Trends in Logistics and Shipping for 2022
2021 was a challenging year for shipping and logistics and the start of 2022 looks to be a continuation of many challenges we have been seeing. To quote a recent article in Supply Chain Management Review, “…global transportation markets continue to be challenged across all modes, with high demand putting pressure on transportation capacity through 2022.” Let’s look at what 2022 holds in store.
Being a truck driver can be a rewarding but challenging career in the best of times. With COVID adding to the pressures of long hours on the road, 2020 has seen a higher-than-normal turnover rate in the industry. At the same time, supply chain demands are requiring ever more trucks on the road. As part of the “Great Resignation”, many more drivers are opting to remain closer to home, making long-haul drivers even more scarce. According to The Wall Street Journal, the number of warehouse and transportation employees near the nation’s busiest port complex in Southern California has surged almost 24% during the pandemic, with plenty of open positions going unfilled. The Los Angeles Times reported on Dec 27, “about one-fifth of all professional truck-driving jobs are unfilled, despite many employers offering increased wages.” With the Omicron variant in full force coupled with unprecedented demand for goods, it would seem labor issues within the industry will continue well into 2022.
Increased Freight Rates
The lack of drivers is one of the causes leading to an increase in freight rates. Another is the sheer amount of goods that require transportation. During the lockdowns, warehouses became depleted in an effort to keep store shelves stocked. Now that many areas have opened up again, these warehouses need to be replenished while keeping stores supplied. With 71.6% of all goods traveling to their destinations by truck, the shortage of vehicles and drivers is increasing rates significantly. According to Bloomberg, the cost of trucking freight in November was up more than 16% from the same time in 2020.
Usually, during times of high demand, carriers naturally increase their fleet sizes to meet that demand. Because of the current lack of available parts, the accessibility of new trucks is scarce and prices for both new and used trucks are skyrocketing. This scarcity is preventing carriers from ramping up their capacity in a timely fashion as they have done in the past.
With this combination of factors high demand for goods, low inventories, labor shortages, and an inability to rapidly grow fleets, freight prices are likely to remain high through the first half of 2022. Rates should level off during the second half of the year as inventories slowly return to normal, fleet sizes grow to meet the need, and inflation softens the demand for consumer goods.
A Focus on New Technology
The unprecedented strains on the supply chain caused by the pandemic in 2021 are leading many businesses to look to new technologies to create more adaptable and efficient digital systems within their organizations in 2022. Many companies see this as an opportunity to create IT systems that take advantage of the latest digital evolutions to create agile systems that can handle rapidly changing supply chain issues, provide more efficient customer service, and improve internal systems. According to Forbes, “International Data Corporation (IDC), a leading market research firm has predicted that logistics companies are expected to dedicate 35% or more of their business processing outsourcing services budget to process automation, in inventory, order and shipment tracking in 2022”
These updated systems will allow companies to take advantage of an untapped goldmine of information. This information will allow companies within the supply chain and logistics industry to become more responsive to industry changes and pinpoint ways to increase profitability. The goal is to reduce costs while improving efficiency and customer service in a wide variety of ways including:
- Correctly forecasting demand to manage inventory
- Consolidating shipments
- Optimizing trucking routes
- Within the warehouse, creating optimal routes for forklifts to move materials faster
- Identifying issues as early as possible to successfully adapt to new changes and disruptions
Will 2022 see autonomous trucking? The technology will continue to move closer to reality, but it is too soon to see actual autonomous trucks on the road. In December, TuSimple completed what it is calling “the world’s first fully autonomous semi-truck run on open public roads without a human in the vehicle and without human intervention.” But there are many safety concerns and regulatory issues that need to be addressed first. A lack of momentum by the federal government to address safety issues, will affect the development of these vehicles.
An Increased Focus on Sustainability
One of the main themes of the United Nations Conference on Climate Change (COP26) held in November 2021, was clean road transport, which accounts for 10% of global emissions. While we are a long way from the zero emission goals laid out in COP26, the conference has put the issue of sustainability within the industry front and center.
One of the results of COP26 that affects logistics and shipping is the creation of the First Movers Coalition. According to the World Economic Forum, this coalition, “…brings together global companies with supply chains across carbon-intensive sectors…. These companies are leveraging their collective buying power to create the market conditions required to unleash innovation which will reduce the amount of carbon emitted in certain particularly pollutant industries.” The goal is to reduce emissions in industries that are hard to abate but make up one-third of the world’s carbon emissions.
Many of the new technology changes on track for 2022 will aid in the goal of achieving zero emissions. These include improvements in system efficiency that will reduce waste, fuel consumption, and resource consumption. We will also see emerging solutions such as low- and zero-carbon fuels, heavy-duty electric fleet vehicles and charging options, clean energy technologies and advanced energy management systems for warehouses.
There are many issues that will affect the upcoming year in the logistics and shipping industry. In addition to those listed, gas prices and the ever-changing weather conditions will pose significant challenges. Despite these challenges, the industry is well-equipped to adapt to rapidly changing conditions throughout 2022. Are you prepared?