As consumers and businesses are finally seeing some relief from inflationary pressures, concern remains among last-mile delivery solutions providers that the impact of inflation on logistics operations will continue into next year. The bad news is those rising freight costs are expected to be passed along to customers.
There is also a mixed bag on the economic outlook in 2024, and meeting delivery windows remains a top concern for more than half of businesses.
The findings are included in a new report being released on Wednesday by DispatchTrack, a global last-mile delivery solutions business. Supply Chain Management Review was given exclusive access to the survey of logistics professionals ahead of its formal release on Wednesday.
The online survey was conducted via SurveyMonkey on Oct. 12 through Nov. 1, 2023, among 101 logistics professionals. Industries represented included furniture and appliances, 3PLs, building supplies, agriculture, auto parts, and food, beverage, and grocery distribution.
This is the second year DispatchTrack has released the Last Mile Holiday Perspective. The report explores how logistics professionals are viewing the current holiday shipping season as well as their outlook on issues heading into the new year.
“There’s no question supply chain organizations are feeling the squeeze,” said Satish Natarajan, DispatchTrack co-founder and CEO. “Not only are they facing immense economic pressure, but they know they have to get the delivery experience right if they want to retain customers. A big part of that is ensuring deliveries are consistently made on time, so I’m not surprised to see missing delivery windows flagged as a major concern.”
If there is a positive to the rising cost concerns, the survey found that will 86% expect fuel and other operating costs to increase this year, only about 4 in 10 plan to raise their fees as a result. And nearly half (48%) are not concerned with inventory shortages or oversupply this year.
However, missing delivery windows is still a prime concern, with 4 in 10 just as concerned as a year ago and an additional 14% more concerned this year.
The economic outlook for 2024 is also mixed, with 39% expecting business to be down, 29% expecting business to improve, and 17% uncertain at this point. Still, that hasn’t slowed technology investment, with 45% continued to invest or expand their investment in new tech this year.
Cost concerns
Among the highlights of the survey is that only 30% expect holiday revenues to increase this year, perhaps reflecting a general economic environment that continues to send mixed signals on consumer expectations. Twenty-four percent are uncertain how the holiday season will play out, but 39% expect to see decreased revenue this year compared to last.
With fuel a large expense for delivery organizations, other costs continue to pressure businesses, with 81% saying their anticipate higher operating costs excluding fuel in 2024 (the number climbs to 86% when fuel is factored in). The amount of increase varies, with 43% expecting between a 10% and 20% increase excluding fuel (60% with fuel) and 18% anticipating a 25% to 50% increase excluding fuel (37% with fuel).
With 39% increasing fees to combat rising operating costs, there is some good news in that 37% said they don’t plan to increase fees. Another quarter (25%) said they would not raise fees because they had already done so last year.
Delivery concerns
Inventory is not the concern it was at this time a year ago, but 22% still expect inventory shortages to impact operations, and 19% said a combination of shortages and oversupply are a concern. When there is product to deliver, though, finding and retaining drivers to get the job done is an issue, with 1 in 2 respondents saying it is more difficult to recruit and retain drivers this year compared to last year.
Returns, economic headwinds, and extreme weather are also concerns for businesses. Nearly one-fifth (19%) anticipate more returns this year than in years page, and 49% said fuel costs are a top concern, although that is down from 82% a year ago. This is followed by losing business due to the economy (43%, up from 38% in 2022), delays outside of their control (40%, up from 37% in 2022), extreme weather (36%, up from 14% in 2022), inflation (31%, down from 50% in 2022), and driver shortages (34%, down from 48% in 2022).
“CEOs and boards are becoming more actively involved in planning and delivery strategy and championing new systems and tech investments to not only improve operational cost efficiencies but also preserve and grow customer loyalty which are both critical to the bottom line,” said Natarajan.
2024 outlook
Looking ahead to 2024, there are number of trends developing. Nearly one-quarter (23%) of businesses started planning earlier for the holidays this year, suggesting more proactive planning going forward, and 45% have invested in new technology.
There also seems to be an easing of the capacity crunch – both in the warehouse and with vehicles. The survey found that 26% of businesses plan to either rent trucks and/or warehouse space to prevent fulfillment roadblocks, down from 41% in 2022. Just 11% plan to rent warehouse space while 7% plan to rent trucks, and 8% plan to rent both trucks and warehouse space.
Sustainability is expected to still be a focus in 2024, although not as much as in 2022. More than half (55%) of respondents said they are prioritizing sustainability or plan to in the coming year. But that is down from 70% in 2022.
Electric vehicles are also taking a hit, with just 7% saying they have either added EVs or plan to in 2024, down from 15% in the 2022 survey.
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