Six Factors Driving Logistics into 2020

Six Factors Driving Logistics into 2020

Author: Karen Roemer, Account Manager at Expeditors

How will we move the economy of 2020? We live in both an exciting and tumultuous time. Buyers globally call for companies to adopt faster and leaner supply chains to deliver products almost instantaneously. Carriers are recovering from the market shocks of 2016. Organizations are calling for more talented professionals to manage the growing complexity of supply chains. Several key demand- driven factors will dictate the course of the logistics industry into 2020 and beyond.

 

1. Consumer Demand

Ecommerce sales are rapidly gaining traction in almost all retail verticals. From banking to healthcare to clothing, companies need to reach their end users on all digital platforms. However, consumers don’t want to abandon the brick and mortar tradition. The answer to this dichotomy is the omni-channel. Omni, a Latin word meaning “all”, describes an all- encompassing retail strategy that includes both digital and physical forms of selling and delivery. The future of retail lies in the hands of consumers and their electronic device of choice.

This phenomenon calls for faster, more robust supply chains to equip omni-channel retail environments. Both 3PLs and carriers must prepare for an increase in just-in-time manufacturing and shipping in response to buying expectations. Smaller shipments and lot sizes will increase mixed freight LTL. Retailers will start to utilize local stores as secondary fulfillment centers to execute same day, or in some cases same hour delivery. We see evidence of this in Amazon’s acquisition of Whole Foods Market. This move by “The Everything Store” will certainly up the ante for grocers but the strategic geographies of Whole Foods locations will simultaneously serve as last mile DC’s for other Amazon products in wealthy urban centers.

More shippers will partner with 3PL companies to enhance agility, expand geographic access, add capacity and improve visibility through technology. These partnerships also help mitigate risks for shippers in volatile economic environments.

 

2. Technology

The logistics industry will benefit from technological advancements that improve speed, efficiency and visibility. Two major disruptors of the 2020 logistics landscape include autonomous vehicles and Blockchain.

Leading automotive manufacturers along with tech companies are racing to develop the best driverless cars and trucks. With prototypes already tested, it is only a matter of time before these vehicles become status quo. The logistics industry will most likely implement the use of driverless vehicles ahead of others. Logistics companies can leverage autonomous vehicles in closed environments such as warehouses and port complexes. Eventually, these vehicles will enhance last mile delivery and regular line-hauls. In 2020 we can expect to see increased use of automation in distribution centers but presence on the road will depend on demand by the public in conjunction with cooperation between manufacturers and lawmakers[1].

Originally developed as a general ledger for Bitcoin, Blockchain also potentially benefits logistics companies and shippers. This complex framework of computing nodes speeds up supply chains by transferring titles and records through layers of the supply chain in real time. Blockchain provides transparency for customers and auditors and greater security for all parties involved. Transactions made on Blockchain platforms will openly track purchase agreements, customs clearance information, title exchanges and shipment movement. Think of it as a hyper accurate tracking system for data and transactions that will help eliminate waste and prevent fraud. Deloitte predicts 10% of global GDP will reside in Blockchain enabled platforms by the year 2025[2].

 

3. Global Markets

Growth in global markets will depend on increasing demand for traded goods along with infrastructure development. PwC predicts that entering 2020, Asia will continue to lead the world in export growth and market dominance[3]. China’s One Belt, One Road initiative plans to inject billions into maritime infrastructure increasing trade lane efficiency between Asia and Europe. This initiative creates further trade access for 65% of the global population[4]. China will most likely benefit from the US’s withdrawal from the TPP. New trade agreements such as the RCEP will spur rapid export growth out of other developing Asian markets such as Vietnam and Thailand.

Emerging markets in Africa will experience the largest percentage growth in transportation as countries continually invest in relevant infrastructure[5]. Latin American countries will continue improving roads in response to growing GDP per capita. Supply chains will further rely on faster modes of transportation requiring further development of railways and distribution centers globally.

Natural gas trade will increase into 2020 as analysts predict the peak market for oil is on the horizon. Ports and shipping companies increased capacity and capabilities for shipping LNG and will continue this expansion over the next few years[6]. The LNG spot market has created more room for investors increasing LNG’s international popularity. BP forecasts LNG will become the leading form of traded gas in the next twenty years[7].

Other popular commodities logistics companies will expect to move in 2020 include electronics, machinery, vehicles and pharmaceuticals. Domestic carriers should expect more mixed loads as companies increase the use of crossdocks and local fulfillment centers to service just-in-time deliveries.

 

4. Ocean and Air Markets:

Last year was tumultuous in the ocean freight market. Recent bankruptcies and excess capacity led rates to plummet and steamship lines to keep vessels idle. Hanjin’s demise left billions of dollars of cargo floating at sea for weeks. However, 95% of internationally trade goods still move on ocean vessels. The ocean market is experiencing steady recovery in 2017[8]. Recent consolidations will regulate capacity and drive up rates at a moderate pace into 2020[9]. Both ocean and air carriers are limiting contractual space and increasing volume in the spot market. Shippers should expect to increase their freight spend starting in 2018. The Ocean Alliance now consisting of Evergreen, OOCL, Cosco and CMA CGM will dominate nearly 40% of the ocean freight market out of Asia. China’s commitment to port infrastructure will catalyze increased ocean traffic between Europe and Asia. Global ports will compete for business by further implementing automation for efficiency and expanding in size to handle larger vessels.

