2022: A Look in the Rearview Mirror—Part II

December 13, 2022

This post continues from where we left off last week! Here, we cover five more supply chain changes that affected the logistics industry. As in last week’s post, some of the issues discussed below have a clearer path than others.

Also, 2022 wasn’t a breakthrough year. However, 2022 laid out a new path ahead, a New Normal, that made itself more perceptible.

The themes of volatility and unpredictability are evident in these five issues, and they all experienced disruptions in supply chain operations. At year’s end, the logistics industry grew stronger.

It focused on achieving agility and resilience, the new principles dominating the logistics industry. Overcoming challenges required all stakeholders to work collaboratively.

Understanding these supply chain changes and their importance can mean the difference between survival and extinction. To survive and thrive, your business must adapt. And it must adapt quickly. Your business must be prepared for both short- and long-term consequences.

In this post, we’ll explore five more areas where a shift to agility and resilience is taking hold.

#6 Ocean transport: Adapting to stay ahead of changing times

It is unlikely that ocean transport will give way to other modes of transportation. With over 90% of goods moved via ocean carrier, ocean transport will remain the dominant mode of transporting goods. But events like Covid and Net Zero carbon regulation are squeezing maritime shipping.

Covid policies in China led to increased blank sailings, taking ships out of operation. Likewise, Net Zero carbon regulation forced many ships in to dry dock for retrofitting.

Yet ocean carriers anticipated imminent changes and adapted accordingly. From regulatory control, like Net Zero 2050 to fuel price volatility, to shrinking capacity, ocean carriers weathered the storms in 2022.

In fact, ocean carriers fared well at the expense of shippers. Big retailers, like Walmart, Amazon, and Kohl’s, sought to lease ships in order to acquire the capacity they needed to meet consumer demand. This reflected a new way of guaranteeing capacity and might.

It worked in 2022, and will likely continue to work and perhaps grow in 2023 as customer focus now takes precedence over costs and profits. Ocean shipping is now more nuanced, strategic, and customer-focused. It also serves to reduce uncertainty in shipping. And it facilitates a strategic view of planning the movement of goods.

The reliance on ocean carriers grew in 2022, and it appears that growth will continue into 2023. Performance and growth of ocean transport operations still remain uncertain, but as the industry adapts, challenges should subside, allowing ocean transport to maintain its commanding lead as the preferred means of shipping.

#7 Trucking: Continues to drive through persistent barriers to deliver goods

As always, trucking remained a topical issue in supply chain changes and management. Costs were high and climbing higher. Labor shortages were high but showed signs of easing.

Against that backdrop, trucking remained a challenging mode of transportation. Prices remained stubbornly high in 2022 because trucks were in short supply in relation to the demand. Also, fuel prices maintained their lofty prices. Diesel fuel prices are up from last year by $1.58 per gallon. But glimmers of hope emerged in the trucking space.

To address truck shortages, more companies came online to meet the demand for trucking. The American Trucking Associations reported that freight trucking would undergo a 24% increase in 2022. Meanwhile, existing trucking firms expanded through internal growth or mergers and acquisitions.

To deal with labor shortages, trucking companies raised salaries to highs not seen before. Competitive salaries attracted more drivers, and that relieved some pressure on the persistent labor shortage. That led to a four percent reduction in unfilled jobs from 80,000 in 2021 to 78,000 in 2022.

Additionally, as bottlenecks at the nation’s ports ended in Oct 2022. That reduced dwell times for truckers improved working conditions, making trucking a more attractive career to future truckers.

Lastly, technology helped to expedite the processing of paperwork, increasing efficiency and making drivers’ jobs less burdensome.

#8  New models of work took root

New work refers to the changed and changing nature of work. That includes how and where workers perform their jobs. The days of working in the office 40 hours per week are over.

We now have a mix of work options: remote work only, remote work and in-office work, and traditional in-office work. Call this new way of work hybrid work.

These new models of work fit with the work ethic and preferences of millennials who grew up with technology and tend to work independently. This approach toward work has set in, making it difficult for many companies to get workers to return to the office. J.P. Morgan, Tesla, and Google are a few companies facing this challenge.

In 2022, we saw a shift in how work gets done. The value/benefits are mixed. Some studies show productivity is higher under this new way of working. On the contrary, other studies show the opposite. So, the final word is out on how productive new work is. Nonetheless, hybrid work is taking hold across industries, not just the logistics industry.

Hybrid work, although popular, presents challenges. Despite new technologies enabling hybrid work, coordination and collaboration are falling short. We have Zoom, MS Teams, and a host of other solutions for virtual meetings, yet they lack the effectiveness of old-school, in-office coordination and collaboration.

