By taking a proactive approach to supply chain risk management, your business can protect itself from disruptions and maintain its competitive edge.

• The shipping environment is prone to disruptions. Disruptions in transportation infrastructure and evolving consumer demands pose additional challenges that require proactive management.

• A robust supply chain risk management plan is essential. This plan should prioritize agility, resilience, and antifragility to navigate disruptions and maintain operational efficiency.

• To achieve agility, resilience, and antifragility, your business must diversify suppliers and transportation routes. 

• You must also invest in technology to streamline processes that enhance efficiency and improve visibility.

• Building strong relationships with suppliers and partners is essential in building a future-proofed supply chain. Collaboration fosters trust and facilitates effective problem-solving during disruptions.

• Continuously monitor and analyze supply chain performance. This enables proactive identification of potential risks and timely implementation of countermeasures.

Let’s get started by looking at what makes navigating the seas, the Red Sea, in particular, risky.

How to Future-Proof Your Supply Chain Against Uncertainty

In today's interconnected global economy, supply chains are more intricate and vulnerable than ever before. The shipping environment is prone to disruptions, ranging from political conflicts to economic fluctuations and logistical challenges.

This necessitates adopting robust supply chain risk management strategies to safeguard businesses from potential disruptions and ensure supply chain resilience.

Political Impacts

The dynamic shipping environment is fraught with political, economic, and logistical challenges that can severely disrupt supply chains. 

• Political instability and conflicts, exemplified by the ongoing Houthi attacks in Yemen, pose significant risks to supply chains. These disruptions can lead to delays, shortages, and increased costs.
• Government policies and regulations, such as tariffs and trade agreements, can also impact supply chains by affecting the flow of goods and the overall cost of doing business.

Economic Impacts

The cost of the crisis is already in the billions. With the continued punishing attacks on Iranian proxies,  expect the costs to grow, putting the global economy at even higher risk.

• Economic downturns and fluctuations in currency exchange rates can significantly affect consumer spending and demand, impacting supply chains and businesses' profitability.

• Rising fuel costs and other economic factors can also exacerbate transportation costs, affecting supply chain efficiency and increasing operational expenses.
• Moreover, changes in government policies and regulations, such as tariffs and trade agreements, can significantly affect supply chains and businesses' operations.

Logistic/Supply Chain Impacts

Logistic and supply chain disruptions further exacerbate the risks. 

Disruptions in transportation infrastructure, such as port congestion and strikes, can cause delays, increase costs, and lead to inventory shortages.

Changing consumer demands and preferences can also disrupt supply chains, requiring businesses to adapt and adjust their strategies to meet evolving market needs.

Building a Robust Supply Chain through Agility, Resilience, and Antifragility

Developing a robust supply chain risk management plan is paramount in light of these challenges. This plan should prioritize agility, resilience, and antifragility to navigate disruptions and maintain operational efficiency. 

Agility enables businesses to swiftly adapt to changing conditions, while resilience ensures the ability to withstand and recover from disruptions. Antifragility takes resilience a step further, allowing supply chains to thrive and grow in the face of adversity.

Key Elements of an Effective Supply Chain Risk Management Plan

Identifying and assessing risks 

The first step in any risk management plan is to identify and assess the potential risks to your

supply chain. This can be done by conducting a risk assessment to help you identify each risk's likelihood and impact.

Developing mitigation strategies

Once you have identified the risks, you must develop strategies to mitigate them. This may involve diversifying your suppliers, investing in technology, or building strong relationships with partners.

Monitoring and reviewing your plan 

Your supply chain risk management plan should be a living document that you regularly monitor and review. This will help you to identify new risks and ensure that your mitigation strategies are still effective.

