Global Trade • January February 2023 • CH-CH-CH-CHANGES

Logistics is a driver of economic growth on a global scale, and thanks to recent events, the industry has seen significant transformation in a short period of time. From the pandemic to the onset of the Great Resignation, the industry took a significant hit, putting it behind consumer demand for some time. Like the past two years, the upcoming years will likely be marked with numerous changes, enhancements, and opportunities. Look at a few of the trends shaping the logistics industry in the 2023.

1 THREATS OF GOVERNMENT INTERVENTION

Throughout the past few years, the government took steps to help facilitate more efficient function within the supply chain, clearing away some of the hurdles to speed deliveries, especially because of product shortages. That has not led to full-on intervention, though. This could be a concern going forward, especially as rising inflation and geopolitical concerns grow. Governments may take the view that shortages and delays are a threat to national security, pushing them to intervene in areas such as sourcing or trade in general.

2 INCREASES IN CONTINUED FREIGHT PRICES

Throughout 2021, ocean freight shipping rates remained high due to factors such as consumer preferences and a surge in demand for goods around the world and in virtually every sector. Other factors, such as container shortages, also impacted costs. There’s an expectation for inland water transport and truckload rates to increase as well, as high as 3% in some instances, pushing shipping costs higher.

A large demand-supply gap exists today, thanks in part to the Ukraine crisis, as a significant lack of exports from Ukraine and Russia continues to push prices higher. Ultimately, this will lead to a drop in global GDP.

3 GROWTH OF RFID

TECHNOLOGY Technology will be a strong player in the logistics industry in numerous ways. While RFID is not a new technology, many companies have put a significant amount of investment into it. While it is expected for this trend to continue to grow, that may be dependent on whether companies invest in better access to computer systems for reading that stored data on the go. Also, the incorporation of barcode labels with RFID is likely to continue its push forward.

4 DEMANDS FOR ENHANCED TRANSPARENCY

One of the most significant changes to the logistics industry in the last decade has been the increasing demand for transparency. Companies today are working to ensure that there’s oversight and complete visualization at every stage of the logistics journey. That includes careful monitoring of the entire journey of the shipping container.

To do this, automated tracking of products from the initial sourcing of materials, through the final truckload to reach the retail outlet, has become critical. Technology is enabling this type of visibility from the preparation and departure steps through the on-the-water, journey to port, drayage, etc.

5 OVERSUPPLY CONCERNS

There’s so much talk about shortages that many companies and suppliers have stepped up to order increasing amounts of goods. That could lead to oversupply in some situations. The summer of 2022 arrived with a glut of products at larger retailers, such as Target, thanks to back-ordered products that finally arrived. Retailers pushed big sales to clear out those products.

A recession could mean less consumer demand; therefore, product could sit in stores longer. Keeping supply and demand in balance in the coming years could challenge retailers and result in empty shelves or overflowing stockrooms.

6 INCREASES IN AUTOMATION

Most of today’s retailers are struggling with labor shortages, and one of the best tools companies have to solve this challenge is automation. Applying technology to processes can enhance speed and efficiency throughout the supply chain. There is little doubt that this trend will continue through the coming years as more automation solutions become available. The utilization of deep tech within the industry has become a dominating factor for some shipping companies.

Automation is creating improvements by providing better monitoring of inventory, reduction in product loss, drops in the theft of goods during the actual shipping process, and a better ability to maintain compliance and regulation requirements. Also, supply chain visibility platforms have become more sophisticated for better tracking of shipping containers from foreign origin into port and onto the distribution centers.

7 FOCUS ON SUSTAINABILITY AND ENVIRONMENTALISM

There’s no doubt the logistics industry has seen an immense amount of change to improve environmental conditions in the last decade, and this is expected to continue. Reaching a net-zero impact is not easy in this industry because of the need for fuel and other processes—yet organizations continue to push toward and achieve improvements.

Warehouses will continue to see the impact of green-building recommendations to reduce carbon. There will continue to be demand for more renewable and recyclable materials in shipping. There is also a likelihood that better sources of power, such as the use of geothermal and solar in warehouses and electric trucks, will continue to push ahead. A focus on clean air will expand, especially into countries where it is a constant concern, such as India.

8 LIMITS ON LABOR ORGANIZATIONS

The labor market was one of the most challenging aspects of the logistics industry in 2022, and no significant change is expected in 2023. Labor issues will continue to be a factor for many organizations at all stages of the supply chain. Costs will rise as existing workers push for better benefits. A stronger focus on improving working conditions, especially in large-scale warehouses, is also likely. Logistics companies will need to work to keep up with inflation in employee wages as well.

This isn’t just a U.S. problem, either. Worldwide, the Ukraine crisis and China’s threat to close the country with new lockdowns for COVID-19 could also impact worker availability. That could lead to more limitations that spread around the world.

9 IMPROVING LAST MILE EFFORT

Beyond a doubt, last mile shipping is one of the most costly and burdensome components of the logistics supply chain. Improving the last mile could mean substantial reductions in overall costs, but home delivery to consumers is not going to go away. It’s likely that consumers will turn to the Internet to find better access to the products and goods they need as inflationary pressures exist.

What can companies do? Some are working to develop autonomous ground vehicles, while others continue to focus on using gig workers. The key here will be a continued focus on finding ways to reduce costs without limiting speed.

A YEAR OF CHANGE?

The logistics industry is in a constant state of flux, and there’s no doubt the upcoming year will mean even more change. Technology will be at the forefront of reducing the challenges many organizations face.

Peter Pace is Vice President of Business Development at AV Logistics and an industry veteran with 35 years of experience in all facets of international shipping and intermodal transportation. He is responsible for identifying new opportunities for growth and expansion within the client bases of AV Logistics and its strategic drayage partner, C&K Trucking LLC.