Supply Chain Optimization
Top 10 Logistics Trends That Could Impact Supply Chains in 2022
Dec 23, 2021
16 mins read
“All great enterprises are about logistics. Not genius or inspiration or flights of imagination, skill or cunning, but logistics.” — Tom McCarthy
The year 2021 has proved it once again that Tom McCarthy was right. Enterprises that did not adapt to new trends faced the brunt of COVID-19 pandemic. Inspite of having a loyal customer base, many businesses experienced a downfall in their revenues. This was majorly due to their inability to understand and adapt to the changing logistics trends.
Rewind to 2021!
2021 may not be a year for the logistics industry to cherish, but it was a year filled with a lot of takeaways. Logistics industry was experiencing capacity constraints, driver shortages, sudden upticks in e-commerce demand, new technologies, different fulfillment models, delays, port congestions, canal blockage etc. Some businesses went over a rough patch, some survived well and some may have mildly succeeded. But all of them have returned with a handful of lessons.
2021 pushed businesses to take giant strides in their logistics processes and operations. A decade back these developments in logistics might have seemed impossible. But now we have entered a new era of logistics that requires technological adoption and strategic execution.
Welcome to 2022: Top 10 Supply chain logistics trends to watch out for 2022
At the end of the year, businesses have learnt a lot of lessons in logistics. Jumping into the new year, it is crucial for businesses to understand the logistics trends that could impact their supply chains in 2022. Planning logistics operations without understanding the future trends causes businesses to lose their significant customer base. Find out the most important logistics trends that could impact supply chains in 2022.
- More focus on last-mile delivery
- Emphasis on driver recruitment and retention
- Sustainability and green logistics
- Optimized reverse logistics
- Localization of supply chains
- Micro-fulfillment centers taking the center stage
- Increase in D2C fulfillment
- Moving towards elastic logistics
- Rise in demand for 3PL and 4PL services
- Omnichannel fulfillment–The new reality
More Focus on Last-Mile Delivery
Demand for last-mile delivery is soaring and is expected to grow by 78% globally by 2030.- World Economic Forum, The future of last-mile ecosystem, Jan 2020
The last mile delivery market size in North America is expected to grow by USD 59.81 billion and record a CAGR of 15.99% during 2021-2025. 82 percent of the global last-mile delivery market growth will originate from the US. -Technavio, Last Mile Delivery Market in North America by Service and Geography – Forecast and Analysis 2021-2025, Jan 2021
Since the COVID-19 pandemic, a huge inflow of home deliveries has resulted in businesses adding more emphasis to their last-mile deliveries. With last-mile delivery costs contributing to more than 50% of total shipping costs, the rising expectations in home delivery increases the risk of encountering inefficiencies.
Many businesses have started to adopt last-mile delivery technologies into their logistics operations and this trend will increase in 2022. As the pandemic continues to rage on, brands will adopt AI-based technologies to help consumers easily track their packages and receive them as contactless deliveries.
Check Out: Last-Mile Delivery: Finding the Right Balance
With rise in orders from customers, businesses face a huge number of constraints and challenges in their delivery operations. As the majority of customers want fast and free shipping, companies are finding it difficult to plan the most expensive and time-consuming part of the delivery process.
The last-mile delivery of parcels requires an astonishing amount of work and time to plan. Businesses need a dispatch management platform to systematically plan and execute their last-mile deliveries. From 2022, we can see a steady rise in enterprise businesses investing in last-mile delivery software.
Global Last Mile Delivery Software Market was valued at USD 5.38 Billion in 2018 and is projected to reach USD 10.78 Billion by 2026, growing at a CAGR of 9.28% from 2019 to 2026. – Verified Market Research, Last-mile delivery software market, Jun 2021
Emphasis on driver recruitment and retention
The driver shortage in the US could surpass 160,000 in 2030 and it was estimated to be around 80,000 this 2021. – Driver shortage update, American Trucking Association, Oct 2021
The logistics of goods breaks down when there are no drivers, and the pandemic has given us glimpses of it.
Some reasons for driver shortages
- Higher number of driver retirements due to high average age of drivers
- Less represented women workforce in trucking making them less than 7% of total drivers
- Pandemic resulting in existing drivers resigning jobs
- Truck driver training schools training less drivers than 2020
- Federally mandated age and hiring standards increasing barriers to entry
2022 is cut out for the logistics industry to not just recruit new drivers but also retain the existing drivers. The driver shortage coupled with customers’ demand for deliveries has forced logistics firms to increase their recruitment of drivers.
