Following a turbulent 2020 full of unprecedented transformation, driven by the Covid-19 pandemic, it is challenging to predict what 2021 will bring.
One change that has emerged the last year is a transformative shift towards DTC (Direct to Consumer). The news that Under Armour will exit 3,000 wholesale partnerships is an indication that the market is moving away from Brick and Mortar, to pureplay online. The second global wave of lockdown has already prompted retailers to hold products at origins and await shipping them until early 2021. This is prompted by a doubling of ocean rates and the lockdown of non-essential stores.
Let us take a look at 5 trends that will shape the supply chain industry moving into 2021.
1. From omni-channel to e-commerce
The transition from four walls/ Omni-channel operation towards a pureplay e-commerce will speed up exponentially, driving the need to engage in a different order and fulfillment model. We see that the tech landscape of the pre Covid-19 does not fit in this new normal. The lack of collaborative tech tools is the main culprit missing out in building ecosystems across data silos. Organizations that have been open to collaboration will be the winners in 2021 and the year to come.
Engaging thinking that focuses on product development, manufacturing and marketing rather than execution as the competitive edge will be the recipe going forward.
2. Volatile freight rates
Freight rates for 2021 will remain volatile across all modes of transport and trade imbalance will remain well into 2023. This contributes to the rate level on parcel, road, rail, air, and ocean (container and bulk) to reach a higher level across the board than we had pre-Covid-19.
The shortage of ocean containers will be swaying between markets prompting rates to stay high.
The airfreight market will remain equally high until passenger aircraft return to normality. The IATA predicts that this will only happen in 2024 at best.We have seen indications that governments may start imposing regulations on rate and service deliverables, protecting the buying power of the average consumer.
Trucking rates will remain equally volatile. As online stores have seen an increase of trade between 30% - 400%, their willingness to subsidize shipping will disappear. The need for smart technology will become essential as brand owners and execution providers come closer.
3. Consolidation
Overall, I am also predicting further consolidation in the third-party logistics provider (3PL) market. Traditional players will struggle to adjust and will either transform or make themselves obsolete.
Within the 3PL industry, there will be a split between the ones that focus on customer solutions vs no- frills execution. The unfortunate effect will be a continuous headcount reduction as operations take advantage of tech to drive towards a near autonomous operating environment. The shift towards “DTC” will further accelerate this.
4. Change of loyalty
The same is also expected in the traditional retail market. For the last 5 years, we have seen a transition from brand loyalty to supply loyalty.
The change of loyalty has been accelerated because of the change in buying behavior. Traditional players have worked hard to fend of the Amazon ecosystem. Amazon has announced opening 1,000’s of city warehouses, posing an obvious threat to many brand owners.
Taking part in shaping mega-trends the market needs to get access to the tools that engage collaboration. In short, you don’t solve strategic problems by providing transactional solutions.
5. Sustainable operations
On a positive note, governments and brand owners are requesting sustainability as they form the “New Normal”. Smart City logistics will be the way forward, empowering suburban economies where we live, work and entertain ourselves within 20 minutes from our homes.
Companies will have satellite offices based on commute time and focused on “Workation” where the office is a space to accelerate ideas more than a traditional office space. Work-from-home will remain a norm till late 2022. It is hard to see us coming back to 2019 style of work if it lasts that long.
End remarks
As we move towards “DTC”, the need for collaboration becomes essential as the delivery promise takes precedent.
Technologies like the MIXMOVE cloud-platform offers the brand owners the power to operate a serialized supply chain. For critical supply chains, the support of EPCIS vouches for a safe and agile operation. Collaboration is essential in lowering the last mile cost, stock balancing, and offering in-transit fulfillment.
The trend that people will settle outside of the large cities’ centers will challenge established supply chains.