Disruption resulting from the 2020 pandemic—and continued challenges within the supply chain in 2021—has reinforced the necessity of prioritizing agility and flexibility. Every step of the supply chain demanded adaptation, with carriers and shippers changing plans when the transport on which they relied broke down. Warehouses reliant on vast workforces pivoted to address shut downs and worker shortages.
Manufacturers sat idle waiting for raw materials, or in some cases switched gears from “normal” operations to make other, desperately-needed supplies. Burton Snowboards, Ranger Creek Brewing and Distilling (and many other breweries and distilleries), lacrosse helmet maker Cascade, Defender Safety, and many other companies halted production on their regular products to make masks, gloves, coveralls, gowns, hand sanitizer, and more.
A 2021 report, Change of Plans, explores supply chain resiliency and its ability to adapt. The research, conducted on behalf of the Council of Supply Chain Management Professionals (CSCMP), examined trends, economic influences affecting supply chains, and what to expect in the near future. Researchers found:
- US business logistics costs (USBLC) dropped 4% to $1.56 trillion—7.4% of 2020’s nearly $21 trillion GDP
- Transportation costs rose 0.8%—much lower than 2019’s 4.7% or 2018’s 10.4% growth and driven, in part, by an explosive 24.3% growth in the last-mile and parcel segment with huge demand in e-commerce and home delivery
- Booming e-commerce drove demand for warehousing space, with warehousing growth up from an already record-setting 2019. Net absorption hit 268 square feet, an 11% increase. Rents increased to $6.76 per square foot. While vacancy rates registered higher than 2019, they were still lower than expected.
Warehousing: A Definite Boom Year
While 2020 Q2 and Q3 leasing volumes lost ground, by Q4, warehouse leasing volumes rose nearly 27% higher than the previous year. The cold storage requirement for vaccines added some pressure, and the report’s researchers suggest even with less vaccine storage needs, capacity will remain tight.
Rising e-commerce—and a healthy respect and appreciation of the potential (and dangers) of supply chain disruptions—may lead businesses to keep more stock on hand, requiring more warehouse space. The report says, “There’s a demand for very large facilities—3+ million square feet—and for downtown urban facilities.”
What Will Work in the Future?
Most essential for not just surviving but thriving among rapidly changing market demands are:
- Collaboration with shippers
- Innovation
- Resiliency
- Technology
Who fared best? Logistics companies who embraced a nimble approach, thought outside the box, opted for something they weren’t necessarily used to, or tried something new. Now organizations must continue to focus on optimizing touch points among the supply chain ecosystem’s diverse components.
Why is optimization so critical? Because networks are dynamic, not static. Evaluating data to determine the optimal number—and location—of facilities and adjusting accordingly, whether to scale up or scale down, preserves budgets.
Another important key to success is the integration of control tower technology. This tech helps manage supply chain silos centered around visibility and data. Control towers, according to IBM, are connected, personalized dashboards of data, key business metrics, and events across the supply chain serving as centralized information hubs to facilitate smarter, better decision-making. Organizations use supply chain control towers to gain a deeper understanding, identify, prioritize, and resolve critical issues—all in real time.
The report indicated that from a data perspective, control towers connecting systems supply chain-wide increase visibility. “Although end-to-end visibility is a daunting feat, for most shippers, pooling data is only half the battle. Implementing solutions to enact resilience requires expertise, resources, and a network fortified with assets—barriers that seem insurmountable to the average shipper and carrier.”
A Rise in Logistics Marketplaces
Manufacturers within the B2B and B2C supply chains have traditionally signed long-term contracts with a smaller number of logistics partners—a strategy that makes sense because it maximizes benefits from volume discounts and justifies the expense of technical integrations and upgrades.
With increased expectation for flexible deliveries, quickly evolving market demands, and increased shipping volumes, the relationship between logistics companies and manufacturers has become more dynamic. This long-term agreement philosophy no longer makes sense. Manufacturers must remain agile to leverage lower prices—a challenge as increased demand required carriers to enact fees, rate increases, and surcharges in 2020.
Recognizing a need to control shipping costs, logistics marketplaces and independent platforms have enabled shippers to compare carrier:
- Costs
- Service levels
- Performance
Sustainable Business Models: The Rule Not the Exception
Never before have consumers been more willing to change their shopping preferences to brands with sustainable business models. According to the National Retail Federation’s 2020 study of 18,980 consumers across 29 countries, more than half (57%) of consumers have weighed multiple factors influencing their purchasing decisions—from company recycling policies to factory locations to the raw materials used—to help reduce negative environmental impact.
The entire supply chain is responding to this awareness. Manufacturers have taken the “green” philosophy well beyond PR, elevating it as an essential requirement when product origin carries more transparency. Logistics have gone green, too, with greener packaging. Recyclable alternatives have replaced plastic fillers and packaging. Package sizes are shrinking to fit the size of the contents they hold. Shipping modes and methods include initiatives designed to provide more visibility into—and compensation for—deliveries’ CO2 impact.
It’s impossible to predict with 100% certainty how supply chains will evolve in the post-pandemic world. But with the COVID-19 pandemic, trade wars, unstable international relations, U.S. taxes on imports, and even Brexit, the logistics models of the past won’t work.
For decades, the gold standard of goods delivery has been the standardization of operations. A relatively quiet global trade has enabled manufacturers to establish efficient supply chains. Standardized processes and offshore production have maximized cost savings opportunities throughout every step of the supply chain journey. But now the focus has shifted to embrace flexibility, transparency, and customer experience. Customer needs, rather than products and processes, will drive supply chains. Networks of trusted third parties—scalable and adjustable— will deliver an ecosystem of modular capabilities. The future will involve a data-powered, insight-driven, technology-enabled approach. The rigid, reactive supply chains of yesterday have been replaced in favor of a nimble, predictive model.
