The supply chain has experienced a lot of volatility in recent years. And yet despite the ongoing challenges, brands and logistics providers continue to adapt to the rapidly changing landscape. With a heightened focus on sustainability, technology, and innovation, they are working to address supply chain disruptions, rising costs, and shifting consumer demand. While last mile logistics remain a key area of concern, industry leaders are optimistic about the opportunities presented by these changes.
According to Logistics Trends & Insights LLC’s recent Parcel & Last Mile Outlook report, companies are addressing these opportunities in a number of ways:
- Logistics companies are investing in electric vehicles to combat climate change
- Brands are emphasizing last mile options such as buy-online, pick-up in store
- Shippers are diversifying their last mile carriers due to higher shipping costs
- Logistics companies are investing in automation to improve efficiencies and lower costs
Wanting to dive deeper into these challenges and changes, we sat down with Cathy Morrow Roberson, Founder and President of the global logistics market research company Logistics Trends & Insights. Here’s what she had to say about how technology, sustainability, global events, and supply chain issues are impacting the current state, and the future, of logistics:
How would you sum up 2022 for the logistics and retail industries?
CMR: Overall in the logistics space, 2022 was mostly a year of trying to get back to normal. We still haven’t gotten there yet, but I believe we’ve reached a “post-pandemic” state.
The first half of the year, retailers experienced run-up inventories. This was all due to earlier delays and them receiving inventory at the wrong times. But then, all of a sudden, their warehouses were totally full. This return to normalization also included more regular retail sales and consumer demands, but it was also a year of high inflation. So, shoppers took a step back and were a little more picky with what they were and weren’t buying.
What surprised you within that return to normalcy?
CMR: It was going from not having enough to having way too much inventory. In 2021, we had bare shelves and then last year all of a sudden we had too much. That quick flip was amazing. And from a last mile perspective we saw a bit of normal creeping back in with the two primary carriers, UPS and FedEx, beginning to see their volume start declining from a year-over-year perspective. According to UPS, they didn’t seem to mind too much, because they shifted their focus away from all volumes at any cost to one of more profitable volumes — and FedEx followed. So, we saw those volumes decline, but also saw increases in rates and surcharges.
What can brands do to combat challenges that come with inventory excesses?
CMR: What’s fascinating to me is that in 2020, suddenly, when we couldn’t go anywhere, consumers started buying everything imaginable. A lot of retailers came out at the time and said, ‘We’re not going to need to have sales to get rid of inventory.’ Well guess what?
Last year, they all had to do promotions to unload the inventory. Sales are back, which is good for shoppers, but really that’s only part of it. Now retailers are running promotions and still having to sell off parts of their inventory to discounter retailers — usually at a loss. In typical years, with the proper forecasting tools, retailers can manage their inventory. But coming out of these extraordinary three years, a forecasting tool really couldn’t have helped with this situation.
As we move forward, and more investments are made in forecasting, we’re seeing AI models used to assess geopolitical, economic, weather and other risks impacting the supply chain.
Do you see the need for diversification pushing brands and/or shippers to smaller, more regional carriers?
CMR: I think a lesson was learned by a lot of shippers that they need to diversify that last mile. Back in the ’90s, shippers put all their eggs into one basket, namely UPS or the post office. But after the UPS strike, they learned they needed to spread shipments across carriers.
Now, thanks to technology improvements, diversification is needed not only to move to regional smaller players, but also to get closer to consumers. There are a number of studies showing consumers are willing to wait for their packages, but they may not be this time next year. They could want them on demand the same day. So, whether shoppers want packages in five days, next day or same day, to achieve that, the delivery service needs to be close to the consumer.
Looking into 2023, is there anything you’re excited to see?
CMR: For starters, continued normalization, which is exciting. Perhaps not as exciting is the upcoming UPS contract with its drivers’ union. It’s another risk for shippers to keep in mind. If they aren’t already, they better start planning the what ifs. The contract expires in July and peak season is just a couple of months after. Retailers need to lock in the capacity for the holiday peak season as soon as possible and be prepared for that “what-if moment” come August 1st.
There’s a lot of what abouts at the moment. No one knows where this market is going because we are faced with the potential for a recession, we still have inflation — though it’s coming back down — retail sales are moderating, manufacturing hasn’t picked back up and then there are a number of major global events. It’s hard to get excited about a market like that.
On the flip side, are there red flags brands and logistics leaders should look out for in 2023?
CMR: From a last mile perspective, the UPS contract is a huge one. Across the board, I think logistics providers need to constantly monitor the market for any potential risks that could impact their operations. One thing could be a risk for one provider, but not for another.
There’s another contract that has yet to be decided as well. It’s the ILWU [International Longshore and Warehouse Union] for port workers on the West Coast. They’ve been working on a contract since July, and questions remain about if and when that will be resolved. These labor contracts always need to be monitored. Providers can’t operate in today’s world without knowing what’s going on in the market and understanding how it could impact them.
Lastly, how do you see sustainability playing into how things will evolve in years to come?
CMR: In recent years there’s been a lot more interest, and big investments being made in sustainable logistics, from transportation to packaging and the way things are done. And we’re seeing shippers move to being part of the Reverse Logistics Association, knowing that returns just skyrocketed over the past couple of years, mainly because of the growth of ecommerce.
Shippers, retailers and manufacturers are trying to lessen the impacts of returns in a greener fashion by keeping them out of landfills, repurposing them and reselling them. I think this model will grow moving forward. And we’ll see more electric vehicles in last mile delivery. We’re already seeing a number of companies, GoBolt as one, embracing electric vehicles in last mile.
Cathy Morrow Roberson started Logistics Trends & Insights LLC to provide research and analysis for such initiatives as competitive analysis, new product development, mergers and acquisitions, IPOs, company strategic guidance, marketing/communications, operations, IT needs and more. Her research and analysis have appeared in a number of reports, consulting projects and as published articles. Find her on LinkedIn.