Predictions in the logistics industry
Retailers wishing to maintain a leading position within the industry must understand and leverage their supply chain trends. This is in addition to the operational measures they take to ensure prompt and efficient delivery of merchandise. Last year—2022—was a year in which making predictions and projections was rendered difficult by the volatile economic circumstances. The geopolitical challenges, such as the Russia-Ukraine conflict and the perpetual crises in Taiwan and the Korean peninsula, have added to the pressure. This article examines some of the key trends that businesses should be aware of for this year.
Getting better control of margins and costs
Supply chain disruptions, inflationary pressures, labor costs, and fuel crises have negatively impacted margins across the industry. While inflation averaged 1.2% in 2020, it jumped to 4.7% by 2021. The International Monetary Fund (IMF) predicted even direr inflation , hitting 8.8% in some areas. Consumer and business behavior often responds to these pressures. For example, inflation erodes away about 8.5%. Spending then falls drastically. Even e-Commerce, which seemed to have done well out of the pandemic, is faced with demanding customers who are expecting generous offers and discounts before being persuaded to part with their cash.
Perhaps one of the benefits of these challenges is the resilience of retailers who are building knowledge on how to best cope with increased competition as well as a supply chain that is less certain. Others are learning to live with growing delivery costs that shrink their own margins. Meanwhile, an overriding and enduring imperative exists to provide customers with the best products at competitive prices. The administrative tasks of managing omnichannel delivery options add to the demands on business.
Small businesses playing in a field dominated by bigger competitors
Those retailers with prominent positions in the market (e.g., Walmart and Macy’s) tend to be better equipped to deal with uncertainty. Smaller retailers may struggle with lower prices and reduced sales. Alignable released a report indicating that up to 59% of small retailers could shut down in 2023 due to these challenges. The key trends to look out for this year include:
- There will be an uptick in the costs of supply and delivery across chains.
- Customers will be less loyal than before, moving to the best deals when possible.
- There will be more acceptance of managing complex operations.
- More online retailers will collaborate with each other to maintain their market position.
- There will be an increased diversification of delivery partners.
- The supply chain will experience certain digital transformations.
Preparing to meet and overcome these challenges
Retailers and suppliers must carefully study these trends to ascertain their potential and actual impact on their trading position. When dealing with inflationary pressures, supply chain disruptions, and labor shortages, it makes sense to prioritize last-mile delivery operations. Research shows that these comprise 53% of total shipping costs. Efficiency savings in this part of the chain could have far-reaching and exponential effects on the entire business model. In addition, Gartner has released a report advising more cost-efficient order fulfillment through leveraging technologies and management solutions.
When dealing with less loyal customers, technologies can help to control costs while offering a much better user experience. Ultimately, technology-driven customer care can become a powerful competitive advantage. Moreover, retailers tend to be wary of over-emphasizing e-Commerce to the detriment of their more traditional segments. This is a trend that diminished with the pandemic, and it is crucial to look back to what was before to see if anything can be rescued. Cost optimization must be part of the mix and not just focus on enhancing customer experiences regardless of the price. For example, the diversification of delivery options, including same-day services, can win back and retain customers that would otherwise be attracted to the alternatives.
Managing more complex operations
Operations are becoming more complex due to five main factors. These include inflationary pressures, unpredictability in the supply chain, shrinking margins, fluctuating consumer spending, and labor shortages. A multi-pronged approach is necessary to address this multiplicity of challenges. For example, businesses must aim for more creativity and agility in operations and their supply chains. The new modern technologies are of the essence because they are configured to address complexity issues. A case in point is how routing can be automated and significantly improved in this way.
The manifest challenges within the industry call for some level of cooperation between retailers. This is particularly important for those operating in e-Commerce. Such cooperation might be the key to mitigating some of the disruptions that the industry has been managing. Today’s competitor is tomorrow’s trusted business partner. The areas of cooperation may consist of order fulfillment, delivery, and inventory management. The fruits of these collaborations may include shared carts, in-store pickups, cross-channel returns, andshared loyalty points. One of the most compelling examples of this collaboration is the Local Selling Program that was initiated by Amazon to allow customers to pick orders from Focus Camera, Best Buy, and Sears.
Using information to make the best decisions
The adage that information is power has never been truer in the logistics industry. One of the challenges businesses faced in 2022 was focusing on demand and delivery needs. This was because economic indicators, such as inflation and spending, were so volatile. When you have the right information (historical, current, and forecasting), it becomes easier to position yourself in the right places at the right time. The introduction of SCM technology has been a game changer in this respect. Those businesses that invest in such technologies will have a competitive advantage in any market they penetrate.
Above all, retailers and logistics managers should not let the trends move ahead of them. If anything, key actors in the sector should be at the forefront of setting and leveraging trends. For instance, the use of artificial intelligence can become a business asset. Similarly, all businesses should consider efficiency settings, such as using sustainable energy and fuels, to reduce costs and attract that segment of the market that is interested in ethical business.
As we start 2023, companies in the delivery and supply chain sectors are looking to understand the projected trends to adjust accordingly. Some of the challenges anticipated include a volatile economy, demanding customers, and high competition. However, by building resilience and embracing innovative technologies, many companies can remain winners despite uncertain times.