Near the end of 2021, I had the chance to make the early call on Logistics Viewpoints on what 2022 would look like across five major logistics themes. Unlike the folks projecting election results these days, I was a little more accurate and the 2022 projections have set the stage for what will happen in 2023. Let’s take a look at what happened with the major themes, as well as the research and analysis we conducted in 2022 to help determine what those themes will look like in 2023.
Theme 1: Global supply chains will be busy, congested and chaotic.
Nailed it. Despite many calling for U.S. import volumes to plummet well before summer, they didn’t. There were record numbers (see Figure 1) through August 2022 and even when September’s volumes receded they were still 7% higher than pre-pandemic 2019. Importantly, port delays remain an issue in 2022, especially for the East and Gulf Coast ports that had record years.
2023 call: Global supply chains will be slightly less busy, congested and chaotic, but cheaper – at least the transportation part. U.S. import volumes may not be as high as they were at the height of the pandemic; however, if they remain above 2019 numbers, the shift away from West Coast ports persists, the labor situation doesn’t get resolved, carriers continue to use blank sailings and importers will continue to see uneven supply chain performance. The only bright note is that shipping costs will be a fraction of what they were over the last several years.
Figure 1: U.S. Container Import Volume Year-over-Year Comparison
Source: Descartes Datamyne™
Theme 2: Online buying will fuel home delivery growth, challenges and new strategies.
Somewhat nailed it. Consumers’ appetite for ecommerce and home delivery continued to grow in 2022 but has been tempered by high inflation in the latter half of the year. The key point was that the pandemic converted more consumers to ecommerce and home delivery, especially the 55+ demographic. In the study we conducted in 2022 called “Ecommerce: Is Retailer Fulfillment and Delivery Performance Keeping Up with Sales Growth?”, convenience was cited as the number one reason consumers bought online and had their goods delivered—and it is consumers’ intention to have more ecommerce purchases delivered to the home.
2023 call: Consumers will focus on home delivery performance and retailers will focus on home delivery cost reduction or recovery. In the same ecommerce study, over 72% of consumers experienced a delivery failure over a three-month period. That’s pretty abysmal. In 2023, consumers will be less forgiving and poised to buy from retailers whose delivery performance is commensurate with the rest of the shopping experience. Retailers will not only face more demanding consumers and focus on delivery performance but will also find ways to lower rising home delivery costs. In 2023, they will adopt more diverse delivery strategies based upon their customers’ delivery personas to either reduce the cost of deliveries or upsell delivery-related services such as premium time windows, expedited delivery timeframes or other value-added strategies.
Theme 3: The Great Resignation will accelerate the existing driver exodus, increasing the focus on retention.
Pretty much nailed it. The driver shortage remained an issue in 2022; however, the factors keeping it an issue reach well beyond the Great Resignation. If anything, the driver shortage was more a function of the “Great find-another-job-that-doesn’tstress-me-out-and-has-a-signing-bonus Movement”.
2023 call: The driver shortage doesn’t get better. A number of macroeconomic and demographic challenges were highlighted in our 2022 study “Resource Shortage: Is the Pandemic Masking a Much Bigger Problem for Supply Chains in the Future?” that will continue to make drivers scarce: 1) A stronger economy than has been anticipated. 2) Far more open jobs than people to fill them and this is especially true for blue-collar jobs like driving. 3) Immigration policy preventing potential workers from entering the country to fill open jobs like driving. 4) Declining birth rate that hasn’t hit the replacement rate since the 1970s. More than ever, companies will continue to focus on retaining existing drivers by reducing driver stress as finding replacements will not be easy.
Theme 4: Sustainability will become an opportunity, not a challenge for supply chains.
Nailed it: Sustainability in supply chains has been evolving for quite awhile but, until recently, there has not been that much scrutiny from consumers, especially in terms of delivery. In 2022, we launched a sustainability consumer sentiment study called “Retailers: Sustainability is Not a Challenge, It’s an Opportunity” and the results were conclusive about the importance of the environment to consumers—39% make buying decisions based upon a company or product’s environmental impact. In addition, consumers indicated their willingness to be flexible when it came to more sustainable delivery options—50% were quite/very interested in environmentally friendly delivery options.
2023 call: Retailers will embrace sustainability for home delivery. There are many reasons for the appeal of more sustainable delivery performance, such as customer loyalty, increasing revenue, etc.; however, none is more important than most sustainable home delivery options are lower cost to execute. As stated in Theme 2, retailers will focus heavily on ways to lower their home delivery costs. What better way to do it and make customers happier?
Theme 5: Machine learning (ML) will go mainstream in supply chain technology.
Pretty much nailed it. The verdict would have been “definitely nailed it” if we were counting all of the “ML-washing” going on in the supply chain and logistics technology market. In reality, machine learning is becoming embedded and, as opposed to the over-hyped “redefiner” of supply chain and logistics technology, it took on a more reasonable role as powerful enhancer for determining metrics like estimated-time-of-arrival (ETA), drive times, delivery locations and many others. The abundance of data in supply chains and logistics operations has made machine learning a well-recognized and powerful tool for putting meaning to that data and making more accurate predictions of outcomes.
2023 call: 2023 will be a “learning” year for machine learning in supply chain and logistics operations. As ML deployments go more mainstream in 2023, supply chain and logistics technology companies will learn more about its capabilities—where it works and doesn’t (we’ve already seen some of these cases). We will also see more sophisticated uses of ML that combine it with “traditional” algorithms to determine optimization improvement areas and system configurations in planning technology.
A little introspection is a good thing as it can help refine our thinking about the future and the actions we must take. Supply chain and logistics professionals can expect 2023 to be a transition year. There will be a move away from all of the scrambling related to meeting heightened demand and more focus on cost reduction, operational excellence and the use of supply chains to engage customers. However, many of the pandemic-induced problems such as global supply chain performance, labor shortages and, yes, COVID will continue to make day-to-day operations challenging. What are your key themes for 2023? Let me know.
As Executive Vice President, Solutions and Services, Chris Jones is primarily responsible for Descartes industry consulting and implementation services for Descartes’ solutions. With over 40 years of experience in the supply chain market, Chris has held a variety of leadership positions including: Senior Vice President at The Aberdeen Group’s Value Chain Research division, Executive Vice President of Marketing and Corporate Development for SynQuest, Vice President and Research Director for Enterprise Resource Planning Solutions at Gartner and Associate Director Kraft General Foods. Chris is a thought leader in logistics and has numerous articles and blog posts published in leading logistics and supply chain publications and online forums across the globe. He has a Bachelor of Science in Electrical Engineering from Lehigh University.