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.

This was the year that supply chains regained some of their footing finding firmer ground. It wasn’t a breakthrough year. But the supply chain industry resolved some major issues and formed a more certain path ahead.

To be sure, volatility and unpredictability still disrupt supply chain operations. That’s par for the course. However, businesses found ways to eliminate, avoid, or mitigate these disruptions.

In that sense, you could say a return to normalcy is underway. Supply chains are still plagued by external events over which they have little control. But businesses are learning how to manage external disruptions and manage internal ones more effectively.

Generally speaking, businesses continued to adapt to rising costs, inflation, recession, war, increased regulation, and remote work. To deal with these myriad disruptors, businesses shifted from static or scenario-based operations to create agile and resilient supply chains.

This shift represents a transition and transformation from fragmentation to integration. More concretely, it represents a shift from a focus on cost to a focus on the customer. And it represents a shift in mindset from taking a short-term view to taking a strategic view in planning.

Those are not insignificant changes, but those changes reflect a major shift from pre-pandemic times. These changes promote future-proof supply chains that are agile and resilient.

That is, they can adapt and respond to both short-term and long-term volatility and unpredictability. On a daily basis, these changes facilitate agility that quick, data-based decisions enable to avoid or mitigate unforeseen disruptions. That results in responsive supply chains that meet customer needs, regardless of changing conditions.

It also provides a viable framework to bounce back from serious disruptions or dislocations. Building resilience into supply chains introduces the shift from short-term to long-term thinking.

The new model being developed in 2022 is customer-centric and strategic in outlook and planning. 

We’ll look back to events in 2022 that show this transition and transformation in the making.

In this post, we’ll explore five of the ten different areas where a shift to agility and resilience is taking hold. We’ll examine the remaining five next week in our final post of 2022.

#1 Geopolitics–An external disruptor promoting volatility and uncertainty

Geopolitical events weighed heavily on supply chains in 2022, promoting volatility and uncertainty.

We had a hangover from the pandemic: Which led to continued inventory shortages, closures of manufacturing plants in China, congested ports, and underemployment.

Another geopolitical event, the Russo-Ukrainian war disrupted supply chain operations in a major way in 2022. Trade basically ceased as ports closed because of western- imposed economic sanctions on Russia.

Cargo planes could not fly out of or into Russia or Ukraine. Likewise, ships could not sail into or out of Russia and Ukraine. Some of that was because of sanctions and some of that was related to safety concerns related to combat operations. That exacerbated food shortages with Russia and Ukraine among the top five grain exporters.

In 2019, both countries combined exported 25.4% of all wheat. As of this year, Ukrainian wheat exports are down 30.7%, drastically affecting Ukrainian and global wheat markets.

Also, sanctions disrupted fuel markets further exacerbated by the Nord Stream I and II explosions.

To adapt, the U.S. administration approved the release of 1 million barrels of oil per day (BPD). That helped alleviate some of the pain. Nonetheless, prices at the pumps spiked contributing to inflation that persisted through 2022.

Another change, caused by China’s Omicron-induced lockdowns, led to an increase in nearshoring and on-shoring. Originally, industry stakeholders believed this would be nominal. Now that’s changed to help alleviate disruptions caused by China’s policy of zero-tolerance for Covid.

#2 Economy–An external disruptor promoting volatility and uncertainty

The economy deserves listing as a separate category from geopolitics, although there is overlap. Both the U.S. and global economies factored considerably in supply chain disruptions.

As mentioned above, economic sanctions led to major impacts on Ukraine and Russia. However, sanctions also had a boomerang effect, negatively affecting the U.S. and the global economy. We saw supply shortages lead to price increases. Inflation set in for fuel and transport costs, increasing logistics costs as a whole over last year.

The rise of economic disruptions led to an emphasis on risks associated with economics. This was evident with the creation of a new report from the New York Federal Reserve. That report is the Global Supply Chain Pressure Index (GSCPI).

The purpose, as stated on the NY Fed’s website, is to integrate “… transportation cost data and manufacturing indicators to provide a gauge of global supply chain condition.”

This metric, referred to as a “Frankenstat” due to its grand scope, has many critics. Putting that aside, the creation of this metric signifies the federal government’s increasing role in supply chain matters.

#3 Supply Shortages exacerbating constraints and dislocations

Cargo capacity exacerbated inventory shortages in the first half of 2023. In the latter half, as stakeholders focused on increasing container capacity, supply businesses began to come to terms with inventory shortages.

To cope with the unprecedented backlog of inventory at ports, penalty fees became a tool to address these issues. For example, at the Port of New York New Jersey (NYNJ), port officials announced a new penalty feels for empty containers with lengthy dwell times. Other ports took notice and followed suit to address capacity issues that prolonged supply shortages.

