With Christmas goods in stores before Halloween this year, I thought there was no reason that we shouldn’t also get a jump on 2022 predictions. Many major challenges of 2021—capacity constraints, ecommerce growth and driver shortage—are rolling over into 2022 and, in addition, the environment and machine learning are becoming more important for logistics and supply chain professionals. Here’s what to look for in 2022.
Global supply chains will be busy, congested and chaotic.
There will be no slow down after the holidays and global supply chains will continue to be challenged. With U.S. import volumes still climbing (see Figure 1), limited processing capacity at key West Coast ports and the International Longshore and Warehouse Union (ILWU) contract expiring next summer, importers will be scrambling to maintain the inventory they need to support the demand increase. There will be little relief in 2022 unless the factors driving the increased import volumes—a strong economy and the fundamental shift in consumer behavior to purchase more goods and less services—change. Importers will look for near-term strategies to move their shipments away from congested trade lanes or process containers further inland to minimize the impact of lead time variability that has dramatically increased in 2021. Near or re-shoring sourcing strategies will be evaluated to “shorten” supply chains and gain greater control of supply chain performance.
Online buying will fuel home delivery growth, challenges and new strategies.
The pandemic’s ecommerce boost will continue in 2022 as the changes in consumer buying behavior become more structural. This is clearly an opportunity and challenge for retailers and last mile logistics companies. The increase in volume will tax already tight last mile delivery capacity, and speed and reliability will either come with a premium price or remain as uneven as it has been over the last two years. For example, Amazon’s Whole Foods business is now incrementally charging for delivery to offset increased delivery costs. We anticipate that more companies will reevaluate their “free” delivery strategies. Retailers will also look for alternative delivery strategies such as combining deliveries for individual customers or geographies to minimize delivery costs and maximize the available delivery capacity.
The Great Resignation will accelerate existing driver exodus, increasing the focus on retention.
Whether long haul or last mile, the driver shortage is endemic and will continue to materially impact retail, distribution and logistics companies. While finding new drivers to replace or add capacity will remain important, it’s also much harder to find drivers than in the past. Instead, in 2022, companies will focus more on driver retention and productivity. Lowering turnover—which has traditionally been high—puts less pressure on the number of drivers that need to be hired and keeps the more experienced ones improving delivery performance. Keeping drivers driving and reducing stress will be the top retention priorities. Companies will need to a better job at reducing wait times and improving driver quality of life through routes that are more realistic to execute, don’t result in extended wait or on the road time and facilitate more predictable hours.
Sustainability will become an opportunity, not a challenge for supply chains.
The focus on sustainability will increase in 2022 and it won’t just be from consumers. Many investment funds are taking an increasingly stronger stance on companies’ sustainability strategies and actual performance. This powerful combination will push companies to move faster to reduce their impact on the environment. It also presents an excellent opportunity for supply chain and logistics professionals to raise the visibility and value of supply chain strategies and operations. Productivity enhancement is at the heart of any good supply chain performance improvement program and almost always results in greater efficiency, reduced paper and other waste that directly translates into reduced greenhouse gas emissions. Equally, many consumers are looking for delivery choices that help the environment, which presents retailers with the opportunity to look at innovative ways to combine or steer deliveries to reduce the mileage associated with home delivery. This will not only benefit the environment and delight the consumer but will also result in lower delivery costs for retailers.
Machine learning will go mainstream in supply chain technology.
Machine learning (ML) will continue to be quickly adopted by supply chain technology providers because of the rich supply chain data that exists to teach ML algorithms. The result will be more accurate plans, estimated-time-of-arrival (ETA), improvement recommendations, etc. that make supply chain and logistics operations more productive and reliable. Rather than displace existing supply chain technology, ML will augment it through embedded uses, such as optimizing stop times, delivery locations, drive times and ETAs, or as part of greater data analytics solutions that are used to provide deeper insights into supply chain performance.
While 2022 will be a challenging year for logistics and supply chain professionals, the “C-suite” will recognize that their supply chains need to be world-class to help drive revenue and profitability. There will provide plenty of opportunities to show the value of advanced logistics and supply chain strategies, tactics and technology—and transformation will not only be the key to success but, for some, the key to survival. How is your company getting itself ready for an enigmatic 2022? Let me know.
As Executive Vice President, Marketing and Services, Chris Jones (CJones@descartes.com) 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.