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5 Key Trends Reshaping Transportation and Logistics in 2023

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5 Key Trends Reshaping Transportation and Logistics in 2023

Logistics and supply chains will continue to face countless and unpredictable disruptions in 2023, such as the economy, weather, geopolitical issues, and much more. As companies prepare for what’s ahead in 2023 here’s what carriers and shippers need to know and how to prepare:

Digitization, data, and visibility Paper is still commonly used in supply chain processes, but it is quickly being replaced by digital communications, and that shift is expected to continue in 2023. Digitization is allowing companies to mine data for valuable insights and to accelerate intelligent decision-making. Data analytics and intelligence provide increasing visibility to customers, which is still one of the biggest challenges for shippers today. When a shipper works with multiple vendors, it’s difficult to know the latest shipment updates without calling different suppliers and simultaneously piece together the legal documentation for transportation. This hassle not only reduces time and operational efficiency but also increases margin of error. By digitizing the supply chain process and collecting the data through the life of a load, any shipper can have full visibility on their shipment, saving them time and energy, and thus making them more resourceful. In 2023, this rise in digitization, data, and visibility will keep soaring and becoming even faster and increasingly accurate as old processes and paper become a thing of the past.

Reshoring and nearshoring for manufacturers – Reshoring and nearshoring have increased over the past decade, mostly due to ongoing tension between the US and China, significant increases in shipping costs from China, the effects of the pandemic on global supply chains, and sustainability concerns. According to a Thomas Survey in April 2020, 64% of North American manufacturers interviewed said they were likely to bring manufacturing production back to the Americas. The impact of these circumstances has led manufacturers to hone in on their strategy. Many companies have relocated from Asia to Mexico or the US to lower transit times and reduce risk around potential challenges. There are various structural advantages to US-Mexico trade, such as proximity, same time zone, similarity of work cultures, and geopolitical advantages. Proximity allows goods to be transported over the road at competitive prices. US shippers that need to bring cargo from China quickly have to pay for air freight, which is expensive. Otherwise, they would have to move cargo via ocean, which takes 20 to 30 days. Given the benefits of bringing manufacturing closer to home, this trend is expected to continue.

 Rising diesel prices From January to June 2022, the price of diesel fuel rose 55% in the United States. The Russia-Ukraine crisis has been a chief cause, as has the international rule IMO 2020, which just took effect at the start of the year. In fact, the geopolitical issues caused by the Russia-Ukraine crisis have led to a significant demand-supply gap in the global trade market, and the increased prices of fuels will most likely reduce the global GDP growth. This international rule requires the fuel oil that powers ships to have a sulfur content of no more than 0.5%, and has affected diesel prices since. With so many factors affecting diesel prices and so much volatility in the market, businesses moving cargo will have to find ways to adapt to this continued rise in prices in 2023. 

Sustainable shipping and environmental regulation – For the global trucking industry, there are already minimum fuel efficiency standards and maximum emissions standards for gasoline and diesel vehicles. Increasing environmental regulations and consumer pressures to bring down pollution and greenhouse emissions are motivating stakeholders in the logistics industry to reconfigure and innovate to take on a green infrastructure and electric fleets. A recent regulation introduced by the Securities and Exchange Commission (SEC) on ESG requires any public company to include climate-related disclosures in their 10-K. Companies would also have to report risks associated with climate change. Through the optimization of logistics and moving goods at a reasonable cost and minimum environmental impact, efficiencies can be improved, and carbon footprints reduced. With the help of ongoing initiatives and regulations, we expect this trend to also continue in the coming year.

Automation – Technology and automation in logistics operations has become very important to address pain points in the industry and manage shipments at lower costs and in a timely manner. According to the McKinsey Global Institute, the transportation and warehousing industry has the third-highest automation potential of any sector. AI, machine learning, computer vision, connected IoT networks, and blockchain can all be applied to simplify logistics operations, make them more efficient, and optimize resources. For that, the rise of automation is expected to keep trending in 2023.  

As we wrap up 2022 and look ahead, we can anticipate that the new year will continue to present us with challenges; however, it’s also a time of opportunity in the supply chain and logistic industries as businesses shift from reactive to proactive and from survival mode to growth mode. Technologies that will continue to reign include AI, digitization, automation and cloud-based solutions. We’ll also witness the launch of more advanced technologies into this sector as more businesses adopt drones and robots. For manufacturers, reshoring and nearshoring will be a top priority while geopolitics will continue to influence supply chains. A key takeaway that will transport us into the new year is the importance of shifting conventional mindsets to develop solid supply chain and logistics strategies that align with the current landscape, as key players adapt to the unending changes in the industry.  