Over the next decade, the industry will have to recruit nearly 1,000,000 new drivers into the industry to replace retiring drivers, drivers that leave voluntarily (e.g., lifestyle) or involuntarily (e.g., driving records or failed drug tests), as well as additional drivers needed for industry growth.- Driver shortage update, American Trucking Association, Oct 2021
One of the most important ways to counter driver shortage is to increase pay and incentives for drivers. But logistics experts opine that just pay rates are not necessarily going to help businesses to retain fleet drivers. Regulatory changes and changes in business practices to improve the working conditions of drivers is much needed.
The added focus of businesses on retaining drivers has made them increasingly invest in optimization platforms like rider apps. Rider apps with competent geocoding abilities map every order with verified addresses thereby enabling drivers to find delivery locations easily.
Whether it is customers providing specific delivery instructions or fleet managers giving updates about orders, rider apps make it transparent for drivers, helping fleet managers to auto-assign tasks based on the best-fit drivers.
Sustainability and green logistics
To satisfy customers’ ever-rising desire to buy products online, without any intervention, the number of delivery vehicles in the top 100 cities globally will increase by 36% until 2030. Consequently, emissions from delivery traffic will increase by 32% and congestion will rise by over 21%. – World Economic Forum, The Future of the last-mile ecosystem, Jan 2020.
Transportation activities (aviation, rail, shipping, heavy and light trucking) are responsible for approximately 17% of global greenhouse gas (GHG) emissions. – Boston Consulting Group, Climate Action Pays Off in Transportation and Logistics, July 2020.
A decade back the discussions about the climate change crisis did not catch much of public attention. But things have changed today.
The World Economic Forum’s report on the “future of the last-mile ecosystem” states that 85% of delivery mileage from freight delivery are majorly responsible for emissions and congestion driven by commercial vehicles. This has created an urgent need for actions and effective interventions from businesses. In 2022, we can see a widespread adoption of green logistics by many businesses.
The number of delivery vehicles on the road will increase by 36% between 2019 and 2030 (top 100 cities globally). These vehicles will emit an additional 6 million tonnes of CO2, putting additional pressure on cities’ and automotive OEMs’ decarbonization targets. -World Economic Forum, The Future of the last-mile ecosystem, Jan 2020.
Sustainability awareness is increasing globally in countless industries including logistics. Consumers today prefer brands with ethical and sustainability practices and this trend will increase this 2022.
34% of consumers in the UK have chosen brands that have environmentally sustainable practices and values.- Sustainability and Consumer Behavior in 2021, Deloitte.
Without doubt, green logistics and sustainability is the future of logistics. But the question is what practices. The serious concerns about impacts of logistics on the climate crisis has spurred new innovations in logistics like electric vehicles, autonomous delivery vehicles, robots, drones, etc.
Some ways through which companies can implement green logistics in the future
- Electric and solar-powered vehicles
- Biodegradable packaging
- Leveraging software to assess and minimize carbon footprints
- Eco-friendly warehouses with timers to calculate usage of resources
Optimized reverse logistics
With e-commerce revenues growing 15 percent annually and a product return rate near 30 percent of sales, we can expect 4 billion incremental units to be added to the annual reverse logistics pipeline by 2022. – Deloitte, Bringing it back. 2019
The growth in e-commerce purchases has increased the demand for returns through the same channel. Reverse logistics has become a must-have feature for businesses and its importance has grown over the years.
In 2022, the global reverse logistics market is expected to be valued at 704.31 billion U.S dollars. By 2028, the reverse logistics market size is expected to exceed 958 billion U.S. dollars. – Statista, Size of reverse logistics market worldwide, 2020-2028
Customers do not purchase a product on an e-commerce site that does not guarantee returns. They want a free and fast returns shipping service for their orders. The biggest concern for businesses is to manage the cost of reverse logistics and optimize it. This has necessitated them to invest in last-mile delivery software.
Managing reverse logistics can be quite challenging with constraints like volume utilization, time windows and routing problems. The usage of a last-mile delivery software enables businesses to generate optimal routes that accommodate reverse logistics and forward logistics operations. It minimizes the empty miles driven thereby ensuring that fleets are not underutilized.
Localization of Supply chain
68% of shippers believe that supply chains have become too global and must be rebalanced towards more regional and local/domestic ecosystems within larger global enterprises. The majority of shippers—83%—said they plan to adjust sources of supply as a direct result of efforts to rebalance towards regional and local/domestic sources. – Third-Party Logistics Study, 2022, NTT Data.
A few years back an e-commerce order took several days to reach a consumer. But things have drastically changed today. With customers expecting ultra-express deliveries at a reasonable price, on-demand deliveries and same-day deliveries are becoming the new differentiators. As global supply chains struggle with providing same-day deliveries, localization of the supply chain has become a necessity for businesses.
