While the pandemic may be behind us, COVID disruption both created and accelerated supply chain trends which will continue to shape the logistics industry, in 2024 and beyond. The issues may feel familiar, but the consequences of the COVID-induced downturn accelerated a supply chain evolution that continues to ripple through the industry.
Coming into 2023, the economy was a source of anxiety. Now, Goldman Sachs pundits predict that the economy will perform better than expected in 2024. However, businesses remain caught between the pressure to contain costs and a growing need to align with sustainability best practices that are both regulatory and customer-driven.
Technology is central to this ongoing evolution, promising much but creating challenges for smaller businesses that find themselves working hard to keep up with well-funded pace-setters.
Digital transformation: From strategic supply chain ecosystems to cybersecurity risk management.
In 2024, if the product of your business is physical goods, your infrastructure likely involves a significant digital component. Technology continues to reinvent the way business is conducted throughout the supply chain, and the risks of falling behind on the technology front are significant. The promise of the “supply chain control tower” — a connected dashboard of real-time business metrics — is the ability to “understand, prioritize and resolve critical issues in real-time more fully” via end-to-end visibility across the supply chain.
As technology enables connectivity, businesses should be building and participating in collaborative ecosystems. There’s a competitive advantage in having a strong network of strategic partners. “Success is a team sport”, notes IBM Consulting’s Jason Kelley. “Coopetition” is the name of the game, with Kelley identifying four areas where ecosystem partnerships will be critical to success, supply chain among them (the others being military operations, cost containment and sustainability, about which more later).
Having the right technology in place is one way to unlock the potential of your partnerships. For example, cloud-based platforms facilitate real-time information sharing. Technology also unlocks the potential value of your data. Which brings us to the much-hyped world of AI.
As reported in the Wall Street Journal, retailers are turning to AI to make smarter inventory decisions. For business giants like Walmart and Walgreens, that might mean looking beyond historical sales information to predict inventory needs, and leveraging AI to examine the impact of factors like weather patterns and social media trends on consumer demand.
For smaller enterprises, AI promises much, but finding value among the AI hype is key. Whether engaging with AI yet or not, good data is a must-have. Organizations need to mine “relevant, clean, well-governed data” to take advantage of the next steps forward in supply chain analytics, whether you’re leveraging AI for deep insights or simply applying data analytics to better understand your business.
Cybersecurity: Protecting the supply chain from digital bandits
An increase in technology requires an increase in cyber-security measures. As expressed by the US Department of Commerce National Institute of Standards and Technology (NIST), supply chain cyber security cannot be viewed as simply an IT issue. Security breaches are often “less about a technology issue and more about human error.”
As your business becomes more reliant on technology, taking cybersecurity seriously is critical. From vetting vendors’ cyber security practices to training employees on security risks and performing security audits, protecting your business requires a proactive approach to supply chain risk management. The NIST’s best practices are well worth reviewing.
Inventory management: Omnichannel expectations are top of mind, 3PLs can help
Technology is central to omnichannel inventory control, which not surprisingly is a top trend in the world of inventory management. Retailers want to maximize profits and customer satisfaction by avoiding overstocks. Suppliers want to ensure they can keep pace with these ever-increasing omnichannel expectations.
A recent review of the inventory management landscape identified 3PL partnerships as a popular approach that offers “specialized expertise and technology that (can) help e-commerce industries optimize their supply chains and increase efficiency.”
Inevitably, modern inventory management ladders up to broader digital transformation capabilities. And while marketplace competition and customer satisfaction are major drivers of this trend, regulation plays a part too.
As the American Journal of Transportation puts it, “Companies that cannot trace the path of their products from development … to shipping will find it difficult to (satisfy) governments, consumer associations and customers.”
As a harbinger of things to come, the FDA’s Food Traceability Rule comes into effect in 2026, establishing new traceability record-keeping standards for food from farm to restaurant or retailer. While these regulations address issues in the food supply chain, they raise the bar on traceability as a core component of the logistics landscape.
Sustainability: The supply chain has much work to do
Sustainability is another area where “raising the bar” is an ongoing trend for the foreseeable future, although investment and action on the issue fail to keep pace with good intentions.
As Abe Eshkenazi, CEO of the Association for Supply Chain Management (ASCM) explains, “All organizations tell you that it’s among their top initiatives. However, the investment, unfortunately, does not match the rhetoric. Investment is much lower now than it is for other technologies.”
