2016 Supply Chain Predictions

Now that I am finally off the road for the balance of the year, I had a chance to sit down and look at some of the macro trends of 2015 and how they could impact logistics operations and technology providers in 2016. In some respects, the biggest trends are continuations from the past several years. Ecommerce, the economy, customer experience and security are dominating the headlines. They are as fundamental as a shifting population and will have significant impact in 2016 and beyond. Here are a few ways I think they will manifest themselves.

Parcel power. There will be more of it and it will cost more in 2016. Ecommerce continues to grow robustly around the globe. eMarketer predicts that US ecommerce will grow 14.5% in 2015 and the recent buying trends point to the greatest growth in small format goods that flow through parcel networks. The carriers clearly have the market leverage and the impact will be felt by B2B and consumer-oriented ecommerce alike. With the recent changes in shipping charges (e.g., DimWeight and UPS’ 3^rd party surcharge), optimizing parcel shipping will be critical for ecommerce-based companies to maintain their margins in 2016.  In fact, the opportunity to optimize parcel spend extends to any business shipping small format goods as it can represent significant savings depending on shipment volumes.

Fleet is back and it’s not just a US phenomenon. There are a number of service-driven factors that are accelerating the adoption of private and dedicated fleets in 2016. Because the customer delivery experience means so much to the consumer’s overall impression of the retailer, retailers want more control of their home delivery operations for high-value, high-touch and large-format goods. The second factor is the ability to react and offer short lead-time delivery services. Amazon has gone as far as announcing that they are taking on some of their line-haul operations to offer faster and more flexible home delivery. Lastly, concerns continue over driver shortage and quality in countries such as the US and the UK, and shippers are trying to create or captivate higher quality delivery capacity.

Increased security. The recent attacks in Paris and San Bernardino will drive more screening of supply chain partners, carriers, employees, etc. Rather than traditional batch or bulk screening, the screening process will be more dynamic and at a transaction level in 2016. Governments will continue to reach further into importer and exporter supply chains for information to better understand all of the parties involved and how the goods are being moved. One of the biggest challenges for importers and exporters in 2016 will be the ability to efficiently gather timelier supply chain data to keep goods flowing across borders.

Omni-channel 2.0. Retailers are beginning to understand that they need to harmonize the consumer’s delivery experience just as they have done to the multi-channel selling experience. Most retailers have multiple delivery methods, but have been running them in silos that provide an inconsistent consumer experience and do not leverage the scale of their delivery options to reduce costs and improve service. Retailers in 2016 will increasingly look at a more holistic approach to home delivery planning and customer-oriented supply chain metrics to better understand their home delivery performance.

Supply chain application security. As supply chain technology becomes more customer-facing and the notoriety of companies that have been “hacked” grows, many boards of public companies and corporate leadership of private businesses are demanding more supply chain technology scrutiny to avoid the effects of more punitive legislation, law suits and brand damage. Having the best supply chain “widget” will not be enough to get the deal. Instead, supply chain technology providers in 2016 – cloud or on premise – will need to show that they can withstand potential cyber-attacks and maintain the integrity of their customers’ data.

Is the investing party over? The boom that the tech market has experienced over the last five years appears to reaching the “bubble” state. That doesn’t mean we are going to see the market carnage of 2000, but it does mean that purchasers of supply chain technology must take a closer look at the financial stability of their current and potential providers. Continued supply chain innovation requires cash – either in the bank already or the ability to generate it from operations. A large number of supply chain technology vendors and “techno-enabled” logistics companies have entered the market in this period with some compelling value propositions. Now the question is do they have the financial wherewithal in 2016 to withstand the bump that appears to be happening in technology investing.

The supply chain will continue to be an exciting, but highly evolving, place in 2016. If you have a chance to step back over the holidays to think about it, let me know what your predictions are.

As Executive Vice President, Marketing and Services, Chris Jones is primarily responsible for Descartes marketing activities and implementation of Descartes’ solutions. Chris has over 30 years of experience in the supply chain market, including the last 10 years as a part of the Descartes leadership team. Prior to Descartes, he has held a variety of senior management positions in other organizations including: Senior Vice President at The Aberdeen Group’s Value Chain Research division, Executive Vice President of Marketing and Corporate Development for SynQuest and Vice President and Research Director for Enterprise Resource Planning Solutions at The Gartner Group and Associate Director Operations & Technology for Kraft Foods.