2023 Supply Chain Predictions: Plan Ahead & Get Organized
Supply chain leaders share predictions, tips, and notes to help you tackle the business challenges ahead.
TREND TO WATCH
Hauling more than 70% of domestic shipments, the trucking industry’s significance to the U.S. and global supply chain can’t be overemphasized. The top four U.S. container ports imported 18% more containers from January-November 2022 than the same period in 2021.
The United States has almost always had a critical shortage of truckers, made worse by the pandemic, and the resulting surge in consumer demand left many fleets even more understaffed. ACT Research’s Driver Availability Index reported the trucker supply-demand imbalance is starting to moderate.
While supply chain disruptions aren’t over, they’re easing. However, if truckers can’t access ports effectively, the supply chain can never fully recover.
By automating port logistics, drivers could get back on the roads quicker, spending less time sequestered, which takes away from paid time. Compared to other countries’ port automation, the United States is lagging. Additionally, UIIA agreements enable truckers to enter ports in order to exchange equipment with less risk. Without a UIIA-approved insurance provider, truckers can’t exchange intermodal equipment at port facilities (and rail terminals). Port automation and UIIA enablement would provide truck drivers with more consistent loading schedules, improving ongoing issues in the trucking industry and the overall supply chain.
–Dan Abrahamsen, CEO,
WHAT TO EXPECT
The environment for managed logistics looks positive in 2023 as customers seek ways to automate and simplify their supply chains and logistics functions.
The pricing environment surrounding LTL has been volatile over the past several years, and shippers are anxious to return to a state of normality.
Managed logistics accounts for an increasingly large portion of the LTL industry. As the market slows down and shipping volumes decrease, managed logistics shippers are going to push to reset rates to match today’s shipping costs in a softening economy.
Customers will be hyper-focused on utilizing technology to make better use of their data internally or work with an outsourced authority to cleanse their data to drive greater supply chain efficiencies, including load and transit time optimization, and carrier profiles.
–Adam Blankenship, Chief Commercial Officer and President of Managed Logistics,
TREND TO WATCH
In 2023, the shipper-carrier relationships will need to strengthen into a true partnership. Gone are the days when transactional relationships will drive efficiency.
With a softer domestic economy, shippers and carriers must come together through joint business planning meetings, open dialogue, and free flow of data exchange. We can do that by improving our processes, communication, and strategic planning.
We cannot change the length of the haul, the speed limit, or the product that needs to be moved. But what we can do is give both the shipper and carrier a seat at the table during planning meetings, invest in technology that exchanges data better, and listen to one another about our respective needs.
–Greg Gantt, President and CEO, Old Dominion Freight Line
3 things to keep an eye on in 2023:
- Fuel prices
- Wage inflation
- Pricing pressure
2023 in a nutshell: Excess capacity, carrier consolidation, and focus on cost controls.
–Frank Granieri, COO, A. Duie Pyle
Spot rates will find a floor in early 2023 as contract rates normalize.
Strong routing guide compliance will continue, enabling shippers to apply downward pressure on contract rates throughout 2023. As for the spot market, though severe weather and other disruptions could cause sudden spikes in activity and rates, current conditions will likely continue until a significant reduction in truckload capacity over time upsets equilibrium. Spot rates will find a floor in Q1 or Q2 as they cannot decline much further before operational costs force carriers to pull trucks off the road rather than lose money.
–David Spencer, Director of Business Intelligence, Arrive Logistics
When considering LTL shipments, keep in mind:
- Many load boards don’t offer LTL.
- Some freight auditors can’t audit at the LTL level.
In 2023, enterprise shippers will continue to focus on optimizing freight costs—but be a bit more lenient on the method of shipment.
Full truckload (FTL) is preferred, but now more shippers are exploring ways to cut costs using LTL.
Consolidation is not ideal, especially from an invoicing or reliability perspective, but the cost savings will continue to catch the eye of shippers for the start of 2023 at least.
Digital brokers will continue to consolidate loads because they get more money out of that shipment compared to the premiums they were paying on FTL.
Though there may be several shippers utilizing one truck and FTL is easier to procure than LTL, when properly audited, shippers can save significant money during a procurement cycle by consolidating shipments with an LTL carrier.
–Chris Cassidy, Chief Revenue Officer, Trax Technologies
With businesses finding new ways to integrate technology into their logistics strategy, I expect shared truckload to take greater market share over truckload and less-than-truckload. After more than a century stuck between the choice of hub-and-spoke and paying to ship air, shared truckload is a smarter alternative.