To achieve agility, resilience, and antifragility, supply chain risk management plans should focus on:

• Diversifying suppliers and transportation routes. This reduces reliance on single sources and mitigates the impact of disruptions. It’s akin to diversifying your investment portfolio. You don’t put all of your assets (or overweight them) into one investment.
• Investing in technology and automation: Automation streamlines processes, enhances efficiency, and improves visibility. It’s a given that technology investment is crucial to building sense-and-respond supply chains.
• Building strong relationships with suppliers and partners. Building partnerships will help amplify your supply chain’s capabilities. Collaboration fosters trust and facilitates effective problem-solving during disruptions.
• Continuously monitoring and analyzing supply chain performance: Data analytics are important today. They will be even more important in the future.This enables data-based decision-making. In terms of SCRM, the proactive identification of potential risks and timely implementation of countermeasures takes SCRM to another level.

Conclusion

The volatile shipping environment demands a proactive supply chain risk management approach.

The growing volatility in the shipping environment underscores the critical need for supply chain risk management. When developing risk management plans, you must proactively address political, economic, and logistical/supply chain impacts. 

By building agility, resilience, and antifragility into your supply chain, your SCRM plan can provide tangible benefits while future-proofing your supply chain. 

Managing these risks to be more flexible and responsive, you can mitigate disruptions, protect profitability, and maintain your competitive edge in today's challenging shipping landscape.

American Global Logistics (AGL) has the resources and the network to protect your business from disruptions. 

Besides protecting your business from disruptions, the AGL Team can help improve your competitive edge.

Contact us today. We're here to help you build a flexible, responsive supply chain that meets your customers' needs. 

Understanding the underlying data and their trends can influence how you run your business, shaping your success in these volatile, uncertain, complex, and ambiguous (VUCA) times. It helps monitor important economic and supply chain signs when things are uncertain. Doing this can give you an edge over your competitors when looking at the 2024 supply chain landscape.

Regular monitoring of key economic and logistics indicators provides direction. They’ll help navigate your business through today’s VUCA.

With that follows our quarterly update on key strategic economic and logistics indicators.

First, we cover macroeconomic indicators and a supply chain pressure index to get a big-picture snapshot. Then, we get more specific and examine logistics measures captured by the Logistics Managers’ Index (LMI).

We’ll start with the key macroeconomic indicators.

Key Economic Indicator #1: Gross Domestic Product (GDP)

The Bureau of Economic Analysis (BEA) reported that the annual US GDP rate increased in December 2023. The fourth quarter recorded an increase of 3.3 percent. In the third quarter, real GDP increased 4.9 percent.

That shows a decline in GDP from the prior quarter. However, the BEA advised this estimate was based on incomplete data. Hence, the BEA expects to release a revised estimate based on more complete data. NLT February 28, 2024.

That reflects an increase of 0.4% from August’s data and 6.9% from the year-over-year data. Consumer spending, business investment, and exports contributed to the increase in GDP. The annual GDP growth rate was 2.5 percent, led by consumer spending.

Another powerful sign was inflation, which declined more than expected. It came in at less than 2 percent, below the Fed's guideline.

Combined, these indicators suggest the economy is strengthening but growing slower. Overall, the economy is doing well. (Data is as of January 25, 2024.) Next, we’ll look at the Consumer Price Index.

Key Economic Indicator #2: Consumer Price Index or Inflation

The CPI measures the average price change urban consumers pay for a market basket of goods and services. (Data is as of January 11, 2024.)

December’s Consumer Price Index (CPI)

The BEA reported the CPI increased 0.3 percent in December. That represents an uptick from November’s rise of  0.1 percent. On an annual basis, the all-items index rose 3.4 percent before seasonal adjustment. You can access detailed CPI data here.

Key Economic Indicator #3: Recession–Business Cycle Contraction

As of December 2023, the Wall Street Journal reported that a soft landing was in the making. Based on a survey of economists, the WSJ reported expectations of recession had dropped markedly.

In line with that, the WSJ projected that the 2024 supply chain would likely maintain last year’s expansion but at a slower rate.

The main line is that a recession is not likely. Rajeev Dhawan, an economist at Georgia State University, described the current environment as “… less (of) a recession and more of a growth stop”. (Information is as of January 25, 2024.)

That brings us to our next indicator: national employment.

