The logistics challenges to watch out for in 2023

While the transport and logistics industries are expected to grow to approximately $171.9bn by 2023, Richard Thame, CEO of parcel delivery company Couriers Please says that, despite promising success and growth, external issues including inflation and supply chain disruptions will lead to challenges for businesses in 2023.

In 2020 and 2021, Australia saw a shift to online purchases. At Couriers Please, we delivered over 28 million parcels last year, a 53 per cent increase on 2019 volumes.

This year, with the rising costs of living, cyber security risks and the return to in-store shopping, I believe several challenges will emerge that the industry will need to solve, either through technology, partnerships, new customer strategies or a focus on new markets.

8 logistics challenges that must be faced in 2023

Labour shortages

Australia will see a continued tight labour market in 2023, putting a strain on the logistics industry. However, in the second half of 2023, I anticipate that labour shortages will be offset by reduced volumes for some companies, as an economic downturn kicks in.

I predict a growing uptake of automation in the industry and an increase in skilled migrants will also help.

Natural disasters

This year, flooding across NSW and Victoria impacted supply chains and delivery networks. For example, a recent train derailment caused by heavy rain in regional New South Wales impacted companies that deliver freight on the railway line from Sydney and Brisbane to Perth.

I anticipate natural disasters such as these will continue to cause disruption to the industry in 2023.

Managing new customer expectations

New consumer behaviours and expectations have emerged in the last three years. Most significant is the expectation for faster delivery, particularly the demand for same-day delivery, which is putting additional pressure on the industry.

I expect retailers and carriers will try to meet the demand by establishing smaller, satellite warehouses and fulfilment centres in populated metropolitan areas, a move that some retailers in the US have made. Some retail stores will also be transformed into fulfilment centres, also known as ‘dark stores’.

Rising costs of warehousing

Neither building new warehouses nor renting new warehouse space may be economically viable for many retailers as supply and materials costs and renting costs continue to surge – industrial rent has increased an average 14.9 per cent year-on-year, nationally.

Retailers will need to look for more cost solutions, such as automated warehousing – the process of automating the movement of inventory into, within, and out of warehouses to customers with minimal human intervention. CouriersPlease, for instance, has already implemented such technology in its own depots, through automated parcel sortation machines.

Cyber security risks

Cyber security will be a prevalent challenge for many businesses, given the concerning increase in data breaches in 2022. As cargo, passenger, fare and other systems used by Australia’s transportation industry become more complex and digitised, they are increasingly targeted in high stakes cyber attacks, including ransomware and phishing.

Companies will take a more rigorous approach to updating their systems and processes to prevent attacks. For instance, CouriersPlease staged ‘mock’ cyber security exercises this year to test its ability to combat and respond to data breaches. Similarly, the Australian Cyber Security Centre will host a series of exercises from May 2023 to help transport and logistics companies prepare for potential breaches.

Economic burden due to rising fuel prices

Petrol costs increased in the major capital cities from between 16 and 22 cents per litre from 28 September to 16 November this year alone, while experts predict costs will continue increasing well into 2023.

I expect these rising prices to lead to higher freight costs in 2023, particularly on the transport of goods that are time sensitive or require refrigeration. While carriers will absorb as much of these costs as possible, consumers may see a slight increase in delivery costs in 2023. These surcharges have already been introduced by companies such as Uber, to reduce the financial burden on drivers.

Demand for sustainable deliveries

Australian consumers increasingly want assurances from retailers and carriers that they are considering their environmental impact. The industry will need to be more agile when adopting important sustainability goals.

I anticipate the growth of parcel collection-point networks will help fulfil decarbonisation goals. Collection point networks in other markets, such as Parcelly in the UK, are already innovating by offering ‘dark store’ options to retailers to reduce the distance between customers; while in Australia, Hubbed’s recent acquirement of Parcelpoint will also broaden consumer accessibility to these options.

I also expect an uptake of electric vehicles will help carriers achieve their goals – it is estimated that collection point networks and electric vehicles, combined, can reduce carbon emissions by 87 per cent.

Maintaining online customer loyalty

In 2022, many consumers were drawn back into stores, and through-the-year sales were down 16.9 per cent as at September 2022. As a result, the challenge for retailers in 2023 will be to attract customers to shopping sites and retain them.

This may be a formidable challenge as more eCommerce stores emerged during the pandemic, leading to increased competition. Promotions, discounts, shopping events such as Click Frenzy, and exclusive online stock and deals will increase, as retailers compete for the consumer dollar in a climate of inflation and rising interest rates impacting consumer spending.

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