–Oren Zaslansky, CEO, Flock Freight
Supply chain and logistics teams are adjusting to decreased volumes and preparing to take advantage of the most potentially favorable market conditions we’ve seen in years.
Spring will be prime time for logistics teams to renegotiate the contracts they struck with their air and ocean shipping partners at the beginning of the pandemic. For some companies, these agreements provided a sense of stability in an uncertain time even if the partnership turned out to be less than ideal.
As the logistics market has steadied, many companies have taken advantage of spot bids and the cheaper shipping rates they bring. It will be competitive this spring for negotiating rates and shippers will start bidding for space earlier than ever.
The on-time service levels should continue to increase across all modes of transport. The most notable decrease in service was the ocean mode, and as shipping lines reposition equipment in the right ports and lower volumes allow for carriers to focus on improving processes, we should see a healthy gain toward pre-pandemic on-time percentages.
–Jeannie Carpenter, Logistics Director, Jabil
WHAT TO EXPECT
Transportation capacity will continue to be abundant for the first half of 2023 as shipment volume remains flat. Freight rates will continue to fall as the ratio of available trucks to available loads remains high. Bankruptcy and other exits from the industry will increase to eventually balance out capacity in Q4 2023 at the earliest, or as late as 2025 if consumer spending decreases significantly.
–Matt Lawrence, CEO, Fox Logistics
The key unknown factor that could impact transportation capacity is labor. The labor market is still very competitive, even with layoffs across various sectors, and labor union negotiations have the potential to cause abrupt disruptions to capacity and product flow. West Coast labor negotiations have yet to conclude, and the Teamsters contract negotiations begin mid-year; both of which could cause disruptions or backlogs impacting capacity.
Even with the unknown factors ahead, logistics managers will be able to focus more on supply chain strategy and network resilience in 2023 as they spend less time battling for capacity.
–Spencer Shute, Principal Consultant, Proxima
Institute new long-haul strategies for the long-term.
Transportation and logistics is increasingly becoming a B2B2C or straight B2C business as manufacturers, distributors, and retailers try to get goods to customers at record speeds. The problem is that shippers carry too much inventory and carriers are at peak capacity right now. There are limitations in fleet sizes, too.
The solution to current long-haul problems will be multifaceted. It will:
- Improve utilization of available cargo space.
- Search for and address even the smallest inefficiencies.
- Employ more predictive planning solutions.
- Provide aggressive incentives and training programs to entice people to join the transportation and logistics workforce.
- Find secondary ports, air cargo hubs, and tracking routes.
- Rebalance the workforce and overall supply chain “working” schedule.
Those who choose to maintain relationships with 3PLs and large shippers will become more collaborative. They will want to integrate those companies into their business review process and ask them to advise on major process changes. Some companies could find it more difficult to secure space in trailers and containers, and priority goods movement could go to the highest bidder. Companies will only tolerate cost surges for so much longer, though, especially if higher prices don’t translate into consistent on-time delivery.
–Andre Luecht, Global Practice Lead – Transport & Logistics, Zebra Technologies Corporation
Shippers will begin to pare back their carrier partners in 2023. When capacity was tight and consumer demand was at an all-time high in late 2021, shippers expanded their carrier base, looking for anyone and everyone who could potentially help keep their freight moving. In 2023, shippers will respond to changes in economic conditions by issuing more formal bids and awarding freight to carriers in an effort to reduce costs. This will result in deeper partnerships with a smaller number of trusted carriers.
–Mike Williams, Exec VP, Commercial & Logistics, ContainerPort Group
AIR FREIGHT RECOVERY
We will see air freight get closer to its pre-pandemic cost and rhythm in 2023 as demand has leveled off and capacity is increasing, which is a major cost driver. So is the time sensitivity for e-commerce logistics.
–Chad Schofield, Co-Founder & Chief Digital Officer, BoxC
Retailers, TAKE Note
We will continue to see the retail industry focus on self-service and customer interaction. With the rise of self-checkout in the past two years, customers have become increasingly accustomed to and interested in contactless purchasing options. Retailers have also turned to these solutions as they have navigated labor shortages and will likely continue to implement new technologies that provide customer service without human involvement.
In addition to self-checkout, we could also see the growth of AI solutions in retail and e-commerce, including sending refill reminders to devices that help guide customers through a store. Many retailers are creating apps for customers that combine a personalized shopping experience with the ease of shopping on personal devices for both in-store and online shopping. Additionally, as mobile technologies have progressed and become more affordable, handheld devices have become more widely used by retailers for customer service within the store.
