Every year, new supply chain trends either promise to revolutionize your operation or threaten to toss a wrench into the works. Keeping up with these market changes can mean the difference between struggling to survive the next disruption or continuing to thrive (and even grow) in the face of it.
With that in mind, we’ve put together this list of the major shipping trends that professionals should watch in 2023.
A potential recession makes demand forecasting tricky
According to economists at the Federal Reserve, we’re in for a mild recession later in 2023 that could take up to two years to recover from. Most recessions resolve in 18 months or less, but banking industry challenges may cause a longer recovery. As the CNBC article notes, recessions related to issues in the financial industry tend to last longer and cause larger problems.
Consumer worries about a recession can make demand forecasting a challenge all the way up the supply chain. Planning is always easier when conditions are steady but throw some big market shifts (like a drop in demand for consumer electronics and luxury items) into the mix and forecasts can quickly veer off the mark.
Effective inventory management and agility will be the keys to navigating potential recession-related challenges through the end of the year.
Fuel costs are still in flux
In June 2022, AAA reported the average cost of a gallon of gas had hit $5.01—an all-time high. And while fuel prices have dropped since last year, we’re still seeing fluctuation that underscores the importance of improving your transportation planning. Taking steps to optimize your shipping modes and routes can help you keep costs down.
For example, instead of sending several loads on smaller vehicles, it may make more sense to consolidate orders onto one larger vehicle. Other actions, like inventory optimization and reduction of empty miles, can also help you mitigate spikes in fuel prices and take advantage when those costs dip.
Transportation rates have eased
During the height of the Covid pandemic, a perfect storm of issues significantly drove up carrier rates. One of the shipping trends we saw was that consumer demand shot up, making shipping capacity too scarce for many shippers’ comforts. On top of that, lockdowns in key manufacturing centers, especially China, coupled with ongoing labor shortages, made getting goods from supplier to end customer a major (and expensive) struggle.
It became a shipper’s market for the first half of 2023 as the pandemic chaos eased and demand evened out. Soaring rates during the pandemic caused a lot of new carriers, meaning capacity was no longer maxed out. And now, as carriers try to keep their vehicles full and on the road, shippers are in a good position to negotiate favorable contract terms. New competitors added during the pandemic also means carriers will need to focus on delivering better customer service to stand out.
Nearshoring becoming a lasting trend
One of the tactics that companies employed during the pandemic (and in its aftermath) to manage supply chain pressures was to bring manufacturing closer to their customer base. By pulling manufacturing operations out of Asia (where rolling lockdowns caused huge bottlenecks at the height of the pandemic), they enjoyed faster transit times in exchange for higher manufacturing costs.
With increasing geopolitical concerns, nearshoring may continue to be a more attractive option for companies, even with the higher overhead involved.
Inventory management will shift again
Before Covid tossed the supply chain into turmoil, most companies used lean inventory management, keeping minimum stock on hand to conserve space and keep warehousing costs down.
However, with the chaos of the pandemic causing many essential products to be out of stock, many organizations shifted to a bigger warehouse footprint and larger on-hand inventory. Keeping these products in larger stockpiles ensured their customers were taken care of.
Now that supply chain woes are easing, many of these organizations are trimming their inventory again. But there’s a trend toward a more middle-ground approach. Instead of going back to razor-thin inventory margins, companies are keeping some extra inventory on hand as insurance if another big disruption hits.
For shippers, that means slightly less anxiety about getting products from far-off factories into customers’ hands. It also means scaling back on the high warehousing costs they had to shell out during the crisis.
These shipping trends will continue to develop over the course of 2023. And especially in the case of a potential recession, it’s difficult to predict exactly what each will look like by the dawn of 2024. However, by watching these and other supply chain trends, you’ll be in a better position to spot sudden changes and take steps to mitigate the next disruption’s effect on your organization.
Stay on top of the latest trends
From industry insights to industry-leading services, Ryan Transportation is dedicated to helping shippers optimize their supply chain and simplify their operations. Contact us today and see the difference that our team can make for your company.