Key Economic Indicator #4: Employment or the National Employment Report

The ADP National Employment Report is a monthly economic data released by Automatic Data Processing (ADP). ADP is a leading payroll services company. The ADP National Employment Report helps to unpack the health and direction of the U.S. labor market. Its report provides up-to-date employment statistics, analysis, and trends.

December’s ADP National Employment Report showed that private businesses increased private employment by 164,000 jobs. Job gains came from an increase in the leisure and hospitality industry. Job gains increased across the board from small- to large businesses. It appears the job market is returning to its pre-pandemic levels. (Data is as of December 2023.)

With that, let’s turn to and analyze PMI-Manufacturing.

Key Economic Indicator #5: PMI-Manufacturing

The S&P Global US Manufacturing PMI for December 2023 decreased to 47.9 from November’s reading of 49.4. That’s a decrease of 1.5, the fastest rate since June 2023. This means the economy slowed down at the end of the year. (Data is as of January 2, 2024.)

In late January, prices experienced a slower growth rate based on the S&P Global Flash estimate.

Here are S&P’s key findings:

• Flash US PMI Composite Output Index. Came in at 52.3—up from 50.9 in December; this reflects a 7-month high.
• Flash US Services Business Activity Index. This indicator also flashed a 7-month high at 52.9 up from 51.4 in December.
• Flash US Manufacturing Output Index. This indicator came in at 48.7, up slightly from 48.1 in December. This reflects a 2-month high.
• Flash US Manufacturing PMI. This flash metric registered at 50.3 in January at 47.9, up from 47.9 in December. This was a 15-month high.

The flash PMI results signal a change from PMI-Manufacturing last month. The most current data show growth picking up. This was the highest increase over the past seven months.

That concludes our review of our key macroeconomic indicators. Now, we’ll analyze our supply chain and logistics indicators.

2024 Supply Chain and Logistics Indicators

Global Supply Pressure Chain Index (GSCPI)

The Global Supply Chain Pressure Index (GSCPI) is a new measurement. The Federal Reserve Bank of New York created GSCPI to measure global supply chain conditions. It assesses supply chain conditions by integrating transportation costs and manufacturing.

The GSCPI combines variables from several indices in transportation and manufacturing. This helps to provide a comprehensive summary of potential supply chain disruptions.

Last month, the GSCPI fell to -0.15 in December. That declined from 0.13 in November (adjusted from an initial reading of 0.11). GSCPI readings measure standard deviations from the index’s historical average. (Data is as of Dec 23.)

Next, we’ll review logistics-specific indicators reported in the LMI Index.

Logistics Manager's Index (LMI).

“The Logistics Manager's Index (LMI) is a monthly indicator of the health of the US logistics industry. It is calculated by the Council of Supply Chain Management Professionals (CSCMP) and is based on a survey of logistics professionals. The LMI is a leading indicator of economic activity, and it is often used to predict future changes in the US economy.”

Here’s the current status as of December, starting with the aggregate measure.

In December 2023, the LMI was at 50.6. That reflects a slight increase of 1.2 from November’s reading of 49.4. Although this has improved since last month, it suggests slow growth, not no growth.

Inventory Status: This measure is mixed. Inventory levels are contracting, but costs showing no change. Inventory levels remained the same at 44.3.

Warehousing Status: Warehousing is expanding in all three measured categories: capacity, utilization, and process.

Transportation Status: Transportation is expanding in two areas: capacity and utilization. Pricing, meanwhile, is contracting. Prices increased 6.3 from 55.8 to 62.1.

Let’s analyze what these changes mean for inventory, warehousing, and transportation.

• The logistics industry is expanding, but at a slower rate than in previous months.
• Inventory levels are decreasing, and inventory costs are holding.
• Warehousing capacity is increasing at a faster rate than in previous months. December’s rate was 55.1, showing increased capacity from November’s higher capacity rate of 60.6.
• Warehousing utilization and prices are increasing. The rates for December over November were 7.4 and 1.2, respectively.
• Transportation capacity and utilization are increasing, while transportation prices are decreasing. Capacity increased by 1.4. Utilization increased by 4.6. And prices declined by 1.1, from 44.2 to 43.1.