–Ansley Hoke, Senior Vice President of Marketing, ScanSource
For e-commerce retailers, growth in 2023 requires a heightened and multi-faceted focus on the customer.
Customers will build an affinity for and become brand loyal to e-commerce retailers that keep promises in terms of product expectations
and delivery time frames.
Companies will strive to be more environmentally and socially responsible as well as encouraging their customers to make more environmentally conscious decisions. As a result, e-commerce retailers will adopt ESG-focused policies, technologies, and products that nudge the customer to think and act in a more sustainable way.
For example, organizations will use technology to help customers make more informed purchases to reduce returns. To help reduce their impact on the environment, retailers will get creative at checkout with prompts that inform customers how their delivery choices impact the planet, such as adding a customer informational message that by switching from next-day to 3-day delivery saves x amount of carbon emissions, or saves x gallons of fuel, or saves x number of trees.
For those instances when there is a need to return an item, creating new and/or adjusting current return policies that make returns quick, efficient, and pain-free will be paramount and will become a hallmark of the best e-commerce retailers.
–Jim Barnes, EVP of Commerce Technology, Körber Business Area Supply Chain
Planning and communication will be key moving into the biggest e-commerce days of 2023.
Holiday deal days like Black Friday and Cyber Monday bring a huge influx of orders to businesses, and retailers and warehouses or fulfillment partners will need to approach this with clear communication and collaborative planning.
For example, warehouses typically receive an uptick in orders over the weekend, and they may decide not to accept more orders on Monday or during deal days. This allows them to focus on getting the weekend’s shipments out the door, stay on track, and keep up with demand without getting overwhelmed.
Planning ahead, and clear communication between retailers and warehouses, will encourage timely and efficient fulfillment.
–Kelton Kosik, Senior Director of Supply Chain Strategy, Ware2Go
TREND TO WATCH
Digital penetration will continue to increase in 2023. This is especially true across social media channels, where 48% of consumers are likely to purchase a product directly from TikTok while 65% have purchased from a streaming platform.
Retailers will need to continue optimizing their operations to mitigate excess spending. They will also need to invest in integrated software systems so they can offer a unified and consistent cross-channel experience that appeals to consumers and be able to fulfill orders strategically, from any location.
–Fara Alexander, Director, Brand Marketing, goTRG
SUPPLY CHAIN OPTIONALITY
Retailers need to better anticipate spend and plan for customer demand in 2023. The key to doing this is supply chain optionality. Retailers can save on procurement spend by having a good handle on how much they are spending to get their products out to the shelves and balancing this spend against the number of touchpoints in the supply chain.
Another important factor retailers will have to contend with is the TikTok effect, the social commerce phenomenon causing a brand to be stripped of its inventory seemingly overnight. A brand’s demand can multiply 20 times in a short period of time because of a viral video. With social commerce shopping trending upwards, brands must incorporate and plan for these spikes in their demand modeling and prepare for a range of possibilities including extremes.
–Dr. Madhav Durbha, Vice President, Supply Chain Strategy, Coupa
The implementation of predictive and prescriptive analytics—as well as advances in big data, algorithms, and robotics—will have broad-reaching effects in the supply chain industry. Big data, analytics, and automation are already being used to enable organizations to mitigate disruption via digital, agile supply chain management.
Additionally, artificial intelligence and machine learning are going to become a driving force for integrating systems by enabling interoperability across various business landscapes. The technology-driven evolution to industry 5.0—which involves a more collaborative approach, as well as partnership between humans and robots—will have a significant impact on numerous supply chain functions.
–Abe Eshkenazi, CEO, ASCM
Connect shippers and carriers.
The supply chain industry is now inundated with plenty of useful—but disparate—technologies. The technology platforms that emerge as industry leaders will offer more than just track-and-trace, making it possible to connect shippers directly to carriers and form a true transportation network.
This allows the two sides to negotiate rates directly, agree to self-executing contracts, confirm insurance coverage, offer real-time visibility from prior to pickup through proof-of-delivery, and automate release of final carrier payment. All of this will be done with little to no human intervention.
–Rick Burnett, Founder and CEO, LaneAxis
TREND TO WATCH
Intelligent supply chain moves to the mainstream.
Early adopters in the industry have moved beyond gathering and monitoring data—“track and trace”—to analyze, dissect, predict, and simulate. The technology is simpler to deploy and integrate than ever, and the business case is there. End-to-end control of merchandise is becoming a strategic imperative.