For some, the push will come from the businesses they supply. The Environmental Protection Agency (EPA) estimates that the supply chain often accounts for more than 90% of a company’s greenhouse gas emissions. And there’s a growing desire to collect and report on Scope 3 emissions (those incurred throughout the value chain ), for which companies need primary sources of information from their suppliers.
In this environment, the Walmarts and Targets of the world will continue to set both sustainability and reporting targets that suppliers will be expected to meet. As these sustainability expectations will only become more common, moving into 2024, suppliers should be prepared to answer questions on sustainability strategies.
For businesses who already feel they have enough on their plate as is, a 3PL partner may be able to assess opportunities to reduce emissions through strategies like coordinated pool distribution, which can reduce under-utilized distribution capacity, and carbon offsets, which can be a step in the right direction.
Labor challenges: As the supply chain evolves, personnel must too
The logistics industry has always been vulnerable to labor shortages. Until recently, the need for human capital was primarily to perform physical labor to drive goods from point A to B. Looking forward, we must start to consider how to attract workers fluent in the technologies the logistics industry increasingly relies upon.
At the cutting edge of warehousing, robots and automated guided vehicles (AGV) are one approach to improving efficiency, reducing labor costs and addressing workforce shortages. That robotic workforce may not be a reality for most businesses, but when you think about supply chain resilience, one cannot overlook the need to hire people who are themselves resilient in the fact of change.
Nestle supply chain manager Andrew Shaw explains, “The sorts of people that we’re looking for are curious, they understand that things are evolving and they’re able to cope with change at a rapid pace. You need people who have resilience and can accept that change is going to be perpetual.”
Experienced 3PL providers can play a part in managing more traditional labor challenges, by taking ownership of transport and warehousing, freeing up clients to focus on their own area of specialization.
Customer service: A cornerstone of asset-light logistics
In business, the old adage goes, the customer is king. That being the case, clear communication is critical. We live in an on-demand, omni-channel universe where businesses like Amazon can offer same-day delivery, and even provide the customer with a range of delivery windows to make things even more convenient.
If you’re supplying goods directly to the consumer, the pressure is on. If you’re supplying the stores they shop in, they’re feeling the heat too. Business-to-business? Even there, when urgency is not always so acute, expectations around supply chain visibility are on the rise.
In the same way that just-in-time supply chain logistics were shown to be vulnerable to unexpected delays during the pandemic, the danger of pivoting to technology while neglecting the relationship-management side of logistics is significant.
“A tech-only layer on top of the current logistics industry just doesn’t work,” cautions Flexport’s Ryan Peterson in the Wall Street Journal, going on to explain, “at the end of the day, there’s a strong role for people with a lot of expertise.”
He echoes our own sentiments on being proactive, customer-centric communicators, noting, “if there’s no web interface for us to … communicate with one of the asset owners, we’ll pick up the phone, we’ll send an email, because we’re here to solve the problem for the customer.”
Consistent communication is a cornerstone of the trend towards an asset-light approach to logistics. As one eCommerce service provider puts it, asset-light logistics “empowers companies to put the needs of their customers first and lower their dependency on physical assets for operations. This eventually reduces operating expenses as compared to asset ownership.”
This shift towards outsourcing logistics has clearly reached a tipping point. Reportedly, 67.5% of companies worldwide entrust transportation operations to 3PL providers, while 63.5% outsource their warehousing operations to similar entities.
Having someone else solve transportation headaches can be a game-changer, but only if they’re demonstrably customer-centric with a strong commitment to communication.
In summary: Tech transformation still requires the human touch
From omni-channel inventory management to ambitious sustainability, 2024’s logistics trends have a technology component in common. Often, the promise of technology is that it frees you up to focus on higher-order goals and core areas of expertise. However, a significant hurdle with technology is securing the necessary know-how to fully utilize it.
As more companies adopt an asset-light strategy in logistics, the choice of your partner becomes crucial. The effectiveness of their communication can be just as vital as the skill and knowledge they contribute.
As we move into the first months of 2024, understanding the momentum swing towards more tech integration, more customer demand for sustainability solutions and the need to deliver on-point customer service to clients, 3PL operators have the expertise to make logistics a competitive advantage for the businesses they partner with.
Whether you’re considering outside logistics support for the first time, or ready to make a change to your current vendor, we invite you to give Expak a call and see how we make your business run smoother through supply chain specialization.