That led to some positive changes as transport prices began to decline. That decline was evident in spot rates and had not penetrated contract rates, as those were locked in by long-term contracts. Continued pressure by port authorities saw constrained capacity decline as a disruptor. It also had the beneficial effect of forcing container prices downward.

In September, HSBC assessed that carrier profits would decrease more than 80 percent over next two years. HSBC cited overcapacity and falling demand as the two main factors affecting this decline.

Adapting mechanisms in 2022 included increased engagement by federal and state authorities. That underscored the recognition that supply chain issues needed a strategic solution. Namely, supply chains in the future can only function seamlessly with closer cooperation and coordination between government and industry/private stakeholders.

That’s a significant change from a predominantly “hands-off” policy. Supply chains are too complex and complicated, hence they required a whole-of-government and whole-of-industry effort.

#4 Changes in consumer demand patterns create uncertainty

Another factor at work came from a change in consumer demand patterns. This was a hangover from the pandemic, which experienced a shift from services spending to product spending.

As Covid-19 declined, that demand pattern shifted back to services, adding unpredictability to previously stable demand patterns.

It also led to inventory excesses. Rather than risk running out of stock, businesses compensated by increasing procurement of inventory to err on the side of caution rather than face stock-out situations and unhappy customers.

The immediate impact on shippers was to be more flexible in their procurement and shipping strategy. The static demand and procurement patterns associated with peak intervals are a holdover from pre-Covid times.

Now businesses are making decisions in tune with real-time data and information. So, many companies accelerated their transition to data-based decision-making in 2022. Shippers have become more anticipatory of consumer demand in their planning. And they have become more strategic in their planning, keeping an eye on long-term effects as opposed to short-term gains.

As we are in the early innings of movement towards NextGen supply chains, this changed behavior that favors strategic planning and customer-centricity will grow in 2023.

#5 The modal shift to air freight from ocean freight

In an effort to reduce supply chain chaos, shippers and carriers turned to expanding air freight operations. Factors causing this shift include: “… high demand, difficulties re-positioning empty containers to Asia and port congestion.” This helped relieve capacity constraints while seeking a way to tamp down the spiraling costs of ocean shipping.

This represented new thinking about moving cargo from the point of origin to its destination. Although air cargo capacity had its limits, it mitigated capacity constraints to keep cargo moving at somewhat competitive costs.

Shifting the movement of cargo to air transport worked well as an interim solution. Its long-term impact remains unclear. Nonetheless, it shows that industry stakeholders viewed new problems with new solutions.  

Greater reliance on air operations also supported a customer-centric view. During and after the pandemic, consumer expectations held steady or increased. Air operations helped to address consumer need for speed but at a cost. The cost, compared to ocean freight, narrowed significantly, making air transport a viable complementary option.

Stakeholders viewed capacity and transport issues from a holistic view, and thus rolled-out bespoke solutions that offered promise. eCommerce was another factor that boosted the shift to air transport. Tailored solutions will emphasize multi-modal operations more so than in the rent past.

At American Global Logistics, we look back annually to make sense of the recent past. More succinctly, as Winston Churchill stated, “Those that fail to learn from history are doomed to repeat it.”

That’s why we look for trends, separating them from fads, to focus on future growth, sustainability, and profitability.

In 2022, we witnessed an industry in transition and transformation. The rise of the significance of geopolitics and economics, to supply shortages, rising consumer expectations, and a shift in reliance on different modes of transportation.

Are you prepared and positioned for success in 2023?

Contact us today to stay ahead of the trends and the competition in 2023.

Sustainability is in the headline news weekly, if not daily. It’s now a strategic issue.

Ignore it at your peril.

This post is the final one in a series on regulatory influence over sustainable supply chains. It is a forecast or future outlook of sustainability regulation on supply chains.

International and national trends and priorities will make sustainability a matter of priority.

We’ll unpack the trends and how they affect you. We’ll look at risks, including costs and benefits. We’ll also address how to achieve solutions that give you a competitive advantage. As always, we want to provide you with a path ahead that avoids risks while looking for opportunities.

Let’s get started.

The emergence of sustainability as a strategic asset

Since the 1970s, sustainability issues have risen in importance. The increase in government regulation, non-governmental regulation, and market-based regulation reflects that.

Government and the private sector are both engaged in reducing their environmental impacts. That includes their supply chains. That raises the question of how sustainability will develop over the long term.

In assessing the outlook of sustainability, we’ll inspect how regulations can affect supply chains. Specifically, we’ll look at the following:

• government-private industry cooperation,
• the rise and utility of technology, and
• the emergent role of innovation.

