After experiencing an incredibly challenging two years in the global logistics industry, I think we can let go of any expectation that the supply chain landscape will ever return to “normal.” By that, I mean that extreme uncertainty on both the demand and the supply sides will continue for the foreseeable future.
Raw materials and component shortages, labor shortfalls, port closures, rising fuel costs and other forces will continue to exert enormous pressures on global supply chains in 2022. And, once again, it will be incumbent on logistics teams to deliver better, faster service, at a lower cost, to get products to market in the face of these continuing issues.
As I write this in the fourth quarter of 2021, there’s just no telling what the new year will bring in terms of emerging logistics challenges. But, whatever happens, there are three certain imperatives for logistics teams, based on our shared experience over the past two years:
- Logistics teams need to become better at sensing and responding to disruptions.
- Faced with continued labor shortages, companies must maximize their limited human resources.
- Finally, as the world embraces more ambitious sustainability goals, logistics providers must minimize their environmental impacts.
How can logistics teams hope to focus on these priorities, when too often they are struggling just to complete daily tasks and deliver on time? The same advanced technologies that can help companies attain these long-term strategic goals also enable logistics teams to operate faster, smarter, more agilely and more profitably every day.
Following is a discussion of each of these competitive imperatives for 2022, and a look at the role of technology in helping logistics teams achieve these objectives.
Early Identification of Disruptions Drives a Faster, Unified Response
Certainly no company could have foreseen the shutdown of the global economy in the early months of 2020 — or the continuing effects of COVID-19, such as port closures, throughout 2021. But at Blue Yonder, we noticed an interesting phenomenon.
Those customers who were quick to recognize new conditions, and respond with innovative strategies, have fared far better in the face of continuing uncertainty than companies taking a more reactive stance. We watched as customers adopted new warehousing and transportation processes, new delivery modes, new technology tools and even entirely new network models that helped them succeed in the constantly changing “next normal” state that characterized 2020 and 2021.
How can logistics organizations build in early-warning systems that enable them to act with speed and innovation when the unexpected happens? Part of the answer lies in making a cultural change. Logistics teams need to eliminate their functional siloes and narrow objectives — instead focusing on shared goals, seamless workflows across functions and end-to-end supply chain excellence. Logistics professionals needs to shift from a tactical focus on the disparate activities of order, warehouse and transportation management to a more strategic perspective that considers the performance of the holistic supply chain. This broad view allows the logistics team to react in an orchestrated, synchronized way at the earliest sign of disruption.
A recent study called the 2021 State of Supply Chain Execution Report, conducted by Blue Yonder and Reuters Events, revealed that 63% of manufacturers and retailers, and 60% of logistics providers, believe their efforts to create end-to-end visibility are yielding the single greatest return on investment of all their execution strategies today. However, a recent Forbes article pointed out that, while 92% of executives believe supply chain visibility is critical, only 27% of their companies have achieved it.
Advanced technology, including artificial intelligence (AI), is crucial to enabling this cultural transformation. Functional teams can’t work in concert unless they are sharing the same data, the same end-to-end view, and the same objective of profitably and quickly getting products to the customer. As logistics teams are unified on a common technology platform, they can all be alerted when AI engines recognize the first signs of a deviation — and they can all play a role in bringing the supply chain back on track. While AI often triggers an autonomous execution-based response, functional managers continue to play a key role by taking innovative actions, like creating an alternative network design, that re-set logistics operations for continued success.
When there’s a plant shutdown, a port closure or a missed supplier delivery, that’s everyone’s problem — not just a problem for one team. Recognizing the issue as early as possible, and bringing the resources and attention of the entire logistics team to bear, is the smartest way to mitigate the ongoing uncertainty that’s sure to occur in 2022.
Managing Labor Shortages Means Working Smarter, Not Harder
It’s certainly no secret that the global logistics industry, like many other industries, is closing out 2021 in the midst of a true labor crisis. According to the US Bureau of Labor Statistics, the pandemic resulted in a loss of 6% of the pre-COVID truck transportation workforce of about 1.52 million employees. While some recovery has been made, employment levels are still short of February 2020 levels by 33,000 jobs.
Headlines are filled with dire predictions about how 2022 will be characterized by continued shortages of drivers, warehouse associates and other critical logistics professionals.
In their 2021 State of Supply Chain Execution Report, Blue Yonder and Reuters Events found that 63% of retailers and manufacturers have been affected by the availability of labor over the past year. The most common way companies are attempting to optimize their human resources is via the deployment of warehouse labor management solutions.
