TL;DR:
- Logistics is complicated, mainly because of factors like scale, volume, delays, and warehousing challenges.
- Logistics costs are rising.
- Delays and long delivery disruptions have a noticeable impact on your business.
- Businesses that fail to use modern technology or hesitate to outsource management struggle.
If you’re a growing business, you’re probably starting to see a whole new world of responsibility open up. Everything from marketing, sales, and development all start to feel ten times more complex.
What’s more, if your business involves shipping a physical product, then the messy world of shipping, warehousing, and logistics also enters the picture. To make matters worse, the more you scale, the more the complexity seems to compound.
In this article, let’s answer a few questions you may have about logistical complexity to prepare you better. After all, this is one of those pillars that the rest of your business relies on.
What Makes Logistics Complicated in a Business?
There are several factors behind this, with the biggest one being volume. Many new business owners do not understand just how overwhelming it is to manage hundreds, if not thousands, of orders. The sheer volume and the fact that each one is tied to a customer with high expectations are huge responsibilities to manage.
Are Logistics Costs Increasing or Decreasing?
Despite the maturity of the industry, logistics costs aren’t coming down any time soon.
Data from the State of Logistics Report by consulting firm Kearney shows that logistics costs climbed 5.4% in 2024 to $2.58 trillion.
As Korhan Acar, lead author of the report, points out, logistics costs now make up a growing share of GDP. As such, these costs are becoming increasingly visible in the profit/loss statements of companies.
If Technology Is So Advanced, Why Are Warehouses Still Struggling?
The main reason is that struggling warehouses aren’t actually using modern technology. The fact is that technology is indeed able to solve some of the most common problems in this area.
For instance, the Business Times Journal reported that when 100 warehouse leaders were surveyed, inventory control was the biggest challenge. Similarly, aspects like space constraints, pick accuracy, and inventory visibility occupied the next top challenges. Each of these problems can be addressed with tech, but owners seem to be a little hesitant.
What Can Warehouse Tech Help With?
According to Innovative Warehouse Solutions, technology can help with several challenges. These include smart inventory management, shipping optimization, sales forecasting, and storage organization.
Sometimes, businesses don’t want to take the trouble to integrate new tech and make use of third-party or 3PL warehouse solutions. It becomes a win-win situation with logistics issues becoming a thing of the past. The businesses that struggle are often the ones that feel like logistics aren’t complex and that they can be managed in their spare time.
Do Delays and Disruptions Really Have That Much Impact on Business Performance?
Something you’ll soon realize when dealing with logistics is the expectation that you are the one to absorb all costs. When things are running smoothly, this isn’t too much of a problem. However, when delays happen (and they will eventually), the impact can lead to both output losses and price hikes.
What Is the Impact of Long Delays?
It depends on what you mean by long. Studies have found that a 21-day delay for foreign inputs, combined with the tariffs factor, creates an output loss of 7.3%. This also leads to a price increase of 1.8%. If we were to look at the delivery delay factor alone, it would be responsible for a 2.6% drop in output and a 0.4% increase in prices.
The biggest impact of such delays is that customers will remember not to buy from a business that has delayed shipment extensively.
Frequently Asked Questions
1. How much can delivery delays actually hurt a business?
It’s a tough pill to swallow, but delays are one of those problems you want to avoid as much as possible. Sure, you’ll have some studies that show that as long as delivery is free, people don’t care. However, that sentiment isn’t infinite, and if customers can choose between you and a competitor without delays, guess who they’re going to pick?
2. Why is inventory control still such a challenge for modern warehouses?
One of the reasons for this is that even with modern tools and tracking systems, things don’t stay the same. SKU counts keep increasing, the layouts will change, and staff turnover issues all come into play. So, even with a clean process, the data has a tendency to drift over time, meaning warehouse managers need to be constantly on their toes.
3. At what point does warehouse space become a bottleneck?
Typically, this happens right after growth starts to increase. It’s incredible how quickly what seemed like an overkill amount of warehouse space becomes super cramped with just a few new clients. This is why it’s always a good idea to have a good buffer of extra warehouse space at all times.
4. Do logistics issues show up more in customer experience or financial performance?
It tends to show up in both, but you’ll probably feel it financially first. Price hikes, delays, and inefficiencies will quickly hit your margins before customers even start to complain. That said, with enough time, factors like late deliveries and stock issues will catch up to you and affect your business.
All things considered, yes, there’s no beating around the bush with logistics. It is indeed as complicated as people say. The fact that you’re not the cause of delays and damages but still need to be responsible for them is a huge factor.
Thankfully, warehouse tech does make a massive difference, but it does require businesses to be open to it. Why suffer trying to manage one of the most complicated business responsibilities when a third-party service can handle it for you?
