The logistics landscape forecast 2023: A MercuryGate webinar recap

Recently, Kevin Zweier, VP of Transportation at Chainalytics, an NTT DATA Company, joined Steve Blough, Co-Founder and Chief Innovation Officer of technology partner MercuryGate, to discuss overarching trends and upcoming opportunities in the transportation marketplace.

These overarching trends include…

Advances in autonomous logistics. Newer systems can auto-select proper transportation modes and optimally plan routes. For example, we’ve worked with a sizable final-mile client that runs a nationwide network of hundreds of vehicles with a half-dozen dispatchers. In a labor-constrained market, this is critical.

Visibility and dynamic execution. Yes, there’s the obvious use case: seeing issues before they become situations. But systems also need to take corrective action if possible or give users visibility into the problem and a path to action.

Digital freight, carrier capacity and dynamic rate management. While capacity issues eased throughout 2022, transportation markets will continue to be volatile and full of change in 2023. We’re seeing dynamic shifts — plenty of capacity on a lane one day, limited capacity the next. As a result, many folks are looking to use digital freight to provide a cushion from those dynamic shifts.

Analytics. In some ways, analytics is simply another type of visibility. It gives clarity and transparency to what happened (and is happening) in your transportation management. For example, understanding how fuel impacts freight cost, cost-per-mile or cost-per-pound trends in and out of a facility is critical to understanding how well your organization performs compared to plan.

Sustainability. Nearly every large shipper has sustainability goals and targets. Thus, third-party logistics (3PL) companies now see sustainability questions in nearly every request for proposal. 3PLs and carriers are being asked to show quantitative measurements of CO2 reductions to flow back into reporting for their shipper customers.

Security.
Security is one of the most important aspects of a cloud system. However, recent data breaches and ransomware issues have gotten everybody’s attention. As more of your things increasingly fly across the internet, make sure your data — and that of your customers — is secure.

“The conflict in Ukraine disrupts marine operations as 10% of the world’s two million seafarers are Russian and 4% are Ukrainian. Their inability to work may continue to cause disruptions.”

A recap of 2022’s challenges and victories

The whipsaw of capacity, availability and rates. The year started with a tight transportation environment and significant inflation. However, it ended with capacity much easier to find and a deflationary rate environment, despite inflation in the general economy. Dealing with volatility was a significant challenge (and victory) for transportation stakeholders.

The Russia/Ukraine conflict created many challenges for the supply chain. Fuel prices and their impact on supply chains were the most visible issues. However, the conflict also disrupted marine operations, as 10% of the world’s two million seafarers are Russian and 4% are Ukrainian. Additionally, their inability to work may continue to cause disruptions.

U.S. port congestion. The follow-on from the conflict increased transit time, causing shippers to order more and sooner than usual. As a result, while congestion eased on the West Coast, it grew on the East Coast. Inventories were higher as demand dropped. At its peak, port congestion got to a point where demurrage fees upset many shippers’ budgets.

What are some primary challenges (and receding problems) in the 2023 forecast?

Securing transportation capacity going forward.
Given the volatility in transportation markets, capacity concerns have been seared into the brains of all shippers, carriers and 3PLs. Capacity issues will be very dynamic and variable for the foreseeable future. Incorporating providers of “guaranteed capacity” as part of a shipper’s routing guide is one often used strategy to secure access to capacity. Developing better transportation procurement processes that compress the timing of sourcing events, and improve the quality of such events, will continue. While bidding frequency may begin to slow down as the market softens, 2023 is the time to evaluate your data quality and improve it going forward. Curating your data, as well as updating your systems or better configuring the systems you have, is vital.

Dealing with the ongoing rise in omnichannel commerce.
Shippers need to improve automated routing decisions by considering an entire transportation plan, across all facilities worldwide. It'll maximize efficiencies and reduce costs. Shippers must look across their plans to use suitable modes. They need to leverage courier networks and logistics companies to provide local deliveries, often out of brick-and-mortar stores. As B2C shipments continue to increase, we’ll continue to see rates for last-mile deliveries rise. Many shippers rely on parcel carriers for moves that, in the end, are unsustainably costly. Throw returns into the mix, and the problem becomes even larger.

Strikes and slowdowns:

• West Coast Longshoremen labor tensions were a big concern for many shippers in 2022. Shippers purposefully hedged their bets by directing cargo away from the West Coast to the East Coast.
• Railroad strikes and their ripple effects caused much angst for most shippers in Q4. We thought we were clear as some railroad unions accepted the latest deal, but holdout unions, unfortunately, kept the strike threat alive.

Long-term strategies to improve business sustainability

Treat transportation like your financial portfolio.
Diversification is crucial. Shippers shouldn’t be all contract, all spot or all private/dedicated fleet. They need a diversified base of suppliers and to resist the temptation to dramatically shrink their provider bases now that pricing pressure has eased. Finding the right mix across “asset” classes and individual investments/suppliers is as important in transportation as it is in your financial portfolio.

Never take your eye off environmental sustainability.
Environmental, social and governance (ESG) goals and commitments continue to increase. Tracking and quantifying carbon emissions is a standard “ask” from shippers’ ESG groups. That’s going to continue. It’s not only selecting providers that can commit to environmental goals, but those that can track performance across multiple tiers of suppliers.