 

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Six Big Trends in Cross-Border Logistics for 2022

As we look back on the year, the supply chain and logistics industry received more attention than ever before as it faced a myriad of challenges and circumstances. As we look towards 2022, here are some of the top trends and priorities to keep an eye on in the year ahead from Nuvocargo, the first digital freight forwarder and customs broker for US/Mexico trade.

Platformization and integration of data across the whole supply chain. The pandemic pushed the adoption of digital platforms lowering the friction to try new solutions that will drive migration from informal and manual communication platforms to specialized products that make their workdays more “automagical” by providing one source of truth and higher visibility. According to a report by Alloy Technologies Inc., 92 percent of executives agree supply chain visibility is important to success, only 27 percent have figured out a way to achieve it. This means, we may see a shift from discrete software to manage specific use cases (TMS and warehouse software) to platformization and integration of data across the whole supply chain, which will increasingly make operations smoother and companies more competitive. To achieve this, blockchain technology can be used to integrate all supply chain components in one platform and offer more transparency in the process.

Vetting suppliers and vendors based on resilience and adaptability.  With digitalization revolutionizing the logistics industry and bringing about more efficient processes, information exchange and visibility, we will see the industry shifting into a careful selection of partners based on their technological aptitude and insights. This will strongly be the case for Mexico since new tax regulations are forcing companies to adapt and optimize their processes in order to comply. Smaller carrier companies will struggle to comply with requirements when dealing directly with clients without the technical infrastructure of brokers. The accounting team of every logistics company will be put to the test and the ones that manage to leverage efficient and automated processes will avoid the crisis of on-time compliance for every shipment. From that angle, staying competitive will require a stricter filtering system of logistics partners and suppliers.

Regionalization of supply chain and nearshoring.  Organizations have been impacted by COVID-19 supply chain disruptions which have led companies to find suppliers closer to home to reduce costs and be less affected by more complex logistics or uncertainties. McKinsey’s report on the coronavirus effect on global economic sentiment says that uncertainty over COVID-19 is no longer executives’ foremost economic worry. Instead, they perceive the mounting fallout on the supply chain and inflation as the biggest threats to growth in their companies and economies.’ “Companies have learned the importance of being agile, adapting and solidifying to be able to thrive in volatile and unpredictable environments. That includes a restructure of the business core, technological implementation, regionalization, partners, etc.,” says Anaid Chacón, Head of Product of Nuvocargo. “Businesses have already started implementing new strategies over their supply chains and we can expect these shifts to continue in the coming years.”

Creative and technological solutions to address driver shortage. Delayed delivery is the accumulation of many factors. According to the American Trucking Associations (ATA), in order to keep up with the current economic demand, more than a million truck drivers will have to join the industry. In 2022, we will see how the industry fills this need by tapping into talent from other areas or demographics with previous low representation among drivers. A 2019 US Department of Transportation report states that 28 percent of the current heavy truck driving workforce will be 65+ years in the next decade. This means that the industry will have to promote and offer more benefits to younger people and women since the current average US truck driver is 48 years old. We may also see solutions based on process automation or self-service systems for customers to deal with these labor shortages. Autonomous trucks are also on the rise since large transport lines are starting to buy and test efficiency and costs.

Innovative financing solutions for the supply chain. Continuously offering partners alternatives that will help finance their operations and improve their cash flow will benefit all parties in terms of incrementing capacity and in keeping the supply chain moving. “Our data collection and experience has taught us the pain points of our partners who have high expenses, get paid 30 to 60 days after delivering shipments, and often need loans with high fees to continue operating,” says Chacón. “This is an industry-wide condition that requires attention if we wish to continue strengthening and growing the industry. Financing is one of the solutions to cash flow unpredictability that is required to respond to demand spikes.”

Greener supply chains.  Logistics and transportation companies are pushing environmental efforts to make their supply chain less invasive or harmful. This may include eco-friendly warehouses with advanced energy management systems, climate-smart supply chain planning, etc. We can expect these initiatives to continue rising and becoming more sophisticated over time.