Since Amazon’s express delivery services to its prime customers, same-day delivery has turned out to be a necessity. The increasing number of customers preferring same-day delivery options has forced supply chains to get more local. Localization of supply chains means connecting customers with suppliers in local areas or fulfilling orders from local sources.
With the global business environment being plagued with uncertainties and volatilities, brands are now moving towards localized supply chains. Localizing supply chains provides better control of delivery times, minimizes carbon emissions, and mitigates risk during times of political or economic risks. Also, going local helps the logistics industry to work within communities and connect with small businesses.
Micro-fulfillment centers taking the center stage
Micro Fulfillment Market is expected to have a cumulative opportunity worth $36B in next 10 years by 2030 with an installed base of 6600 MFCs if the technology and concept remains permanent. -Micro-fulfillment market, LogisticsIQ, 2020
The US is going to be the main market for the next 10 years followed by the U.K, Japan, France and China. We expect around 3400 MFC installed base i.e., more than 50% of the worldwide market within the USA by 2030. – Micro-fulfillment market, Logistics IQ, 2020
In 2021, micro fulfillment centers became one of the most popular e-commerce fulfillment methods. In order to meet the rising volumes of parcels, demographic nature of e-commerce demand and growing desire for same-day delivery, businesses have started to implement micro-fulfillment centers in their logistics operations.
The years 2022 and 2023 are going to be the determining period for the development of micro-fulfillment centers that would set a base for the future. Being outside the city limits, centralized fulfillment centers result in additional delivery costs and time. This would not fulfill the expectations of consumers especially in the Food & Beverage, retail and grocery industry.
Micro-fulfillment centers are located in dense urban areas which makes it accessible for retailers to reach them easily. It minimizes the cost of real estate, picking, storage, retrieval and last-mile delivery costs too. Being deployed at the backside of retail outlets, basements or malls, it can fulfill same-day deliveries through in-store picking and other last-mile delivery options.
Increase in Direct to Consumer (D2C) Fulfillment
“The U.S. D2C online market is forecast to grow to 129 U.S. dollars by 2021”. Instead of this, Please type “The U.S. D2C online market is forecast to grow to 129 billion U.S. dollars by 2021”. Just add a billion 129 in this statistics of the subheading “Increase in D2C fulfillment”.
D2Cs are brands with a digital native presence who sell goods and services directly to consumers without any physical storefronts.
Many manufacturers and Consumer Packaged Goods (CPG) brands have found D2C fulfillment as an attractive route to reach customers quickly. With in-person shopping being completely affected by COVID-19 pandemic, the growth of D2C has accelerated.
With brands like Warby Parker or Allbirds leading the charge of D2C operations, D2C brands have disrupted the US markets. Insights from an E-marketer study mentioned that by diversifying consumer experiences, D2C brands have successfully disrupted the retail industry.
US direct-to-consumer (D2C) ecommerce sales will reach $151.20 billion in 2022, an increase of 16.9% compared to this year. – E-marketer Forecast, D2C E-commerce sales, US 2019-2023, Feb 2021.
D2C provides brands greater control over their sales, branding, distribution strategies, customer service and logistics. They have the added flexibility to experiment with distribution models like shipping directly with customers, opening pop-up fulfillment stores, or partnering with third-party logistics providers.
By purchasing directly from brands, consumers enjoy the benefits of useful and attractive deals. With consumers’ quick delivery requirements, demand for error-free delivery, and pressure on shipping networks, a strong fulfillment strategy and scalability are necessary for D2C brands to remain successful.
Moving towards elastic logistics
2021 was a year filled with a lot of supply chain issues like the Suez Canal blockage, US port congestions, turkey shortage, toy shortage, Post-Brexit chaos, US-China trade tensions etc. All these made supply chain predictability a challenging task.
With the accumulated threats of volatilities, uncertainties, frequent and unexpected disruptions, businesses need to build elastic supply chains. They are facing a growing volatility in consumer behavior with respect to logistics and need flexibility to contract and expand logistics capabilities to meet demand within a given timeframe. This flexibility is called elastic logistics.
Elastic logistics is a sustainable strategy that enables businesses to deliver products on-time keeping costs at minimum, despite a rise in demand. A business with an elastic supply chain can scale up or scale down its operations based on changing demand patterns. Beyond reducing costs, minimizing risk and improving service levels, it enhances a company’s competitive edge.
2022 is going to be a year where businesses will develop their capabilities for elastic logistics. As business strategies turn increasingly customer-centric, supply chain professionals have already started preparing for the future with a focus on elastic logistics.