With that, let’s start with the emerging trend regarding government-industry interests.

Moving towards greater balance between competing interests

Moving into the future, it’s clear sustainability regulation is on the rise. All you have to do is look at the latest CIA World Factbook, 2020-2023. This is a source prepared by the CIA for its use and the government’s. It serves as a baseline of intelligence for making national security decisions.

In the 2021 issue of the Factbook, the CIA added environmental issues to its assessments. Environmental issues in the Factbook include Current Issues; International agreements; Air pollution; Climate; Land use; and Urbanization, to name a few.

The government’s interest in sustainability has grown and will continue to grow. The same is true for the private sector. Exxon is spending between $15 billion in the next five years. Exxon set aside this outlay of cash for specific programs.

Chevron, too, is dedicating vast sums, over $10 billion, to reduce carbon emissions. These are only two companies addressing sustainability. Many others are following suit and embracing the transition to sustainable operations.

Maersk also has an admirable sustainability program that focuses on “sustainability performance”. It has clear decarbonization goals making it a sustainability leader among ocean carriers. Case in point: it has aligned the company with the European Climate Foundation 2050 Net Zero carbon emission. And Maersk is on track to meet that goal.

As stakeholders embrace sustainability, cooperation between the public and private sectors should improve. That will likely stem from increased collaboration and coordination between government and industry.

In the years ahead, the inherent conflict of interest should diminish. Agreement on goals will help to cement agreement and foster cooperation. Economic opportunities will also encourage improved relations between regulators and industry.

Technology enables and drives sustainable supply chains

A key driver of increased cooperation between regulators and private industry is technology.

Stakeholders agree resources are scarce and becoming scarcer. They also understand the need to reduce their pollution footprint. Global competition is yet another stimulus advancing sustainability as a strategic issue.

As leading firms adopt “green” initiatives, they may set industry standards that exceed governmental standards. That would positively affect the environment and profitability. Additionally, some green initiatives can help reduce risk—a major issue in a world of increasing risks.

In 2022, we find ourselves relying increasingly on technology to deliver solutions. Technologies available to make operations more sustainable are as follows.

• Big Data
• Artificial Intelligence/Machine Learning
• Internet of Things (IoT)
• Additive Manufacturing (3D printing)
• End-to-End Visibility
• Automated and Electric Vehicles
• Drones and Robotics

That’s the picture in 2022. The future will likely offer more sophisticated technological solutions. These solutions will likely make operations leaner, more effective, and more efficient.

This may sound like Nirvana, and to a degree, it is. All the existing technologies businesses leverage today are in various stages of development/implementation. The future will see greater technological solutions enabling sustainable operations.

Innovation enables and drives sustainable supply chains

Like technology, innovation factors hugely in fostering sustainable supply chains. Innovation will likely increase out of sheer necessity. Government regulation, global competition, increasing supply chain risks, and opportunities will demand innovative solutions.

Chief among these will be the shift from regulations’ reliance on costs to benefits. Again, the tug-of-war between sustainability and economic goals will diminish. Technology and innovation will make opportunities and outlook of sustainability detectable. The shift in thinking will move from inherent conflict to mutual benefit. That change alone will propel the drive toward sustainable supply chains.

Corporations’ future depends on innovation for profitability and market advantage. These are positive drivers emphasizing the carrot over the stick. Thus, a new and positive approach will take hold. Once this happens, stakeholders can integrate sustainability into supply chain planning and execution. Along with increased cooperation among stakeholders, the future of sustainability looks bright.

The value of marketing sustainability issues

Marketing opportunities will also arise to appeal to customers. Stakeholders, especially customers, want to see corporations act more responsibly towards the environment. Non-governmental and market-based programs will factor heavily here to advance goodwill.

Conclusion of the outlook on sustainability

Sustainable supply chains are the wave of the future. Sustainability and supply chain management will work together seamlessly.

Sustainability regulation is here to stay, and it's growing. Businesses can influence the pace and nature of regulation by being strategic and proactive.

The path ahead is not set in stone. That means you can influence it. To do that, you must approach sustainability strategically and proactively. Governments and industry are moving from inherent conflict to mutual benefit. Regulations will balance costs with benefits. These approaches to regulation indicate the future of sustainability is on the rise.

At American Global Logistics, we focus vigorously on daily operations. We approach future operations with dedication and effort. Once we identify a potential trend, we explore it in-depth for risks and opportunities.

We go beyond ordinary standards. We seek extraordinary solutions to give you a competitive edge. We look at how we can convert challenges into opportunities.

If you want different results, you must do something different. Partner with AGL to get different results. We’ll help you improve your profits and performance.