The 'Logistics Crisis' That Is Completely Different from Past Crises, and the Romance of Logistics DX Challenging Social Issues

Hello!
I am Yamada, a consultant at Milife Inc.

As a recruitment agent, I mainly support hiring for SaaS venture companies and provide career support for candidates. Among these, I am currently personally very passionate about client companies in the logistics DX field.

We take for granted that 'packages arrive the next day' and 'fresh food is lined up at the supermarket.' However, the logistics industry that has supported this convenience is now facing an unprecedented crisis. This is the logistics crisis, including the so-called '2024 Problem'.

As an agent, I would like to share what I have learned about the industry to increase the resolution of the social issues my clients are facing and to correctly understand the massive logistics industry from its foundations.
What emerged from that was a structural social problem hidden behind the superficial news that 'there are not enough truck drivers.'

In this article, I would like to summarize from a broad perspective the historical background and structural issues of the logistics industry that I have learned, and why there is a sense of romance in 'logistics DX' right now.

You cannot just sum it up as 'logistics.' The complex entanglement with diverse players.

The first thing I realized when I started learning about logistics was that the perception that 'logistics industry = trucking companies that transport goods' is far too low in resolution.

The process of logistics is composed of a wider variety of players than one might imagine. 'Shippers (manufacturers, retailers, etc.)' who make and send goods, 'transport companies' who actually carry the goods, 'logistics warehouses' that temporarily store and sort goods, and 'end users (consumers)' who finally receive the goods. Only when all these players connect like a bucket brigade does the massive infrastructure called 'logistics' function.

However, a problem that this industry has long held is that information coordination between each player is fragmented. Shippers want things 'transported as cheaply and quickly as possible,' transport companies want to 'reduce unreasonable schedules and long waiting times,' and consumers want 'free shipping and redelivery.' The current situation is that the efficiency of the industry as a whole has dropped significantly as a result of each player seeking individual optimization.

To truly improve the industry, there is a limit to what transport companies can do on their own. Improvements in shipper business practices, efficiency in warehouse operations, and a change in awareness among end users (such as reducing redeliveries) are essential. And above all, the cooperation of 'IT/SaaS vendors (logistics DX ventures)' that connect the fragmented players with data and optimize and streamline the entire supply chain is absolutely necessary. They are the ones playing the role of a 'hub' to untangle the complexly intertwined threads.

There have been two 'logistics crises' in the past. But this time is decisively different.

When you hear 'driver shortage' and 'logistics crisis,' you might feel like it is a problem that suddenly appeared in recent years. However, looking back at history, Japan has experienced serious driver shortages (logistics problems) twice in the past.

The first time was during the period of high economic growth in the 1970s. We entered an era of mass production and mass consumption, and the movement of goods increased explosively. Due to such rapid growth, the supply of trucks and drivers could not keep up at all.

The second time was during the bubble period in the late 1980s. A new service called 'home delivery' for individuals spread rapidly, and this was compounded by an abnormal economic boom due to the bubble economy. At this time, too, we fell into a situation where there were not enough people to carry the rapidly increasing number of packages.

However, the root cause of the crisis we are facing now is completely different from these two past crises.

Both of the past two times were caused by an 'imbalance between supply and demand.' As the economy grew steadily, 'demand (packages to be transported)' expanded rapidly, and as a result, 'supply (people/vehicles to transport)' could not keep up temporarily. In other words, it was like 'growing pains' that could be solved over time by raising wages, increasing the number of trucks, and improving infrastructure.

The decline in the working population and the 'multi-layered subcontracting structure.' This crisis is a 'structural' social problem.

On the other hand, the third logistics crisis currently occurring (the 2024 problem, the 2030 problem, etc.) is in a different league. It is not happening because demand is exploding. It is a 'structural problem' caused by changes in the very foundation of society.

First is the 'absolute decline in the working population' and 'aging.' Japan's declining birthrate and aging population are progressing, and the active job opening ratio for drivers continues to significantly exceed the average for all industries. The average age of drivers is also high, and a large number of retirees are expected in the future. The era where 'people will gather if you pay money' is already over.

Second is the 'correction of work styles (2024 problem).' Until now, the logistics industry has barely maintained its convenience through the long overtime hours of drivers. However, from April 2024, the 960-hour annual cap on overtime work for truck drivers was applied. This is an extremely correct correction to protect the lives and health of workers, but it is confronting us with the reality that 'packages that could be transported until now can no longer be transported (a decline in transport capacity).'

Third, there is the 'multi-layered subcontracting structure' that is eroding the industry. The Japanese transportation industry has a pyramid structure (primary, secondary, tertiary contractors, etc.) where large companies receive work from shippers and then subcontract it to mid-sized companies, and further down to small businesses. Because of this structure, sufficient freight rates (profits) do not reach the end-stage transport companies and drivers who actually move the goods, which has resulted in an environment of 'long working hours and low wages.' Furthermore, inefficient operations are rampant, such as long 'waiting times' at warehouses and low loading rates (a state where about half of a truck's cargo bed is empty while driving).

In other words, the current logistics crisis is not a temporary imbalance of supply and demand, but a 'structural social problem' caused by demographic changes, legal regulations, and the multi-layered business structure itself that is deeply ingrained in the industry.

Trump tariffs and the Strait of Hormuz issue. The arrival of an era where 'goods do not arrive'

Broadening our perspective, the importance of logistics is not limited to domestic issues. Now, the premise that 'goods arrive as a matter of course' is on the verge of collapsing on a global scale.

For example, the US tariff hikes are significantly fragmenting and restructuring global supply chains. Companies can no longer 'manufacture and ship in the cheapest country' as they have in the past, and are facing the complexity of logistics routes and rising costs.

Furthermore, rising geopolitical tensions around the Strait of Hormuz in the Middle East and the Red Sea are dealing a major blow to maritime logistics. To ensure safety, ships are being forced to detour around the Cape of Good Hope, causing significant delays in transport days and a surge in ocean freight rates.

Until now, we have treated logistics as a 'transparent infrastructure that is taken for granted.' However, logistics is currently at the forefront of international politics, geopolitics, and macroeconomics, and has truly become a 'central issue of the world.' If logistics stalls even once, factories stop, prices rise, and our very lives become unsustainable. The risk that 'goods will not arrive' is no longer a fantasy, but a real threat right in front of us.

I want to share the 'romance' of understanding the big picture and challenging social issues

Until now, I may have viewed the business of companies involved in logistics DX from a localized perspective of 'creating convenient systems.' However, having learned about the logistics field from a broad, structural perspective based on history, my view has changed completely.

What logistics DX venture companies are challenging is not merely 'IT implementation of operations.' They are taking on an extremely difficult and meaningful battle to unravel the multi-layered subcontracting structure that has hardened over decades, connect fragmented players with data, and preserve the 'normality of goods arriving' for the next generation in a shrinking Japanese society.

There is a gritty yet grand 'romance' in the logistics field.
I will continue to work as an agent to support my clients and contribute to the growth of logistics DX ventures that underpin the industry.

And if there is anyone who read this note and felt even a little bit that 'logistics is interesting' or 'I would like to solve this social issue together,' there is nothing that would make me happier. Let's definitely talk!

Thank you for reading until the end.

(References/Citations)
・'Deciphering the Future of Logistics!' (Kazuo Yuasa, Akimiko Uchida, Toshiko Shibata)
・Ministry of Land, Infrastructure, Transport and Tourism 'On Recent Logistics Policies'
・Various company blogs and columns (hacobu, Logizard, PUDO, JAF, Digital Agency related materials, etc.)