Logistics and Supply Chain Trends: 2023 and Beyond
January 5, 2023 •Kevin Baxter
Each year, predicting logistics and supply chain trends is a hit-or-miss proposition. As freight shipping enters 2023, the industry finds itself in a much different position than it was a year ago, when rates remained sky-high and capacity extremely hard to come by on the tail-end of a roughly two year pandemic-related surge. Now, the market is in the midst of an undeniable correction back to pre-COVID activity levels, so many of the predictions of logistics and supply chain trends of last year can be thrown out the window. With that preamble out of the way, let's go over some things we can expect from the freight industry in the coming year of 2023 - and beyond.
What Are Some of the Logistics and Supply Chain Trends of 2023?
At this point the last couple of years, the concept of rate wars was a foreign one, as the market was stuck in a perpetual peak condition and stressed supply chains. Now though, the freight industry is trending back to a normal cycle, and carriers need all the business they can get. That means shippers are benefiting from the competition with lower spot rates than they've seen in quite some time. In many cases, competing on service is no longer enough as companies undercut their competitors to such a degree that the temptation of the lowest rate is too great to pass up. Providers must fight to keep the business that they have while also going to those low numbers to draw more in.
Instead of the prevailing sentiment over the past couple of years of "get me a solution, no matter what," rather it's "what can you offer me on price?" Of course all that being said, service and relationships still matter. So once shippers pick their provider - even if it's based purely on price - it'll be a one and done scenario if the experience is a bad one. And even for those shippers that are rate shopping and hopping from place to place to fill their needs at this time, the companies they'll eventually come back to and settle on for the long haul are the ones that treat them well. How long will the rate wars last? Until the next peak season rises, which could happen on schedule in late Summer this year - as many predict a return to a more normal freight market cycle in 2023 as the year goes on and the less volatile contract rates reflect that expectation as well.
Widening Equipment Availability
A major part of the challenges of the last two years in shipping had to do with demand to move product outpacing the supply of transportation. More specifically, capacity was hurt by equipment scarcity of both containers and chassis - with many turning to simply anything available that would move and hold goods. New containers and chassis were simply not being produced quickly enough, a fact exacerbated by the COVID-19 pandemic which led to shortages of raw materials and manufacturing shutdowns without enough workers available to keep lines moving. In response, as soon as those shortages of materials and people became less of an issue, production on new equipment became hot and heavy.
In short order, the shortages of just a couple seasons ago have given way to surpluses of containers - some even say too many. This means container capacity - and chassis numbers (which followed a similar pattern as well) - is generally no longer an issue. Expect to see those older, makeshift containers head back to the scrap yard as equipment gets a refresh. Chassis have gotten the update as well, though chassis pools and ownership by certain carriers can still make availability a less than sure thing in some cases. Either way, because of this catch-up in production of these key pieces of freight equipment, availability should be less of a problem moving forward, even when the next peak is upon us.
A Return (or Introduction) to Intermodal
As the prospect of a railroad strike loomed large in the second half of 2022, many who typically relied on intermodal as part of their freight strategy shifted away from the rails to avoid the risk of stranded shipments. But with a new contract agreement in place between Class I railroads and rail worker unions, the possibility of a work stoppage in the near-term has gone away. That means those who have used intermodal before can lean on it once again, and others who hesitated to explore this freight mode can jump on board in the coming year. After initially moving slower on rate reductions than truckload, railroad carriers have made pricing competitive and just as with other modes, capacity is no longer an issue.
Intermodal will still be dependent on shipping lanes meeting the needs of shippers, but many domestic shipments do qualify - and that includes Mexico and Canada as well, a fact that makes nearshoring more feasible. And with new intermodal facilities popping up across North America now and in the coming months, service levels should only improve. Additionally, companies focused on sustainable supply chain solutions will look to intermodal as a method to significantly reduce their carbon footprint.
Logistics & Supply Chain Technology
A common refrain in logistics and supply chain technology and trends in 2023 and beyond is automation. The use of automation is increasing across supply chains, whether it be within warehouses, at the ports, at intermodal terminals or elsewhere. Automation can counteract some worker shortages that have persisted in the transportation field for one, a problem that has persisted for a number of years. Relatedly, autonomous trucking still remains in the discussion and driverless trucks are moving closer to greater adoption.
As noted last year, augmented intelligence - using AI to assist logistics pros - should continue to gain adoption, something AI has already done in many cases. More and more freight and logistics stakeholders are taking advantage of cloud-based transportation management system (TMS) solutions, allowing them a centralized platform to in essence run their entire shipping operation. And with more and more integrations occurring in the TMS space, these platforms - and the technology they support - are only getting more robust allowing for shipment tracking, load boards, carrier communication, back office management and beyond.
Drones are also a topic of conversation in the freight industry moving forward. We've long heard the concept of residential drone delivery of packages, something Amazon and Wal-Mart have both begun implementing. In a newer wrinkle, higher payload drones are designed for use in the middle mile of the freight process. These drones could be incorporated into a freight and logistics strategy to reach harder to access areas, avoid crowded roads or reduce carbon emissions. As a clear sign of this mode's legitimacy, TMS software is programming functionality for drone visibility.
As a final technology note - once again reiterating an item noted in last year's predictions - it's important for any and all involved in the freight industry to consider cybersecurity. The more technology integrations occur, the more attack surfaces there are, and for many businesses, it just takes one successful cyber attack to shut them down. With the additional impact an attack on the transportation industry can have, many may find themselves in the crosshairs, so a strong cybersecurity posture complete with trained staff, firewalls, endpoint protection and file backups among other items is a must.
If these trends have you excited to take your logistics and supply chain game to the next level in 2023 and beyond, we'd be happy to join you. Reach out to us, and we'll follow up quickly to go over your specific needs and help you find the right solutions.
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