4 Supply Chain Logistics Trends to Watch
Supply Chain Logistics has never been a stagnant activity. From steam ships and covered wagons, to trucks and rail, to air travel and digital logistics management systems, the logistics industry has transformed time and again over the last 100 years. The pace of change has always been rapid, and as supply chain logistics are impacted by trends such as crowdsourcing and cloud applications, these changes are gathering speed. So what are the trends we think are most important to watch in supply chain logistics? Here are four to consider.
4 Supply Chain Logistics Trends to Watch
1. Crowd-sourced Logistics
Uber isn’t just for passenger trips anymore. Several companies are developing applications to enable the crowdsourcing model for supply chain logistics. Two such applications, Convoy and Cargomatic, have launched crowdsourcing applications that could be as disruptive to the trucking industry as Uber has been to the taxi industry. Consider this: fully 70% of the freight moved in the United States every year travels by truck. However, not every return trip of a freight load contains freight; the practice of “deadheading,” or sending empty trucks back from deliveries empty, negatively impacts the profitability of trucking cargo. Companies often offer their empty space to freight brokers to fill in order to cut down on “deadheading,” but freight brokerage is expensive. Freight crowdsourcing apps will allow trucking companies and owner-operators to connect directly with other companies whose products are going the same direction as the trucks. Logistics crowdsourcing apps charge a fee for each load delivered through the application, but this fee is much lower than the fees of up to 45% that might be charged by a freight broker. This trend could be quite disruptive to the supply chain logistics industry and over the long term could even disintermediate many freight brokers.
2. Warehouse Space Getting Tighter
The rise of eCommerce, along with consumer demand for next day and same day shipping, is driving demand for warehouse space in an expanding number of locations. This is causing rents for warehouse space to skyrocket around the United States, most notably in cities like Seattle (Amazon headquarters), Atlanta and Los Angeles. These rent increases are happening as a result of a sea change in how supply chain logistics are being handled. Once, shipments could be managed from a small number of distribution centers servicing a large section of the country. If an item needed to arrive in a week, it could be shipped to a one of a few distribution centers then trucked to customers over the course of several days. Now, eCommerce and the demand for next day or same day delivery requires that companies have a strategy to fulfill orders in a much faster timeframe. This means the regional model of distribution centers doesn’t work. Companies fulfilling large numbers of same day or next day orders might need to have a distribution center in each city they serve, or at least break their service areas down into much smaller areas. The problem is that only so much warehouse space is available. ProLogis reports that rents for industrial and warehouse space jumped 9% in 2015 and are likely to continue rising in 2016. The rise of eCommerce and the recent economic recovery have led to rent increases of more than 25% over the last three years, with warehouse space currently 97% rented – leaving very little space available. This means higher rent for companies seeking to expand their distribution networks.
3. Supply Chain Logistics Moves to the Cloud
The cloud is transforming many industries, and supply chain logistics is no different. Currently, about one quarter of all enterprise applications are operating within the cloud. By 2025, that number could be as high as 80%. This change is already rapidly happening in supply chain logistics – applications as diverse as transportation management systems and order management systems are already moving toward the cloud, where the cloud model is putting more sophisticated capabilities into the hands of small and medium businesses. Why is supply chain logistics moving to the cloud? There are a number of reasons, but two of the most important include: 1) Easy setup makes it easy to put cloud applications into the hands of a distributed workforce––exactly the sort of workforce that comprises the supply chain logistics industry. 2) Low startup costs reduce risk and allow logistics departments and companies to take advantage of new applications without the cost and IT footprint associated with on-premise solutions. Demand for logistics visibility and desire to collaborate more efficiently with customers and others in the supply chain should continue to provide an opportunity to put cloud applications to the test.
4. Sustainable Logistics
Sustainability has been a watchword for years in many industries, particularly the food and beverage industry, as consumers increasingly take an interest in where their food comes from and how it was produced. It typically is not the first thing that springs to mind, however, when it comes to supply chain logistics. That could change as consumers and businesses take a more holistic approach to managing their sustainability footprint. It isn’t enough to produce goods sustainably if getting your products to market is not environmentally friendly. One of the most important trends to watch in sustainable logistics is CO2 labeling. For customers that care about their carbon footprint, CO2 labeling on the products they buy will provide the transparency into the carbon produced in the production and distribution of those products and enable them to make more sustainable purchase decisions. This in turn could transform the supply chain logistics industry as carbon output could become another “cost” that manufacturers and distributors will need to consider and control in order to be competitive. From moving freight with Uber-style applications to managing the carbon footprint of your logistics, the supply chain logistics industry continues to evolve. Keeping on top of the trends impacting the industry will help to ensure your organization won’t be left behind by the rapid pace of change. What supply chain logistics trends are you watching? We’d love to hear about it in the comments.