Pandemic-related factory closures, national lockdowns, fluctuating demand and labor shortages have rattled supply chains and lead times across various industries, particularly those that rely on supply from China and other parts of East and Southeast Asia. With supply chain volatility continuing into the new year, many companies are making changes to prepare for future disruptions, leading to larger trends such as greater consolidation efforts, automation, sustainability initiatives and more.
Rise in Consolidations
In an effort to strengthen their resources and reduce competition, many companies are choosing to consolidate, a trend that will likely increase in 2022. Mergers and acquisitions will be more prevalent than ever in the logistics space, as large industry players acquire smaller ones, and smaller ones merge to become more formidable.
Instead of third-party logistics operations with one to three warehouses, we’ll start to see ones with 50-plus warehouses, as they acquire real estate and geographic territories. Whoever has the most coverage territory and tech to move goods at lightning speed will gain the competitive advantage.
Growth of Automation
In 2022, the industry will see a rapid adoption of robotics that will equip warehouses with the technology needed to keep up with the high demand of e-commerce and global supply chain shifts. Given the increasing complexity of supply chains and consumer demand, adding machine intelligence to the solution will help planners better solve ever-shifting supply chain equations.
With the growth of the warehousing industry and greenfield warehouse development, companies will increasingly adopt the latest warehouse technology, including wearables, to track productivity and improve scanning efficiency. Additionally, hybrid models that allow robots and humans to work together will continue to proliferate as more capital is devoted to automation technology to reduce material handling costs.
Increased Logistics Costs
The year 2021 saw the explosion of logistics costs. As online consumer shopping, inflation and energy costs continue to drive prices higher, we can expect even more cost increases in 2022. Trucking costs rose 36% year over year in 2021, fueled by pandemic consumer demand and bottlenecked materials and ports. As long as these challenges continue, another 30% increase is expected for the trucking industry in 2022, while consumer prices may increase upwards of 10%.
Return to the Workforce
The Great Resignation in 2021 touched all sectors, but especially dealt a blow to warehousing and material handling. Though hiring and retention took a dip this year, it’s likely that job seekers will return to the warehouse as more companies offer competitive wages, work technology and benefits for warehouse workers. As logistics workers take time to examine which companies have better benefits, company culture and work-life balance, we’ll see a resurgence of employees entering the workforce. Full recovery might not be immediate, but the industry is set up to rebound post-holidays, especially since jobless claims recently hit a 50-year low. The hope is that it can only go up from here.
Going Green
Climate-change advocacy groups and consumers’ growing efforts to be more environmentally responsible have been pushing supply chains to cause less harm to the environment. With green consumerism on the rise, more companies are expected to implement eco-friendly supply chain processes in the coming years.
Electricity and transportation are major contributors of greenhouse gas emissions in the U.S., so green logistics are quickly gaining traction among companies. Eco-friendly warehouses feature advanced energy management systems that use timers and gauges to monitor usage of electricity, heat, water and gas over all facilities, helping to prevent excessive waste of resources.
Electric and solar-powered vehicles are also becoming more prevalent, as they can help reduce the overall carbon footprint of supply chains. Similarly, climate-smart supply chain planning will be impacted as environmental shifts brought on by climate change affect the availability of materials and resources, posing potential disruptions to supply chains. Companies will have to consider these factors and look for other resources if necessary.
Shift to Circular Supply Chains
Though this will take many years to implement on a large scale, 2022 could see circular supply chains, where manufacturers refurbish discarded products for resale, start to eclipse linear supply chains. To deal with the rising costs of raw materials and their volatile availability, many companies are opting to break down their products and turn them back into their raw material form. Though there’s always an initial cost of implementing new processes, looping the supply chain in this way can help cut costs in the long run, resulting in long-term savings. With a circular supply chain, companies can spend less on raw materials and, in turn, enjoy a reduced risk of price volatility. Moreover, a circular supply chain creates less waste, helping companies reduce their overall impact on the environment.
Stricter government regulations on recycling and waste disposal may also push companies to consider adopting the circular supply chain. Businesses with sustainable practices stand to gain incentives for their efforts, not only from the government but also from consumers, a majority of whom prefer environmentally friendly products.
The good news is that pandemic-inspired disruptions forced the industry to innovate faster than ever, and companies are increasingly deploying new software, tools and machine intelligence to better manage short-term volatility. From the expanding role of human-plus-machine intelligence — or augmented intelligence — to increased eco-friendly initiatives, 2022 is shaping up to look different from years past.
Gabe Grifoni is chief executive officer of Rufus Labs.
This article first appeared in Supply Chain Brain