The overall expansion of the logistics industry is positive news for the economy. It indicates that the economy is growing, albeit slowly, and that businesses are doing well. Future growth estimates denote expansion up to 59.9 from November’s projection of 57.4

The logistics industry is transforming. That adds elements of  VUCA. To survive, you must address these challenges.

That said, the economy seems to be on a strong footing as it recovers from the pandemic. These economic and logistics indicators reflect an improving business environment.

Analyzing data from year-to-year and month-to-month provides meaningful context. That informed context enables us to refine our forecasts and better prepare by optimizing supply chains in 2024.

And that allows you to operate in challenging times with confidence. In turn, this will lead to better results, giving you a competitive edge.

Your partner in navigating the 2024 supply chain

At American Global Logistics (AGL), we monitor what’s happening in the economy. That’s because the economy seems to play an outsized role in global supply chains.

Our data-driven approach keeps our customers informed about upcoming developments. This proactive strategy allows us to mitigate risks instead of reacting to events.

As a future-oriented 3PL, we rely on data to guide our strategy. Even if mixed, detailed data is far better than no data. Using our data-driven approach, we can transform VUCA into an advantage for you.

Contact AGL if you want to move your business ahead with data-based decisions.

Supply chain management is undergoing a seismic shift. Professionals must adapt to an age of swirling change, breakneck technological advances, and customers demanding more. The old status quo cannot manage these disruptions in the 2024 supply chain. 

To get ahead of these tectonic shifts, identifying emerging trends will help you navigate the coming 2024 supply chain changes. These trends represent the imperatives of future supply chains. Companies that embrace them will thrive despite the expected disruptions.

Without further ado, let's start with supply chain management.

Supply Chain Management

With disruptions likely to persist in 2024, developing supply chain resilience and agility will be crucial. We foresee reliance on control towers, scenario modeling, and dynamic risk management to enable quicker responses and ensure continuing operations. 

Companies will also expand local and regional supplier bases to hedge risks. Onshoring and nearshoring will become increasingly popular to shrink supply chains globally. Using standardized analytics and artificial intelligence will help enable flexibility.

Businesses need the flexibility to sense real-time changes to pivot sourcing, production, and logistics accordingly.

Global Logistics

Geopolitical tensions, climate events, and the pandemic aftermath will further spotlight logistics network flexibility and visibility. Shipping costs could remain high due to fuel costs, port congestion, and container shortages. 

We expect the ongoing focus on the following:

• Port infrastructure improvements
• Nearshoring and onshoring
• Creative routing options using all transportation modes from ocean to air freight. 

Companies must have comprehensive contingency plans. They should include logistics partners across multiple regions. That would enable the rerouting of goods quickly as country-level disruptions occur.

De-globalization is alive and well. It is surging as geopolitical events take front and center in the world. The Russian-Ukrainian war is entering its third year. The ongoing Hamas-Israeli war threatens to expand as shipping lanes become precarious.

Negative effects will likely result. Some are higher prices, reduced choice because of smaller inventories, and possibly less innovation. 

Next, let’s address supply chain risk management in the 2024 supply chain.

Supply Chain Risk Management 

Monitoring risk across expanded supply chains will intensify - from assessing supplier financial solvency to identifying extremist events that could disrupt operations. Simulating crisis scenarios and preparing mitigation steps will enable agility. 

We expect continued adoption of real-time supply chain monitoring, simulation, and preparedness tools. Strategies like dual sourcing, increasing buffer stock, and supply chain finance may provide stability when the unexpected occurs.

One of the greatest risks affecting the supply chain is cybersecurity.

Cybersecurity

Cybersecurity poses a major threat to supply chains in 2024 and beyond.

Increased Digital Surface Area

Technology has advantages and downsides. As supply chains adopt IoT devices, cloud-based platforms, RFID tech, etc., they increase their exposure to cyber-attacks. Leaders will have the added complexity of monitoring and securing a vast digital infrastructure.

