Logistics outsiders often say the industry is “just about getting something from point A to B.” While the statement is not incorrect, it dramatically oversimplifies the complexity and continuing evolution of the work. This year delivered cutting-edge technology, economic challenges, and new ways of operating that have the industry fighting to keep up. The pace of change will not slow down anytime soon, with many more advancements and pressures on the horizon. Here are some developments that intrigued us in 2019 and the trends we’re watching for 2020.
Insufficient labor, rising logistics costs, and real estate constraints represented significant challenges for warehousing in 2019. Rigorous consumer demands around e-commerce and omnichannel fulfillment also continued pressuring the supply chain in new ways. As a result, we saw the rise of agile warehousing – facilities able to ebb and flow in response to shipping demand and capacity. Agile warehouses can scale or cut back without significantly impacting their cost structure due to long-term technology investments. Automation from robotics, artificial intelligence, and the Internet of Things (IoT) is driving the transformation from traditional warehousing to an agile approach.
The push for more “on-demand” logistics and warehousing will increase in 2020 and beyond. The sharing economy – assets shared between individuals or companies – will further support supply chain and logistics adaptability. In 2014, the sharing economy represented $14 billion. By 2025, this number is expected to reach $335 billion.
Blockchain gained traction in logistics this year. Blockchain represents a shared ledger across companies engaging in different pieces of work, resulting in the same end goal. Major international companies like Maersk, Walmart, Nestle, Unilever, UPS, FedEx, and DHL all are making significant investments in blockchain technologies and engaging in trials throughout their supply chains. We anticipate major growth in blockchain next year as pressures for data transparency increase. Blockchain becomes particularly essential in supply chain management as multiple companies coordinate on same-day deliveries, financial transactions become more regulated, and food safety concerns increase.
Consolidation & Closures
We saw multiple asset-based transportation providers close their doors in 2019 – more than 640 carriers exited the industry in the first six months of the year, which outsized all of 2018. The reduction pulled more than 20,000 trucks off the road impacting major providers like Falcon Transport (FTL), New England Motor Freight (LTL), and Schneider Direct (final mile). The capacity reduction also touched the international borders with container ship operator closures and companies like Covenant Transport boarding up their cross-border operations.
With indicators showing signs of an economic slowdown in 2020, we anticipate more closures and an increase in mergers and acquisitions. Larger companies will take advantage of better purchase prices for businesses with tangible assets like drivers or warehouses in anticipation of the next economic upswing.
Escalating tariffs on an increasing amount of goods was the major headline for 2019. Shippers were left in unfamiliar territory for managing their supply chains. While trade negotiations continue between the US, China, and other countries, we foresee the tariff issue extending into the new year. This likely will prompt global shippers to source suppliers in countries less impacted by tariffs like Vietnam and will force them to rethink their entire supply chains. The tariffs also are prompting container ships to port in Canada, where smaller packages under the duty threshold of $800 are making their way to US consumers. If the tariffs are prolonged, more companies may take advantage of this option.
Forward Deployed Inventory
As companies felt the increasing pressure of speeding up e-commerce deliveries this year, forward-deployed inventory grew in popularity. This practice of moving inventory closer to the consumer has companies shifting fulfillment from large regional warehouses to smaller, decentralized facilities closer to their customers. Amazon is continuing to test the boundaries of immediate deliveries. The company now has fulfillment centers in 30 of 50 states, with 14 of those states having four or more facilities. We anticipate other major retailers will follow suit. As more brick and mortar outlets succumb to e-commerce pressure, more retailers may transform these locations into fulfillment centers, as Best Buy did a few years ago.
For companies daunted by what the new year will bring, JIT Services can help. We stay ahead of the trends for our customers with optimized supply chain services perfect for today and prepared for tomorrow.