Customer expectations, complexity, and competitive pressure are all increasing, and as they increase, so does the need to make decisions faster and automate. An intelligent supply chain, supported by live data, enables real-time collaboration with multiple supplier partners, faster planning, and execution while offering better accountability and customer experience.
–Sanjay Sharma, CEO, Roambee
We see a steady march forward in the implementation of warehouse and supply chain automation, but external factors will play a role both in the increased necessity for robotics and other innovations, and the speed at which enterprises are able to deploy these upgrades.
On the staffing side of the equation, overall hiring remains a struggle, and employees deservedly have more power to work in safer, more comfortable settings. We also expect to see furloughs as major retailers push back on suppliers to keep prices manageable for consumers. The need to keep costs low across the supply chain also contributes to the need for automation.
But the irony of our present situation is that the development and installation of new technologies is impacted by the supply chain slowdown. Materials and parts needed for robots, for example—everything from semiconductor chips to suction cups—are in higher demand and more difficult to come by.
–Jeff Pepperworth, President and CEO, iGPS Logistics
Companies will select technology solutions that allow them to add speed, reliability, and agility to their end-to-end supply chain operations while reducing costs and minimizing risk.
Mobile robots: Mobile robots will be the most sought-after supply chain technology for e-commerce, warehouse, and retail operations. As labor markets remain constrained while demand for retail and e-commerce continues to grow, retail and e-commerce operations will accelerate investment in mobile robotics to support growth.
Visibility applications: Investment in applications that provide end-to-end visibility of material will double. With visibility remaining a challenge and increasing complexity in supply chain flows, visibility applications will be leveraged to better meet customer satisfaction and provide greater visibility to assets in motion.
Voice-directed solutions: Logistics providers will invest in voice-directed maintenance and inspection for their fleets. Due to increasing costs of fuel, labor, and overall inflation, operators will look for creative ways to reduce cost, and voice-directed maintenance and inspection will help to reduce vehicle maintenance and the impact of unplanned downtime.
–John Santagate, Vice President, Robotics & Voice, Körber Business Area Supply Chain
Software platforms that derive valuable insights from the data being generated will drive huge transformation across supply chains in 2023. In this context, digital twin technology will continue to attract headlines as a means of making sense of—and, critically, using—the huge volumes of data being generated.
–Toby Mills, CEO, Entopy
Many enterprises will reignite their sustainability efforts by refining their business cases. However, EY survey findings showed: One-third of the participating companies lack a business case. Business cases should take a holistic approach to sustainability, focusing on cost reduction, revenue growth, risk management, and intangibles such as customer loyalty.
We anticipate companies will look beyond procurement as they pursue sustainability. For instance, 27% expect delivery/logistics to make the most progress in sustainability into 2024.
–Sumit Dutta, Supply Chain & Operations Leader, EY Americas
I anticipate increased regulation and emphasis on improving global supply chain labor and human rights practices. In terms of mandatory human rights due diligence laws, I foresee an increased focus on industries related to conflict minerals, rare-earth minerals, and lithium. As EV production rises along with the integration of microchips, this means using more lithium.
I’m curious to see if legislators will allow it in countries where mining was previously banned. In the case of the United States, will we remain reliant on China (sources 90% of the world’s lithium), which will bring more focus on the human rights aspect of ESG?
That being said, I expect global reporting initiatives requiring human rights disclosures to become more prevalent.
–Rick Dorsett, Director – HSE Review and Verification & ESG, ISN
TREND TO WATCH
In 2023 more enterprise businesses will work to make sustainability more operational and a more achievable goal. In addition to managing service time and cost, the emissions impact will be key for managing businesses.
We should see more executives creating an ESG culture, starting inside and demonstrated outwardly, that promotes the importance of making sustainable business decisions. Strategic economic and emissions decisions will be made not just because of upcoming SEC reporting changes mandating that large public companies will have to report scope 3 emissions by 2025, but because it’s the right thing to do.
Many transportation companies will seek out reliable, credible data providers for the collection of data they will need to analyze in order to set sustainability goals across all modes, lanes, vehicles, and regions.
–Josh Bouk, President, Trax Technologies
ESG (environmental, social, and governance) has become a high-priority corporate objective in recent years. Sustainability is growing in focus with regulations and legislation around the world coming into force. Nevertheless, most organizations have not set formal policies and have made little real progress.
