Why 62% of Logistics Leaders Expect Higher Costs This Year

In a recent DispatchTrack survey of more than 100 logistics professionals, fuel costs (59% of respondents) and inflation (46%) topped the list of current challenges for 2023. So it shouldn’t come as much of a surprise that nearly two-thirds of logistics leaders expect higher operational costs this year than last year.

Respondents were also concerned about:

• Delays outside of their control (41%)
• Unpredictability (38%)
• Driver shortages (32%)
• Losing business due to the economy (30%)

It’s easy to see how any of these concerns could also start to add up to cost increases. Delays can wreak havoc on delivery execution downstream. And when driver shortages hit you may be stuck paying more for contractors or 3PLs. Simply put, all the uncertainty endemic to the modern supply chain makes it difficult to optimize costs. 

So how are businesses grappling with these supply chain challenges, and how are they planning to deal with them in the future? 

How Rising Costs Impact Delivery Businesses

The two biggest cost factors for most delivery organizations are fuel and labor. When fuel costs rise—as they seem to do more and more regularly—delivery costs obviously go up as well. And of course it’s not just the increases in cost—it’s the unpredictability. Price volatility makes it much harder than in previous years to predict delivery costs in advance. 

Inflation obviously has a similar effect. It can increase labor costs, which can contribute significantly to overall delivery costs. All the while, it’s potentially increasing the costs of the goods being delivered—creating smaller margins and a greater need for efficiency than ever before. This obviously puts a lot of pressure on the delivery planning process. Inefficiencies all of a sudden need to be rooted out wherever they can. 

What Logistics Leaders Are Doing About Rising Costs

In spite of rising costs, delivery businesses are split on whether or not to raise their delivery fees. 40% say they plan to raise fees within the next year, while the remaining 60% don’t. 

This is obviously a choice that every business is going to make differently based on their unique circumstances. Delivery organizations that are laser-focused on customer experience might be hesitant to do anything that makes customers think twice about placing an order. Plenty of businesses have built large elements of their brands on low delivery costs (especially in the wake of Amazon’s impact on global commerce), and it could be jarring to renege on that promise. 

So how else can these businesses try to tackle increasing costs? Our study showed that the most commonly cited initiatives that delivery businesses were planning to undertake in the next year were:

• Increasing technology usage or adopting new solutions (57%)
• Hiring more drivers or increasing delivery capacity (55%)

When your best option is to optimize your deliveries, it makes sense that you’d turn to increased technology usage. It’s not hard to see how the right delivery management software could put you in a position to get smarter about how you approach your delivery management process from end to end.

Tactics for Cost Optimization in the Last Mile

With the right tools and technology, it’s possible to find new areas for potential cost optimization and fight the inflation and uncertainty that are plaguing today’s supply chain. Here are a few tactics for making that happen.

Upgrade your route optimization

Like we said above, fuel prices have a huge impact on total delivery costs—which is precisely why finding a way to drive fewer miles can be so impactful to your bottom line. With the right route optimization technology, you can do exactly that. 

Smart, AI-powered routing enables you to quickly and easily run all of your orders for the day through your delivery parameters and find the shortest delivery routes. This, in turn, decreases miles driven per stop, which cuts down on both fuel and labor costs. Let’s say your routing engine can shave 10% off your total mileage—that translates into significant money saved. 

Of course, the benefits of AI-powered route optimization don’t have to end there. In a perfect world, you’d have a solution that also generated incredibly accurate delivery ETAs for your routes. How does this impact costs? By reducing missed and failed deliveries and the costly redelivery attempts that come with them 

Simply put, when you show up at the right time, every time, customers are much more likely to be ready to accept the delivery when it arrives. It’s hard to overstate how much this can reduce disruptions and the expenses that come with dealing with them.

Invest in customer experience

Basically the same logic for how accurate ETAs save money applies to effective customer communication. When your customers are kept in the loop with calls, texts, and emails throughout the entire delivery process, they’re less likely to miss a delivery. Not only that, but they’re more likely to reach out to you proactively if a delivery time suddenly becomes a problem for them. 

Here, the best practice is to offer schedule confirmations, reminders the day before or the day of delivery, and ETA updates throughout the day. Ideally, you’d also offer customers a dedicated, real-time delivery tracking portal so they could track the truck and see live ETA updates from the comfort of their own device. 

By making delivery visibility the standard in your deliveries, you can keep customers engaged and stave off disruptions like not-at-homes much more easily. Not only that, but you can also encourage repeat business. Buyers make choices based on customer experience to a much greater extent than they did even five years ago, so the impact on customer loyalty here can be significant. 

Prioritize true strategic visibility 

What you can’t measure, you can’t optimize. What you can’t see unfolding in real time, you can’t fix in real time. That’s why visibility is so crucial to successful delivery management. But what does real, impactful strategic visibility actually look like?

It’s not just about collecting the right data and storing it. Instead, it’s about making sure you have the right data, in the right place, at the right time. If you have to spend time hunting for the information you need, it may have gone out of date by the time you find it. 

On the day of delivery, this might look like a command center or dashboard that makes it impossible to miss potential exceptions or anything else that might need your attention. Sure, most every last mile delivery solution has a visibility dashboard of some kind, but it’s not just about having a dashboard—it’s about having a dashboard that’s organized in the right way to ensure that the exact information you need is always at your fingertips. 

Zooming out a little, visibility can play a big role in analyzing your operations more broadly. When you’re collecting the right delivery data—and ensuring connectivity with other logistics-related solutions you may be using—you can begin to glean insights about potential areas to boost efficiency. Again, this is a matter of making sure that the right data is easy to access and presented in a way that’s actually helpful. 

62% of logistics leaders might be expecting cost increases over the course of the year—but that doesn’t mean that delivery businesses are simply stuck accepting lower margins. On the contrary, with the right logistics technology, you can fight cost increases and ultimately make your delivery operations smarter and more efficient.