Global trends in shipping continue to evolve in the wake of uncertainty and risk. The recent outbreak of the Coronavirus threatens to undermine use of shipping options that would involve air freight between the U.S. and China, explains Wired. New hazmat regulations are taking effect in 2020. Retailers are trying to stay evergreen and compete with Amazon. The list of risks is endless, and the only way to really succeed will lie in understanding the trends in shipping by vertical and a few key sectors that require vigilance in the coming year.
Regulatory change has never been an easy concept for managing supply chains, and 2020 is on track to be the year in which regulations will dominate the headlines. The recent Coronavirus outbreak is on track to result in a 50% capacity reduction for airfreight through Cathay Pacific, says Supply Chain Dive. Even the pharmaceutical supply chain is at risk, despite no reporting as of January 31 of such risks. Labor resources are at risk too. “China’s more integral part in the global supply chain today means a decline in its output has the potential to disrupt U.S. production. ”
Europe is on track to force manufacturers to produce automobiles and spare parts with net-zero impact on global carbon dioxide levels, and in the U.S., major trade conflicts and tariffs undermine the efficiency of traditional supply chain planning.
To combat these effects, all verticals need more data and informed decision making to mitigate the risk of disruptions. There will be a gradual shift of Less-than-truckload (LTL) shipping to parcel shipping for imports, but even still, the demand for LTL may be higher. If air freight, responsible for a multi-modal leg of parcel shipping, falters, LTL shipping will be necessary to maintain supply chain stability.
Trends in shipping derive from Amazon and Walmart. These major retailers have taken the e-commerce world by storm and show no sign of letting up. Moreover, Walmart is ramping up to force suppliers’ hands in providing ultimate transparency from origin through storefronts. Meanwhile, the increased use of buy online pick up in-store fulfillment will imply a need for more transparency in all shipments deriving from stores and distribution centers alike. Additional risks within the retail market include the need to avoid counterfeit products, again regarding transparency and the ability to leverage parcels and LTL capacity throughout the global supply chain.
Pharmaceuticals, which fall under the purview of retail, will also suffer setbacks in 2020. As U.S.-China tariffs rise, drug manufacturers abroad may require more advanced notification for replenishment and greater use of LTL shipping to reduce the potential points of origin and lower tariffs. The same applies to the current issue involving the Coronavirus. Global trade regulations affecting carbon emissions—regardless of the U.S. stance—will influence more manufacturers and resellers to take advantage of the greenest, most sustainable means of shipping.
According to Joe Harris via Supply Chain Brief:
“Green logistics not only helps the environment but can lower costs and increase customer loyalty and organizational goodwill. This is especially true among Millennials, 66% of whom are willing to pay more for products that are eco-friendly or sustainable. The sheer volume of waste created by shipping boxes and other packaging will continue to shrink in 2020, while shippers reduce costs through efficiency and the development of more sustainable packing materials. This innovation will include items such as boxes that don’t require tape, or edible packing peanuts, alongside other eco-friendly packing materials.”
Maintaining sustainability will also have a counterpart that is unsustainable by today’s standards. Retailers must adopt year-round service, meaning more use of after-hours delivery capabilities and Sunday delivery, says Supply Chain Quarterly. With Amazon’s more recent release of free, two-hour grocery delivery in select markets, the emphasis on speed will force a stronger investment into efficiency-gaining software and functionality. Yet, these entities must not trade off sustainability for speed, or they will pay an undesirable price—alienating Millennials and future generations.
Another fact remains. More inbound shipments for major retailers that want to remain competitive with Amazon and handle SKU proliferation will need to start thinking out of the box and evolve fulfillment to resemble aspects of the wholesale supply chain.
Wholesale trends in shipping are direct to consumer (D2C), and as the industry evolves, the use of LTL and parcel shipping to enable consolidation/deconsolidation will be essential. Since sustainable shipping involves more complex aspects of shipping, including consolidation and asking manufacturers to fulfill orders directly (dropshipping), wholesalers will become subject to the same standards of transparency, requirements to avoid counterfeit products, ability to offer a full range of shipping options, up to and including final mile delivery, and even more visibility.
It would seem that visibility and collaboration are the two priorities affecting trends in shipping for wholesalers. In fact, restaurants, which rely on a time-sensitive food supply chain, will become another area that must embrace both trends of retail and wholesale alike. What’s the result?
Parcel, LTL, and final mile logistics must evolve and become something more than the standard modes, and similar patterns will come to permeate the original equipment manufacturer (OEM) supply chains as well.
The automotive industry supply chain is anxious. While 2020 is not forecast to result in fewer sales, sales will remain at 2019 levels, explains a S&P Global report. Combine that with the increased perception of risk between U.S.-China trade, and it is easy to see why the supply chain is on edge. Any spark could ignite the problem, so everyone is working to find the most affordable and efficient means of shipping. Again, it goes back to combined shipping options, especially in parcel and LTL modes. The same applies to hazmat shipping. As hazmat shipping regulations move closer to new changes, such as the need to isolate lithium batteries from other cargo during air transport, the increased demand will force shippers to use LTL and freight consolidation practices to move more product and avoid disruption.
Before we wrap this article up, there is a final piece of housekeeping to recognize. The digital twin, referring to the virtual counterpart for all physical operations, will destroy every preconception of supply chain and join with physical operations through integration capabilities. What does that mean? More technology in the supply chain will promote cross-functional capabilities and offer insights through the application of Big Data analytics, informed decision making, visibility-guaranteeing sensors, and much more. The coming year will see marked changes in the trends in shipping across all verticals, and while those highlighted above stand apart, it is important to emphasize the uncertainty. The market is uncertain, and shippers must embrace a full spectrum of supply chain capabilities to maintain success and business continuity.
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