Greenwashing has become common, and consumers and governments are increasingly critical of perceived greenwashing. As a result, in 2023 businesses will place a growing focus on making tangible gains on sustainability, reducing carbon emissions, and increasing reusability of their products.
To achieve this, organizations will need to put in place processes and systems to better baseline their current carbon emissions and progress against goals. Additionally, they will need to more effectively and efficiently collaborate with suppliers to reduce scope 3 emissions (those produced by the supply chain), which constitute an average of 70% of a business’ emissions.
–Alex Saric, CMO, Ivalua
Manufacturing leadership teams are under pressure to enhance the sustainability, performance, and resilience of their operations as a result of a more unstable world economy. Manufacturers are seeking to enhance traceability across operations for greater sustainability, productivity, and transparency in their supply chains as a result of this mounting demand. Industry leaders can contribute to the movement toward a greener future while lowering waste and operational costs by enhancing sustainability in their supply chains.
Many manufacturers are still essentially blind to an astonishing percentage of events on the factory floor and in supply chains. The rise in black swan events and economic disruption will finally force them to increase their focus on improving traceability in order to meet their sustainability goals and weather the economic storm. As a result, ESG will thus be more thoroughly integrated and assessed by business systems.
–Doug Lawson, CEO, ThinkIQ
Circularity (making products with an eye toward end-of-life use) and supply chain transparency will be critical for retailers, especially as EU regulations will mandate companies to provide details about their carbon footprint.
–Margaux Herbet-Saada, Product Marketing Manager, o9 Solutions
Labor shortage woes will continue. As labor shortage challenges continue, organizations need to focus on reducing stress on their staff with better technology, reducing time-to-value of new hires, or replicating siloed success with automation.
–Chris Jones, EVP of Industry and Services, Descartes
2023 is going to be all about upskilling, reskilling, and internal mobility for businesses as talent shortages persist. It’s never been more obvious that companies need employees who can navigate challenging situations and find innovative solutions to unforeseen problems (this almost goes without saying when talking about the supply chain).
By prioritizing agility upfront, organizations can move qualified people into new roles when unforeseen needs arise. 2023 is also going to usher in a recalibration toward quality and speed in hiring.
–Anthony A. Reynolds, Chief Executive Officer, HireVue
To retain top talent, warehouse managers and manufacturing leaders must provide performance-based incentives and provide clear career progression opportunities. Workers are increasingly seeking employment with companies that create a desirable work culture, executed at the local level and enabled by centralized investments.
Despite uncertain macroeconomic conditions in 2023, industry analysts are forecasting ongoing challenges in recruiting and retaining a stable industrial workforce required to operate the domestic supply chain. Leading companies are focused on becoming an “employer of choice” for potential candidates, investing in new capabilities and programs to increase the employee value proposition.
Our research indicates multiple areas are critical for this endeavor, including a high-touch and quick-response recruiting process, a competitive base wage, engaging onboarding methods, and flexible scheduling.
–Andrew Billings, Vice President & Supply Chain Lead, North Highland
Turning to 3PLs
Companies will turn to third-party providers that specialize in optimized delivery processes.
Macroeconomic changes, like surviving a recession, will pressure company leaders to make decisions that positively impact their bottom line. Some business leaders will turn to third-party providers that specialize in optimized delivery processes, for example, as a way to streamline and reduce last-mile delivery costs.
Many are considering eliminating courier costs to optimize delivery operations by using last-mile delivery services that can provide an on-demand, overflow labor source of contractors with vehicles. Others are holding on to their employees but improving efficiency processes by implementing innovative tech that saves time and costs with faster delivery times through route optimization and other insights.
–Ryan Hanson, President and Co-Founder, Dispatch
In 2023, 3PLs will turn to the use of hyperautomation technology, which combines artificial intelligence, machine learning, and process automation to efficiently streamline processes and operations.
Hyperautomation technology can also enable predictive analysis, allowing 3PLs to anticipate problems before they occur, helping them reduce operational costs and save time. By leveraging the potential of hyperautomation technologies, 3PLs can continue driving high levels of efficiency within their businesses and remain successful in the market.
–Renee Krug, CEO, Transflo
Expect to see more 3PL partnerships as businesses look for ways to optimize their supply chains and improve fulfillment.
As the demand for logistics providers, warehousing space, and automation continues to grow, we will see an increase in warehouse automation to better utilize warehouse space, fill the labor gap, and excite and retain new talent.
–Maryah Merchant, Product Marketing Manager for Distribution, Tecsys