Targeted Attacks 

Highly coordinated, data-driven supply chains are attractive targets for hackers. Attacks could shut down production systems, disable logistics visibility, spoof orders, or taint data integrity. Leaders could even face extortion by attackers threatening disruption.

Vulnerable Technology Partners  

Also, with extensive supplier and technology partner integration, exposure along the supply chain increases risk. Leaders will need air-tight cyber protocols across their ecosystems.

Insider Threats 

Even accidental breaches by employees or partners via phishing scams or misplaced devices could disrupt operations. Stringent access controls, cybersecurity training, and data protection will be imperative.

Lack of Visibility

Tracking cyber risks across complex, global supply networks will be extremely challenging. Leaders can't secure what they can't see. So, transparency into network traffic, data access, and user activity will be key.

Adopting a proactive, risk-sensitive security mindset will be key to managing cyber risks in the 2024 supply chain. Supply chain leaders must employ mitigating steps. They include proactive monitoring, state-of-the-art defenses, cyber-attack response plans, and vigilant culture-building. 

Key challenges and opportunities around supply chain costs

Cost Management Challenges

• Persistent inflation and disruptions will sustain higher supply chain operating costs. Leaders will struggle to balance absorbing costs vs. raising prices.
• Transport costs will remain volatile, with fluctuating fuel prices and ongoing shipping container/truck driver shortages.
• Holding excess buffer inventory to hedge risks will be expensive with high working capital demands.

Cost Mitigation Opportunities 

• Leverage predictive analytics and demand sensing for optimizing orders and inventory levels.
• Revise and update supplier and 3PL contracts, switching to more cost-efficient transport modes. 
• Nearshore manufacturing and streamlining distribution to save costs.

Customer Centricity Challenges

• Disruptions, long lead times, and lack of supply visibility will persist, testing customer trust. 
• Sustainability concerns around packaging, emissions, and ethical sourcing continue mounting.
• Data security and privacy concerns could escalate with tech advances.

Customer-Focused Opportunities

• Improve order/delivery accuracy and reliability through supply chain automation initiatives.
• Offer complete supply chain transparency around sourcing, sustainability, and fulfillment cycle times.
• Provide exceptional order tracking visibility and flexibility around delivery dates, shipment splitting, and return options.
• Invest in cybersecurity and data privacy protection overtly.

Along with customer experience and profit margins, leaders can leverage innovation to build customer loyalty and achieve cost targets. These steps can guide companies through even the most turbulent conditions in 2024.

A boon to modernized supply chains is technology. But it also presents some challenges.

Emerging Technologies

Innovations like autonomous vehicles, drones, artificial intelligence, 5G cellular data, cloud computing, and blockchain will increase traction. That will lead to greater automation, optimized logistics operations, end-to-end transparency, enhanced prediction capabilities, and increased productivity. 

Warehouses and transportation will also benefit from emerging technologies. Warehouses will become more automated. They will use real-time supply chain data. Accessibility will increase, and processes will improve in efficiency.

Today’s hybrid model of work is as important as emerging technologies.

Work Models

Businesses could widely leverage remote and hybrid work options to access talent and maintain operations through disruptions. Providing work/life balance, emphasizing diversity & inclusion, and nurturing company culture will be vital in retaining skilled, motivated teams.

Supply chain leadership demands will heighten as volatility persists, requiring originality, transparency, collaboration, and responsible vision.

Pre-pandemic supply chains had genuine issues that hampered the seamless flow of goods and services. Post-pandemic supply chains are more, not less, unstable. That will impede the seamless flow of goods and services. Here are some of the key leadership challenges I foresee in supply chain management in 2024.

Managing Complexity and Volatility

Supply chain disruptions will likely continue. That means leaders must manage fast-changing situations and make quick decisions amidst uncertainty. They must apply sophisticated data modeling to assess risks and simulate scenarios.

Driving Innovation  

Leaders must stay on top of emerging technologies like AI, blockchain, robotics, and autonomous transport and implement those that improve resilience, sustainability, and productivity. They'll have to understand technical possibilities and their business application.