Twenty-five percent of respondents are using warehouse robotics, a trend that Blue Yonder expects to continue. Robotics and task automation make the most of limited human resources, while also freeing available employees to focus on strategic work instead of manual labor.
But perhaps the most promising way to maximize the contributions of the workforce is to leverage advanced technology, including AI, to allow human employees to work smarter, not harder. The entire world owes a huge debt to the drivers, warehouse associates and other essential logistics workers who kept supply chains moving during the worst months of the pandemic. But state-of-the-art technology can help automate decision making, reconfigure processes, support more efficient workflows and implement best practices that significantly amplify human efforts. Technology can relieve some of the burdens of overtime and excessive stress that logistics team members have been experiencing since early 2020.
For example, Traxion, Mexico’s largest logistics provider, brokers services and optimizes loads, capacity, freight and routes via an AI-enabled optimization engine that gathers real-time data and autonomously makes the best decision on the fly, without human intervention. This dramatically cuts down on the physical and analytical demands placed on supply chain professionals every day.
As transportation management solutions automate the processes of procuring carriers, planning truckloads and determining optimal routes, the result is a huge productivity boost. When inevitable disruptions occur, AI engines can quickly make proactive decisions that reset the supply chain in real-time — for example, finding new inventory, a new carrier or an optimized route — without hours of manual analysis. Humans will always be at the heart of the logistics industry, but advanced technology makes their lives easier and their organizations more efficient.
More Than Ever, Acting Sustainably Makes Good Business Sense
The recent Blue Yonder/Reuters Events survey found that 53% of manufacturers and retailers, and 50% of logistics providers, are investing in sustainability programs. And with good reason.
Worldwide, virtually every country is mandating stricter environmental regulations, with the goal of minimizing carbon emissions and mitigating the effects of climate change. US President Joe Biden recently announced a goal of cutting greenhouse gas emissions in the country by up to 52% by 2030, compared to 2005 baseline levels.
Because the global transportation industry is a primary contributor of emissions, eliminating miles and otherwise reducing the carbon footprint is the responsible thing for logistics organizations to do. According to the US Environmental Protection Agency, growing supply chain complexity means that, by 2040, the freight transportation segment will produce more emissions than all other transportation segments combined, including passenger, unless dramatic action is taken.
But focusing on more sustainable operations isn’t just the right thing to do. It’s the smart thing to do, and the profitable thing to do.
Again, advanced technologies, enabled by AI, can help. Based on pre-defined sustainability objectives, AI optimization engines make smart, environmentally responsible decisions that take trucks off the road, minimize paperwork, reduce waste and support other green initiatives. At the same time, these decisions improve financial metrics and profit margins by optimizing the productivity of physical assets and reducing the company’s fuel and energy costs.
SuperFrio, a leader in the refrigerated logistics industry in South America, won the 2020 Energy Excellence Award given by the GCCA (Global Cold Chain Alliance), based on its sustainable supply chain improvements. By implementing a warehouse management solution that automated and optimized processes, the company reduced its annual consumption of bond paper by 40%.
Prepare for the Future, No Matter What the Future Brings
If the past two years have taught us anything, it’s that we need to brace our supply chains for the unexpected. Fortunately, logistics teams can apply ever-advancing technology solutions to prepare themselves for an uncertain future.
By transforming siloed, disconnected supply chains into connected, fluid and responsive ecosystems, AI and other technology innovations can help logistics organizations quickly enact an orchestrated, synchronized response across the supply chain in real-time.
We will never have the capability to sense a global pandemic, or an event like the Suez Canal blockage, in advance. But state-of-the-art logistics technology can identify these types of supply chain challenges at the earliest possible moment and position the supply chain for success in the face of new obstacles. Whatever happens in 2022 and beyond, the world’s logistics leaders will be those companies that adopt advanced, AI-enabled technology today.
Terence Leung is Senior Director, Solutions Marketing at Blue Yonder. He has a keen interest in digitalization and the value it generates throughout the supply chain. In this role, he leads his organization to drive thought leadership and go-to-market strategy for supply chain execution and logistics solutions. In addition, he works with customers to understand requirements and drive best practices in the digital journey.
Prior to joining Blue Yonder, Terence was the leader in product marketing and value engineering at One Network. Previously, he was in leadership positions in industry management at Savi Technology and solutions and management consulting at i2 and Deloitte Consulting respectively. Terence holds an MBA from the University of Texas, Austin and an Electrical Engineering degree from MIT.
