logistics service providers can share current information with their customers.

An easy way to access these AI benefits is through a digital brokerage such as Uber Freight, Convoy, or Doft. Digital brokerage firms provide a tracking service that benefits shippers and customers alike, giving both parties the route of the package and an estimated time of arrival. In addition, shippers can choose drivers with excellent ratings from previous orders, so they know their shipment is in good hands.

Stakeholder Integration: A Digital Freight Network

Spot rates have fallen 11% year after year, encouraging more retailers to use digital brokerage instead of contracted freight. Using a digital brokerage can be beneficial no matter the size of your business. Small businesses that don’t have large freight volumes or have an irregular shipping pattern can use a brokerage to save themselves a significant amount of money compared to expensive and rigid freight contracts. Also, larger companies with additional drivers and assets after the pandemic can offer their services at spot rates to take advantage of this trend and optimize their vehicle use.

Many digital broker apps have ML capabilities to monitor business performance and make money-saving and logistics recommendations. Depending on the amount of cargo, AI technology can automatically make real-time decisions and allocate vehicles to match order size. Automating these decisions eliminates the risk of human error and makes complex decisions in seconds, giving customers a fast and optimized system.

Working on a sustainable future

Sustainability and optimization go hand in hand, especially with the help of ML technology. Of 71% of Americans who say 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 keep customers happy.

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

The downside of EVs comes from the high initial investment. However, with initial costs declining over time and publicly available charging stations more than doubling over time, last five yearwidespread use of logistics EVs does not seem far off.

Another less costly way to implement green practices in logistics companies is to deploy AI-powered chatbots. These quickly become a buyer’s best friend, such as: 62% from consumers would rather 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 significantly reduce a company’s carbon footprint as offices are used 12.1 trillion sheets paper per year.

Since an economic downturn is a normal stage in the financial cycle (as much as we’d like to), companies should not make hasty, hasty, cost-cutting decisions. To future-proof your business, you must prioritize optimization, especially within your supply chain. By leveraging digital brokerage and AI-powered technology, businesses can continue to thrive while achieving high customer satisfaction.

Dmitri Fedorchenko is founder and CEO of doft.