Enabling Agility

Leaders will need to architect flexible, dynamic supply chains and instill a culture of responsiveness across their organizations. This means obtaining support from different departments, empowering teams, and establishing processes that can grow with the organization.

Attracting and Retaining Talent

The talent shortage could intensify with high churn and retirement rates. Leaders must build contemporary businesses. They need to create attractive work environments.

Prospective employees will view progressive companies more favorably and draw more desirable candidates. They must also address employees’ personal as well as professional concerns. 

To be competitive in the employee market, businesses must offer remote and hybrid work options. Today’s job candidates are driving the new work arrangement that considers personal and professional matters. 

So do family-related issues. Policies that address employees’ concerns will attract new employees more easily. Companies with outdated policies lag behind their competitors.

Corporate cultures should value flexibility and work-life balance. So, leaders must also focus on upskilling teams and providing engaging career paths. Lastly, leaders must build inclusive, purpose-driven work cultures.

Unlike in pre-pandemic times, the sustainability of your company’s long-term survival is a near-term concern. The planning horizon now extends strategically beyond the present.

Boosting Sustainability

With growing stakeholder demands around ethics and ESG, leaders must exemplify values-based, sustainable practices and transparent reporting. This requires customer education, impact analytics, carbon reduction expertise, and ethical sourcing finesse.

The complexity of challenges in 2024 will demand a lot from supply chain leaders. Investing in resilience, vision, technological prowess, leadership skills, and responsible innovation will be key.

Agility requires flexibility and speed. Agile supply chains must be flexible across operations. Next, supply chains must be able to adjust strategies quickly in response to changes in supply, demand, and risk scenarios. Transparency depends on capturing reliable data to determine what happens at every key step and location. 

Resilience means having strategic alternatives in place and established buffers and redundancies. Your company will also need the capacity to respond rapidly to potential disruptions. Companies that cultivate these three attributes will position themselves best to address escalating volatility ahead.

Sustainability 

Consumer and regulatory pressures on ethics, environmental impact, and social responsibility will intensify. Companies will need carbon-tracking tools, investments in clean transport modes, and resource conservation tactics. 

They will also need circular supply chain models, ethical sourcing policies, and waste reduction systems. Renewable energy investments, carbon offsetting, and comprehensive ESG frameworks will become essential for responsible operations.

In 2024 and beyond, you must cultivate agility, transparency, and resilience to gain a competitive edge. Strategic planning will position your business to navigate the landscape ahead.

How to Navigate Global Supply Chain Trends in 2024

Last year was a volatile year. But this year promises to be even more volatile—many risks will dominate global supply chains. And supply chain risk will increase thanks to the increase in using technologies. 

Furthermore, the convergence of risks amplifies the overall risk. It’s a perfect storm in the making. As a result, business leaders must seek new ways to manage in an environment with heightened risk. 

They must have viable contingency plans. They must be agile to make quick decisions based on real-time data and events.

Leaders must also embrace uncertainty. They must develop preventive mindsets to build teams with a supportive culture. That includes developing useful training. 

Finally, sustainability and other corporate values must become strategic elements rather than an afterthought. Good corporate citizenship must extend beyond corporate interests.

That makes sense when you think about it. It provides your business with valuable insights you might have missed. Also, involving the customer helps achieve support more easily. It benefits both parties.

Here’s the bottom line. Future global supply chains should be agile, resilient, and responsive.

Conclusion

At American Global Logistics (AGL), we are prepared to help companies navigate the complexities of global supply chains in 2024 and beyond. As an established 3PL, we have our finger on the pulse of emerging trends while never losing focus on flawless execution.

We empower businesses to avoid disruptions. More than that, we can help your business turn uncertainties into competitive advantages. We do that by building agile, resilient, and responsive supply chain solutions. 

With AGL as your partner, you can leverage our reliability, efficiency, and cost-effectiveness to drive growth despite market volatility. Our customized services can give your company the dynamic supply chain capabilities you need to thrive in 2024. By working together, we can unlock your organization's full potential.

We invite you to contact American Global Logistics to discuss how you can thrive in 2024.