To complicate matters, more workers are seeking hybrid jobs, as reported by Andy Medici, in the Atlanta Business Chronicle. Even so, Medici suggests it may be a mistake for businesses to resist hybrid work. He states workers now view hybrid work as an expectation rather than a perk.

The main issue is flexibility. Only 3% of workers stated they want to return to the office full-time. Additionally, the data on virtual meetings is telling.

  • Prior to Covid, 12% of meetings occurred virtually.
  • Presently, 93% of meetings occur virtually.
  • In the future, 66% of all meetings are expected to be virtual meetings.

The first data point reflects workers in lockdown. The second data point shows the gradual return to normal operations. The third data point shows businesses still not returning to pre-Covid times.

That seems to solidify a new trend in how work gets done, at least according to expectations.  

Businesses are not returning to normal, they’re transitioning to a New Normal.

#9 Regulatory controls increased and evolved in 2022

Regulatory controls come in three forms: governmental, industry, and individual companies. In 2022, we saw an increase in all three. Altogether, they form a spectrum of regulations that run from mandatory to voluntary and from punitive to rewarding.

The impacts in 2022 haveresulted in achieving more balance in regulations than before. The last-minute averted rail strike shows the growing importance of regulation in the future. In this case, any solution seems impossible without government involvement.

Regulatory control will continue, but the nature of policy and regulation will change. Workers seem to have at least an equal seat at the table and are exercising their influence. Compromise seems to be the best answer and the way ahead in the future.

Regulations issued by the governmental command-and-control model still hold sway. But to ensure enduring policies, regulations must balance all stakeholders’ needs. That was evident in the recent rail strike.

In terms of supply chain changes, the mandated Net Zero initiative lost some ground because of Covid as businesses struggled to survive. Businesses struggled to compete against a backdrop of rising fuel prices, inflation, and industry competition.

Nonetheless, businesses made progress in building sustainable supply chains. They did this by integrating sustainability into their supply chain frameworks.

  • That includes on-shoring, near-shoring, and the redesign of networks.
  • The use of alternative fuels to burn cleaner fuels.
  • A change in packaging using environmental materials.
  • An increase in reverse logistics and disposal and more.

Common among these regulatory initiatives is the elevation of these issues to the strategic level. That means regulations were broader and more inclusive if they were expected to have a lasting effect.

Again, regulatory controls were prominent in 2022. However, regulation evolved from command-and-control to more accommodating regulation because of the realities of the market.

Looking back, we may see 2022, as the beginning of a less confrontational, more accommodative approach.

#10 Technology as a means to future-proof supply chain changes, rapidly

Technology, more than any other area of logistics, became a game-changer. And a strategic one at that. External forces and internal challenges naturally led companies to turn to technology.

The adoption of technology-related solutions accelerated in 2022. Covid-19 was the stimulus, but other issues cropped up affecting supply chain performance since Covid.

Persistent labor shortages. Lack of skilled workers. Rising costs of acquiring workers.. We also saw demand for speed, rising customer expectations, and the fast-changing nature of demand patterns. All these compelled businesses to turn to technology

Understandably, technology became a de facto go-to solution. Technology is on track to become the backbone of logistics businesses.

Without technology, businesses would have struggled to come to grips with the supply chain changes listed above. Along with that, leaders began to view these issues at a strategic level. These issues were too large and broad sweeping to treat in isolation.

Volatility and uncertainty demanded quick yet comprehensive solutions.

That led to efforts to optimize supply chains based on a holistic view, as opposed to sub-optimizing, by focusing on resolving narrow issues. That meant aligning your supply chain strategy with your business strategy.

It also meant considering the effects of automation on all your stakeholders up and down the supply chain. Technology became a dominant means to future-proof supply chains.

The accelerated adoption of technology in 2022 led to a renewed effort to improve supply chain performance. Governments demanded it. Stakeholders demanded it. And customers demanded it.

In 2022, we saw the accelerated evolution of supply chain technologies that resisted a return to the past. Instead, the rate and scope of technology adoption in 2022 ushered in a new era of improved performance due to agility and resilience.

At American Global Logistics, we track trends in the making. An annual review allows us to look back and assess what happened and why.

In tracking trends, we’re careful to make sense of what’s important to our clients and what’s not. It’s just as important to identify what’s not important to avoid spending time and resources with little or no benefit to you.

There’s no doubt the logistics industry is in transition. We’re seeing a sea change in the making. To survive and thrive, your business must adapt and transform to succeed in the future.

Contact us if you want to succeed in 2023 and beyond.

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