Rise in demand for 3PL and 4PL services
Third-party logistics (3PL) is a growing industry in the United States. There has been a year-on-year increase in revenue every year besides 2019, when the total industry revenue dropped to 212.8 billion U.S. dollars. By 2022, the 3PL market is expected to reach 278 billion U.S. dollars. – Statista, Revenue generated from US 3PL market, July 2021.
The 4PL market is expected to grow to around 86.26 billion U.S. dollars by 2025. – Statista, 4PL market size from 2018-2027, Jun 2020
With a steep rise in e-commerce demand, the demand for 3PL and 4PL services has increased drastically. As companies are increasingly looking for an efficient last-mile delivery system, 3PL companies offer last-mile delivery expertise and experience to brands . Both 3PL and 4PL services are cost-effective and responsive logistics models.
64% of 3PL users and 86% of 3PL providers agree that the use of 3PLs has reduced overall logistics costs. -Third-party logistics study, 2022, NTT Data,
Consumers have high expectations on deliveries like free and fast shipping. 2022 will see businesses increasingly investing in 3PL majorly for logistics cost reductions and scalability. Firms that want direct control over their logistics operations more than cost reduction as their priority will go with alternative distribution models.
Omnichannel fulfillment: The new reality
Logistics has undergone huge changes in the past 5 years. The rising customer expectations of speed, convenience, and channel shifts driven by COVID-19 have accelerated changes in the retail industry. A decade back, omnichannel logistics would have meant a luxury or irrelevant. But now it determines whether a customer will stay with the business or exit their services.
A recent McKinsey survey of consumers shows that five of the top nine factors driving customer value in omnichannel retail are related to logistics. 15% of consumers value delivery speed and cost. 15% of consumers value control over delivery operations and processes. 9% of consumers value a good return policy. 4% and 1% consumers value product availability and return at stores for omnichannel delivery. – What US Consumers value in Omnichannel retail, Sep 2021.
A gartner report states that creating omnichannel experiences for customers is a must-have feature to drive digital commerce. Since the pandemic, the importance of providing frictionless omnichannel delivery experiences through streamlined channels to customers has grown rapidly.
By 2022, 50% of large organizations will have failed to unify engagement channels, resulting in a disjointed and siloed customer experience that lacks context.- Digital Commerce for marketing leaders, 2021: A Gartner trend insight report
Digital transformation is the key towards building a frictionless omnichannel experience. The logistics industry will face its acid test when it attempts to manage multiple fulfillment models, customer channels, payment methods, etc. in a seamless and interconnected way. As customers increasingly expect faster deliveries, omnichannel logistics will turn out to be a new reality for last-mile businesses in 2022.
Locus’ Prediction for 2022: Significant transformation in logistics
2021 was a year filled with uncertainties, volatilities, and risks for the logistics industry. It led them to make some temporary immediate changes in their operations. But 2022 is the year where businesses will make significant and foundational changes to their logistics operations. All organizations will rebuild logistics processes that contribute to the smooth operations of the supply chain.
As the popularity of e-commerce explodes, the demand for faster delivery increases. And this requires businesses to remain on top of the global logistics trends. After all that has happened in 2021, logistics experts are bullish about the future of the logistics industry, especially in 2022. With the above trends, businesses can easily build a strategic roadmap for managing their logistics operations in 2022.
The adoption of the right technology will determine the success of a business in its logistics operations. Managing last-mile deliveries that are filled with mind-boggling complexities requires smart solutions like a last-mile delivery software.
Locus’ last-mile delivery software is a sophisticated dispatch management platform that helps businesses manage last-mile delivery processes effortlessly. Our machine learning algorithms help fleet managers solve real-world and dynamic last-mile delivery problems with minimal human intervention and world-class fleet tracking abilities help businesses improve customer experience and attain sustainable logistics goals.
CEP and 3PL
Japan’s Fashion Retail Supply Chain is a Speed Game Now More Than Ever
Dec 17, 2021
The fashion retail supply chain is facing many challenges. Find out how the fashion retail industry can adopt 3PL to fulfill the fashion supplier requirement.Read more
5 Ways Technology Can Help Logistics Companies Tackle New Year Demand
Dec 29, 2021
Here are five ways in which technology can tackle the new year’s logistics challenges like quickest routes, delivery fulfillment to enhance customer experiences.Read more
ABOUT THE AUTHOR
Lakshmi Narashimman is one of the senior writers at Locus. He is a voracious reader and a passionate writer who loves making complex aspects sound simple.Read other blogs by this author
SUBSCRIBE TO OUR NEWSLETTER
Stay up to date with the latest marketing, sales, and service tips and news
Top 10 Logistics Trends That Could Impact Supply Chains in 2022