Logistics and supply chains will continue to face countless and unpredictable disruptions in 2023, such as the economy, weather, geopolitical issues, and much more. As companies prepare for what’s ahead in 2023 here’s what carriers and shippers need to know and how to prepare:
Digitization, data, and visibility – Paper is still commonly used in supply chain processes, but it is quickly being replaced by digital communications, and that shift is expected to continue in 2023. Digitization is allowing companies to mine data for valuable insights and to accelerate intelligent decision-making. Data analytics and intelligence provide increasing visibility to customers, which is still one of the biggest challenges for shippers today. When a shipper works with multiple vendors, it’s difficult to know the latest shipment updates without calling different suppliers and simultaneously piece together the legal documentation for transportation. This hassle not only reduces time and operational efficiency but also increases margin of error. By digitizing the supply chain process and collecting the data through the life of a load, any shipper can have full visibility on their shipment, saving them time and energy, and thus making them more resourceful. In 2023, this rise in digitization, data, and visibility will keep soaring and becoming even faster and increasingly accurate as old processes and paper become a thing of the past.
Reshoring and nearshoring for manufacturers – Reshoring and nearshoring have increased over the past decade, mostly due to ongoing tension between the US and China, significant increases in shipping costs from China, the effects of the pandemic on global supply chains, and sustainability concerns. According to a Thomas Survey in April 2020, 64% of North American manufacturers interviewed said they were likely to bring manufacturing production back to the Americas. The impact of these circumstances has led manufacturers to hone in on their strategy. Many companies have relocated from Asia to Mexico or the US to lower transit times and reduce risk around potential challenges. There are various structural advantages to US-Mexico trade, such as proximity, same time zone, similarity of work cultures, and geopolitical advantages. Proximity allows goods to be transported over the road at competitive prices. US shippers that need to bring cargo from China quickly have to pay for air freight, which is expensive. Otherwise, they would have to move cargo via ocean, which takes 20 to 30 days. Given the benefits of bringing manufacturing closer to home, this trend is expected to continue.
Rising diesel prices – From January to June 2022, the price of diesel fuel rose 55% in the United States. The Russia-Ukraine crisis has been a chief cause, as has the international rule IMO 2020, which just took effect at the start of the year. In fact, the geopolitical issues caused by the Russia-Ukraine crisis have led to a significant demand-supply gap in the global trade market, and the increased prices of fuels will most likely reduce the global GDP growth. This international rule requires the fuel oil that powers ships to have a sulfur content of no more than 0.5%, and has affected diesel prices since. With so many factors affecting diesel prices and so much volatility in the market, businesses moving cargo will have to find ways to adapt to this continued rise in prices in 2023.
Sustainable shipping and environmental regulation – For the global trucking industry, there are already minimum fuel efficiency standards and maximum emissions standards for gasoline and diesel vehicles. Increasing environmental regulations and consumer pressures to bring down pollution and greenhouse emissions are motivating stakeholders in the logistics industry to reconfigure and innovate to take on a green infrastructure and electric fleets. A recent regulation introduced by the Securities and Exchange Commission (SEC) on ESG requires any public company to include climate-related disclosures in their 10-K. Companies would also have to report risks associated with climate change. Through the optimization of logistics and moving goods at a reasonable cost and minimum environmental impact, efficiencies can be improved, and carbon footprints reduced. With the help of ongoing initiatives and regulations, we expect this trend to also continue in the coming year.
Automation – Technology and automation in logistics operations has become very important to address pain points in the industry and manage shipments at lower costs and in a timely manner. According to the McKinsey Global Institute, the transportation and warehousing industry has the third-highest automation potential of any sector. AI, machine learning, computer vision, connected IoT networks, and blockchain can all be applied to simplify logistics operations, make them more efficient, and optimize resources. For that, the rise of automation is expected to keep trending in 2023.
As we wrap up 2022 and look ahead, we can anticipate that the new year will continue to present us with challenges; however, it’s also a time of opportunity in the supply chain and logistic industries as businesses shift from reactive to proactive and from survival mode to growth mode. Technologies that will continue to reign include AI, digitization, automation and cloud-based solutions. We’ll also witness the launch of more advanced technologies into this sector as more businesses adopt drones and robots. For manufacturers, reshoring and nearshoring will be a top priority while geopolitics will continue to influence supply chains. A key takeaway that will transport us into the new year is the importance of shifting conventional mindsets to develop solid supply chain and logistics strategies that align with the current landscape, as key players adapt to the unending changes in the industry.
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