Supply Chain and Logistics Predictions for 2014

By Adrian Gonzalez

Making predictions is risky business. Back in 1966, for example, TIME magazine published an essay that imagined what the world would be like in the year 2000. They predicted that “remote” shopping would be possible in the future, but that it would never become popular because “women like to get out of the house, like to handle the merchandise, like to be able to change their minds.”

Today, of course, women (and men) are behind the rapid growth of online retailing, and online retailers like Amazon are disrupting the retail industry.

But making predictions is also fun and a good way to get a conversation started. So, here are some of my supply chain and logistics predictions for 2014. You can also watch me discuss them in the video below. Afterwards, post a comment and share your predictions for the year ahead.

1. Shipping and delivery capabilities become even bigger competitive weapons. A couple of years ago, retailers offering free shipping was all the rage. Now, it’s common practice. Retailers are raising the bar again by offering same-day delivery, Sunday delivery, and ship-from-store options. Their objective is not to lose a sale because they can’t meet the delivery expectations of a customer. But it’s not all about speed — it’s about offering a variety of delivery options and executing them reliably. Retailers that can leverage shipping and delivery to drive top-line growth — and do so profitably — will be the winners. As a result, “last mile” logistics will become a hot area of the transportation management systems (TMS) market next year, and couriers and local delivery companies will play a more critical role in transportation networks.

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2. Shippers and carriers continue to shift away from long-haul trucking and one-way freight. As I’ve discussed in other postings this year, shippers are very concerned about truckload capacity tightening in the future, so they are shifting more volume to rail, intermodal, and dedicated/private fleets; they are also making changes to packaging and investing in load optimization software to fit more products per case, pallet, and trailer, which results in fewer truckload shipments; and they are implementing “carrier friendly” practices and exploring collaborative transportation opportunities. At the same time, many large carriers have diversified their service offerings, and truckload transportation is now at best a fourth priority for them, behind intermodal, dedicated, and brokerage. If you think of transportation as a big puzzle, and the different modes as pieces of that puzzle, then what’s happening is that the truckload piece is changing shape, and where shippers and carriers are placing that piece is also changing.

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3. Supply Chain Operating Networks (SCON) introduce enhanced network-based analytics and social networking capabilities. Generally speaking, the first phase of Supply Chain Operating Networks was about connecting companies and computers together to facilitate the timely and accurate flow of data and documents between trading partners. The next phase is about facilitating communication and collaboration between supply chain and logistics professionals — the people side of supply chain management. And it’s about providing these professionals with network-based business intelligence and analytics to help them make smarter decisions faster. Simply put, Supply Chain Operating Networks are becoming the business equivalent of Facebook and LinkedIn, enabling communities of trading partners to communicate, collaborate, and execute business processes in more efficient, scalable, and innovative ways.

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4. Further “consumerization” of business IT. Enterprise software users, specifically those on the frontlines of day-to-day operations, are gaining power and influence in selecting the solutions they want to use at work. The old formula of the CIO and corporate IT dictating what the masses will use is not going to work anymore, especially as a new generation of workers who have grown up in the social/mobile/cloud era enter the workforce. What users want are applications that are easy to learn and use, easy to configure and customize, and easy to upgrade. In short, they want the applications they use at work to be as intuitive and flexible as the ones they use at home. And in response, enterprise software vendors are starting to invest more in improving the user experience and interfaces of their applications.

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5. With operational excellence a given, IT and talent become greater value propositions for 3PLs. Manufacturers and retailers expect much more than operational excellence from their 3PL partners; they also want their 3PLs to provide them with timely, accurate, and complete visibility to orders, shipments, inventory, costs, service levels, and everything else related to their supply chains. In response, 3PLs are investing in technology platforms and setting up “control towers” to provide this integrated visibility to customers. Customers also want their 3PLs to provide them with insights, to tell them something they don’t already know. This is where talent and experience come in. As companies across all industries struggle to find and retain supply chain and logistics talent, 3PLs that invest and succeed in this area will have a leg up on the competition.

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6. The robots keep coming. I made this prediction last year too, but when you look at recent developments, like Amazon testing drones to ship packages and Google buying its eighth robotics company last week, it’s clear that the line between what humans and robots can do is becoming thinner every day. Driverless trucks on our roads and Kiva robots in the warehouse are just the beginning. Think a robot can’t do your job? Think again.

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7. Energy will play a bigger role in supply chain strategies and decisions. As Bill Lee, Vice President at Breakthrough Fuel, said in the mega session I moderated at this year’s CSCMP Annual Global Conference, companies need to think more strategically about managing the energy that is used to move product to market. And while natural gas is a growing factor, it’s important to keep the bigger picture in mind — that the energy footprint is more diverse and dynamic than ever before.

8. Companies will become more proactive and smarter about supply chain risk management. Supply chain professionals need to get to the point where talking and thinking about risk is as common and instinctual as talking and thinking about cost and service. Unfortunately, we’re not there yet. Too many companies still take a reactive approach to supply chain risk management, treating it as a standalone project instead of an ongoing business process. The good news is that companies know they need to improve in this area, and they’re starting to take, albeit slowly, corrective action. The emergence of new software solutions focused on supply chain risk management is helping their efforts.

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9. Trade agreements, protectionism, and threat of port strike will dominate global trade news in first half of 2014. The Trans-Pacific Partnership (TPP) is dominating the headlines at the moment. Although the negotiations have stalled, due in large part to disagreements between the United States and Japan over agriculture and automobiles, the talks are set to resume in late January. The countries in the TPP — which includes the U.S., Canada, Japan, Vietnam, Australia, Singapore, and six other Asian countries — account for 40 percent of U.S. imports and exports. Another important trade agreement in the works is between the EU and US. But whatever gains are achieved via trade facilitation will be reduced or wiped away if countries continue to adopt protectionist measures, which the former head of the WTO warned about earlier this year. Finally, if you import or export goods through the West Coast ports, prepare yourself for a possible strike this summer when the current agreement between ILWU workers and the ports expire in June.

And with that, I wish you all Happy Holidays and continued health, happiness, and success in 2014.