January 13, 2023 | Insights
Supply Chain Update: What to Expect in 2023
January 13, 2023 | Insights
At this time last year, manufacturers and suppliers were still at the height of global pandemic supply chain challenges. Lumber and labor shortages have been common themes since 2021, along with growing delays for companies that rely on shipping. Here’s where we stand today, and what to expect this year.
Thirty percent of supply chain professionals say the logistics issues the economy faced last year will continue until the summer of 2023. As an innovative logistics solutions provider, the NSSL team has done a deep dive into these trends and what they mean for distributors.
What to Expect in 2023
Overall, several factors are likely to have an impact on the logistics industry in 2023, including ongoing labor shortages, inflation, consumer spending patterns, and continued port backlogs. And although the 2022 economic downturn has slowed, we’re still not in the clear. Companies are continuing to raise prices to stay afloat and safeguard against the looming recession.
The logistics industry is facing a major labor shortage. This is due to many factors, including an aging workforce and increased competition for skilled workers. Since the start of the pandemic, 1.7 million workers retired from the labor force earlier than expected.
Many companies are turning to automation solutions to help them fill the gaps. Automation is being used to reduce labor costs, increase efficiency, and improve accuracy. But automation isn’t an end-all solution. While it’s estimated that 50% of workers’ duties have the potential to be automated only 5% of jobs can become fully automated.
For example, robots can be programmed to pick orders from shelves, and with AI-integrated software, can anticipate and resolve warehouse yard inefficiencies (or even collisions) before they even become apparent to humans.
Companies are seeking more creative ways to fill the labor shortage, too. For example, some companies are offering incentives for employees to stay with them long-term, such as higher wages or additional benefits. Others are looking for ways to make their jobs more attractive to potential employees, such as offering flexible work arrangements.
Companies are also looking for ways to dive into untapped labor pools. Some companies offer apprenticeships and internships to students and recent graduates. These give individuals an opportunity to gain experience in the logistics industry and give companies access to fresh talent. Veterans also represent an untapped talent pool for companies to hire from.
Inflation is another major trend that is likely to have an impact on the logistics industry in 2023. To combat the effects of inflation, companies are looking for ways to increase efficiency and reduce costs. This includes finding ways to reduce the time it takes to move goods from point A to point B by streamlining internal processes, such as using artificial intelligence (AI) and machine learning (ML) to automate certain aspects of companies’ operations.
In addition, companies are looking for ways to reduce fuel expenses—which has the added benefit of reducing their carbon footprint and increasing sustainability. This is leading to increased investment in renewable energy sources, such as introducing short-haul electric vehicles into distribution center yards and regional routes.
Consumer Spending/Other Retail Trends
Consumer spending is another major trend that is likely to have an impact on the logistics industry in 2023. Consumers are increasingly turning to online shopping, and this is having a major impact on the way companies are managing their supply chains.
Digital Shelf Space
The digital shelf is how and where a given product is displayed for purchase online. And it’s a powerful concept for eCommerce. Up-and-coming brands can outsell established products simply by providing a more valuable digital shopping experience—by making products available where and when customers need them. That means online shopping is only becoming more prevalent, putting an added burden on shippers and distribution centers alike.
With or without digital shelves, companies are looking for ways to make the delivery process faster and more efficient. This includes investing in last-mile delivery services to deliver products quickly and cost-effectively. The last mile is known as the most expensive mile in the order fulfillment process, and a lot of money is being spent trying to change that. As it is, 53% of an eCommerce company’s total shipping costs are spent in the last mile.
Companies are also looking for ways to make their products more sustainable, such as using recycled materials in their packaging or offering customers the option to buy products in bulk.
Status of Ports and Other Common Pain Points in the Supply Chain
One of the major trends likely to impact the logistics industry in 2023 is the status of ports and other common pain points in the supply chain.
Ports are a major bottleneck in the supply chain, as they can cause delays and disruptions. To address this issue, companies are looking for ways to make ports more efficient. This can include investing in advanced technology that streamlines processes and reduces delays.
Reshoring, which bypasses the need for ports, continues to be a trending solution for these challenges as well. We expect to see more North American companies investing in domestic manufacturing throughout 2023.
What These Trends Mean for DCs and Short-Haul Logistics
The above trends will have a major impact on distribution centers and short-haul logistics. They will lead to a challenging environment for distributors, but there are also exciting advances in technology that can be implemented now to make DCs more efficient, reduce costs, and improve customer satisfaction. As the saying goes, “with great challenge comes great opportunity.”
For now, companies need ways to make short-haul logistics more efficient, such as route optimization and real-time tracking, to reduce delays and transportation costs. This can include investing in personalized packaging and offering discounts or loyalty programs.
Stay Ahead in 2023—Request a Virtual Yard Assessment
The logistics industry is facing several changes in 2023. At NSSL, we are committed to helping our customers stay ahead of the curve. We offer a variety of innovative logistics solutions to help you outpace the trends. Request a virtual yard assessment to discuss how we can help you outperform your competitors in 2023.