Japan’s logistics crisis

Japan's logistics crisis

Demand for home delivery in Japan has skyrocketed during the coronavirus pandemic. But it comes just as the country’s logistics industry grapples with a growing labor shortage. There were more than one million truck drivers in Japan in 2000, but by 2030, that number is forecast to halve. Grueling hours and low pay have made the job unpopular, and Japan’s rapidly aging population means fewer people overall are entering the workforce. Delivery companies are finding it increasingly difficult to find the staff they need. Industry analysts predict that by 2030, there will be a 35 percent gap between demand for delivery and the size of the logistics labor force. That scenario would leave one-third of cargo in Japan undelivered.

For some, a logistics crisis is already here. Horio Jun, a general manager at Ajinomoto, one of Japan’s biggest food corporations, says a number of delivery partners have recently declined to renew their contracts with his company because of a lack of manpower. The firms were offered better terms, but they maintained that they couldn’t find the labor needed to fulfill the demand.

People in Japan got a taste of how a logistics crisis could affect their lives early last year when online misinformation fueled a toilet paper shortage. Rumors on social media claimed the item was made from the same material as face masks, which had in fact run out. This led to a buying frenzy that left supermarket shelves bare. But when retailers tried to get extra stock, the real problem became clear: logistics. While there was more than enough toilet paper, delivery companies simply could not keep up with the heightened demand.

Some companies are taking steps to ensure that kind of short-term crisis does not become more common. Ajinomoto is working with other food suppliers to improve delivery efficiency.

In Japan, the average load factor—the percentage of a vehicle’s cargo capacity that is actually utilized—is around 40 percent. In Europe and the US, the figure is around 60 percent. Experts say this is because Japanese consumers tend to be more specific about when they want their products delivered, meaning fewer orders are shipped together.

Ajinomoto and its partners are working to increase load factor by standardizing packaging and implementing cooperative distribution networks. The companies are devising their own solutions to reduce the pressure on carriers.

Supply chain technology is also coming into play. In February, the Ministry of Transport and the Ministry of Economy, Trade, and Industry together tested the use of a driverless fleet of delivery trucks. Firms such as Rakuten, Panasonic, and Japan Post are exploring how to use drones and robots.

Another solution being explored is what is called the ‘physical internet,’ a transportation network built on similar concepts as its namesake. In the same way that data travels through a series of networks and servers, the physical internet ships cargo through a unified route of networks that include various modes of transportation. The concept is gaining traction in the European Union, where logistics companies hope to use AI technology to get a system off the ground by 2030.

Experts say the ongoing increase in demand for deliveries shows there is still potential for growth in the logistics industry. How business leaders and government officials respond could shape the looming crisis into a new opportunity for Japan.

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