Retail Logistics Trends: Challenges of 2023, Opportunities for 2024

2023 was a challenging year for retail logistics. The industry was still recovering from a pandemic-fueled supply chain crisis, as well as a crippling labor shortage. Technology changed, HR strategies shifted, and retail logistics providers evolved to move past the challenges of 2023 and towards the opportunities of 2024.

What could the new year bring? In this article, I’d like to recap some of the issues retail logistics providers faced in 2023 while highlighting areas in which they can make gains in 2024. Treat this as a strategy session for the year to come.

The Challenges of 2023

Robotics has been around since the 1960s, but you wouldn’t know it to look at warehouses today. A recent survey conducted by JLL, a global real estate services company that invests in warehouses, found that only six in 10 logistics occupiers across Asia Pacific have deployed some form of automation systems (e.g., automated guided vehicles and telescopic conveyors).

Part of the obstacle is the considerable financial investment it would take to outfit a warehouse with robotics. But another part is the lack of cooperation between warehouse owners and third-party logistics providers (3PLs), specifically in sharing the cost of implementation.

“Third-party logistics providers have little incentive to invest in technology within a logistics facility when their landlord and/or customer isn’t willing to co-fund the investment or to commit on a long-term lease,” says Michael Ignatiadis, head of supply chain and logistics solutions, Asia Pacific, at JLL.

Another widespread issue has been the labor shortage. One report, jointly published by the trade group MHI and consultancy Deloitte, found that recruiting and keeping qualified workers remained the top challenge for supply chain executives in 2023.

Volatile market trends and consumer demands also challenged logistics providers.

“Decades of driving toward leaner supply chains to cut costs ultimately ended up catching many companies flat-footed as volatility surged during the pandemic and beyond,” wrote Abby Jenkins, product marketing manager for NetSuite.

Companies that lacked robust contingency plans suffered longer downtimes and greater financial losses.

These challenges were tough, but not insurmountable. And, in 2024, I predict that new opportunities will make the savvy 3PL better able to keep retailers happy.

Opportunities in 2024

Robotics and artificial intelligence can significantly optimize warehousing operations. Robots can automate the picking and packing process, reducing the time to fulfill orders. AI can optimize warehouse space utilization by analyzing the size, weight and frequency of access to items, ensuring optimal placement of goods.

By automating warehousing operations, companies significantly reduce not only labor costs — helping mitigate that talent shortage we’re currently facing — but also human errors, leading to improved efficiency and reduced operational costs. Faster order fulfillment also enhances customer satisfaction and leads to increased business.

As for AI, it can analyze data from sensors and historical maintenance records to predict when equipment and vehicles are likely to fail or require maintenance. This predictive maintenance can prevent unexpected downtimes and extend the lifespan of the equipment. AI can also optimize delivery routes by analyzing traffic conditions, weather and other variables in real time. This ensures that goods are delivered via the most efficient and quickest routes, saving fuel and time.

However, it’s important to keep in mind that 3PLs will not be able to entirely replace the human workforce with robots. They will need to maintain a balance between technology and the human element. Data shows the best way to keep employees happy is by offering flexible schedules and increasing pay. If your company can manage that, I highly recommend adopting those anti-turnover strategies. Right now, talent is scarce, with over 75,000 open positions for logistics labor. You want to keep the employees you already have happy.

Moving Past 2023’s Challenges

To ensure success in 2024, retail logistics providers must integrate advanced technologies like AI and robotics, all while maintaining the human element. If you’ve delayed integrating robotics or AI into your warehouse, it may be time to speak to your retailer customers about sharing the cost of implementation. If you’re finding you can’t hang onto talent, it’s time to take a good hard look at your wages and scheduling policies. Those that don’t adapt to yesterday’s challenges won’t thrive in tomorrow’s landscape.

Lastly, I recommend staying informed about industry trends. Adopt proactive and informed decision-making strategies to adapt to consumer demands and market dynamics. In 2024, we may still face the same issues or we may face brand new ones. But the more you prepare today, the better off you’ll be tomorrow.

Beth Ward is the chief operating officer of Smart Warehousing, a full-service 3PL logistics partner.