Air markets suffered similar consequences from overcapacity last year. However, steady hikes in demand out of Asia and Europe currently aid recovery. According to IATA, the largest airfreight markets by tonnage worldwide in coming years will remain the United States, China, Germany, Hong Kong and the UAE in that order. Some developing nations will contribute to growth in global air freight including Vietnam, Bangladesh, Brazil and Peru[10]. Rapid development in ecommerce and just-in-time manufacturing will also benefit the air freight industry.

 

5. Sustainability

Although President Donald Trump discontinued US participation in the Paris Climate Accord, many cities, states and major corporations remain vigorously committed to abating greenhouse gasses. Improving efficiency in logistics programs will help companies meet their sustainability objectives. Efficient engines coupled with more consolidated freight and fewer dry runs will naturally reduce overall emissions while companies cut costs in their supply chains[11].

Customers will also hold retailers and manufacturers accountable. Delivering great products at low prices is not enough for many millennial buyers. The growing ethically conscious consumer base possesses unparalleled access to information. Transparency and ethical integrity will gain further importance in building credible brands that will survive in the marketplace of the future.

 

6. Talent

Supply chains are becoming cornerstones of nearly every company’s success strategy. These complex systems involve everything from engineering to finance to logistics to information technology. The best supply chain leaders understand how all these factors harmonize to meet the goals of their organization.

Deloitte reports growing demand in these supply chain skills: supply chain optimization, demand forecasting, business planning, supplier management, risk assessment and implementation of technology.

As logistics footprints become increasingly global, companies look to hire more compliance analysts and managers with comprehensive experience in export compliance, government agency requirements and customs brokerage. Wages for trade compliance managers are also increasing upwards of $120,000 in technical industries[12].

Logistics professionals should expect job security and wage growth into 2020. However, companies already demand higher caliber workers often with education beyond college. Language skills will also be a plus. Many universities are racing to fill the logistics and supply chain talent gap by offering industry certifications, specialized master’s degrees and focused MBA programs. Many STEM certified supply chain programs integrate business and engineering to produce supply chain professionals with robust capabilities. Educational institutions must keep pace with this burgeoning industry that keeps evolving and demanding more.

 

Conclusion

Technology and intensifying consumer demand will shape the logistics industry of 2020. Organizations must equip their employees to succeed in the future by training them in technology, compliance and analytics. The real cost in supply chains no longer lies in freight rates but in failure to deliver the right product at the right time. Companies should look to align themselves with strategic, knowledge based logistics partners that provide value added services that strengthen agility, compliance and increase access to emerging markets.

To prepare your organization for the dynamic logistics world of 2020, attend industry relevant events to learn best practices from those at the helm of the world’s most advanced supply chains. The 2017 USC Supply Chain Excellence Summit will feature distinguished speakers from the likes of Google, Johnson and Johnson, FedEx and more. Reserve your seat today!

http://globalsummit.uscsupplychain.com/

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[1] Heutger, Matthias, and Markus Kückelhaus. “Self-Driving Vehicles – The road to the future?” DHL | Self-Driving Vehicles | English. N.p., n.d. Web. 19 June 2017.

[2] “Blockchain: Trust economy.” DU Press. N.p., n.d. Web. 19 June 2017.

[3] PricewaterhouseCoopers. “Global Economy Watch.” PwC. N.p., n.d. Web. 19 June 2017.

[4] “China’s One Belt, One Road: Will it reshape global trade?” McKinsey & Company. N.p., n.d. Web. 19 June 2017.

[5]   PricewaterhouseCoopers. “Future prospects in Africa for the transportation & logistics industry.” PwC. N.p., n.d. Web. 19 June 2017.

[6] APA MLA Chicago

Bordoff, Jason. “How Liquefied Natural Gas Will Transform Global Energy Markets.” The Wall Street Journal. Dow Jones & Company, 24 May 2017. Web. 19 June 2017.

[7] “BP Energy Outlook.” Bp.com. N.p., n.d. Web. 19 June 2017.

[8] Ocean Alliance. N.p., n.d. Web. 19 June 2017.

[9] “GEP Worldwide.” GEP. N.p., 18 Mar. 2016. Web. 19 June 2017.

[10] Iata. “Search.” IATA – Air Freight Monthly Analysis. N.p., n.d. Web. 19 June 2017.

[11] Cerasis_IT. “5 Improvements from Logistics Sustainability.” Transportation Management Company | Cerasis. N.p., 24 Nov. 2015. Web. 19 June 2017.

[12] Salary.com, Site Built by:. “Compliance Manager Salaries.” Compliance Manager Salaries by education, experience, location and more – Salary.com. N.p., n.d. Web. 19 June 2017.

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