Can you believe it's almost January? It's definitely been another eventful year in freight forwarding. Volatility and the long-lasting effects of the pandemic continued to be felt, as new patterns and trends emerged and took hold.
Despite the challenges, we managed to help our customers navigate the choppy waters and kept their shipments and businesses moving smoothly.
Before we say goodbye to 2022, let's look back at what we've learned and what we can expect in 2023.
1. Supply Chain Disruptions
The COVID-19 pandemic highlighted the vulnerabilities of the global logistics network to future disruptions, such as political instability, changes in regulations and natural disasters.
During 2022 disruptions were exacerbated by global political and economic instability. It's been challenging to build a long-term, cohesive supply chain strategy in the face of constant change.
There's been recurrent shipping delays, clogged ports with unusually long turnaround times and shortage of workers across the shipping and logistics industry.
Supply chain disruptions have been on the rise in recent years and this trend is expected to continue in 2023, affecting both, businesses and consumers.
National Retail Federation (NRF): 97% of its members were impacted by port congestion and shipping delays and, in the US, 60% of consumers were unable to get a product due to shortages or delays (1).
2. Increased Costs
Huge increases in shipping rates for an extended time.
Growing fear of a recession in the face of rising prices and inflation.
A high number of unfilled jobs has led to fierce competition for talent, driving up salaries. This has contributed to a higher cost of many consumables.
The rising cost of fuel has been a major concern for consumers and businesses, as it has a widespread impact on the cost of transportation and other goods and services.
"Shippers and carriers should continue analyzing the past 12 months and examine energy cost expectations as motivation to improve their transportation network strategy. Opportunities exist to create or maintain a competitive advantage while navigating one of the most challenging energy markets in decades."
Matt Muenster, chief economist at data provider Breakthrough Fuel (2).
3. Non-existent Peak Season
No spike in rates. During a traditional peak shipping season, we usually see a spike in rates due to increased demand for goods. However, this year we saw a decrease in demand, an excess of inventory, and many businesses shipping goods earlier, resulting in no such spike.
Capacity and space were more available than they would normally be.
The volatility of the industry, which included lockdowns, labour shortages and strikes, filled ports with backlogs of dozens of ships.
4. Inventory Management
Supply chain disruptions had a big impact on Australian businesses, their purchases and inventory management.
Businesses invested more in inventory on-hand to stay ahead of supply chain delays and poor carrier performance.
Inventories spiked. As the pandemic subsided, many retailers found that their stockpiling was not met with the expected level of demand.
Global shortages of energy and raw materials, particularly in manufacturing hubs like China, affected the availability of certain goods.
5. Supply Chain Resilience
The challenges and disruptions experienced in recent years have highlighted the fragility of supply chains and the need for greater resilience.
Supply chain disruptions are occurring with increasing frequency and severity, lending new urgency to supply chain resilience measures. Despite significant efforts to make supply chains more resilient in 2022, there's still a lot of work to address the ongoing challenges and vulnerabilities.
Amid the volatility and uncertainty of the freight forwarding industry, it's been difficult to build a cohesive strategy and bolster the resilience of the supply chain.
6. Consumer Expectations and Trends
Businesses faced increasing pressure to provide fast deliveries. Consumers expect goods to be delivered more quickly than ever before.
Consumer confidence has held relatively strong after the economic downturn caused by the pandemic, but it's uncertain whether this trend will continue in 2023. As we face the fear of rising prices and inflation, concerns about a potential recession are increasing. Factors such as fluctuating energy costs, war and ongoing conflicts have the potential to impact the strength of the economy and consumer confidence over the long term.
A trend that we saw in 2022 and is expected to persist in the future is consumers becoming more conscious of the impact their purchasing decisions have on the environment. They're increasingly choosing to support brands that demonstrate commitment to sustainability.
7. Supply ChainTechnology & Supply Chain Data
2022 tech trends that are expected to continue next year:
Investment in Cloud technology becoming increasingly critical with remote working.
Cybersecurity becoming a management priority for both Australian and New Zealand businesses and organisations. (3)
Businesses embracing innovation and investing in digital platforms that can support new and more effective ways of working.
Technology investment boost: to incentivise digital adoption by small businesses, the Federal Government dedicated $1.6 billion of its 2022/23 budget for technology investments. The incentive ends on 30 June 2023 and allows small businesses to deduct an additional 20% of the costs incurred on new technology. (4)
"Geopolitical disruption, inflation, currency fluctuations and supply chain challenges are among the many factors vying for CIOs time and attention, yet contrary to what we saw at the start of 2020, CIOs are accelerating IT investments as they recognise the importance of flexibility and agility in responding to disruption. As a result, purchasing and investing preference will be focused in areas including analytics, cloud computing, seamless customer experiences and security."
John-David Lovelock, Research Vice President and Distinguished Analyst at Gartner (5)
8. Supply Chain Sustainability
2022 was a challenging year for achieving sustainability goals, with rising shipping costs, limited space and uncertain ETAs. Sustainability trends that are expected to continue in 2023:
Businesses becoming more aware of the potential benefits of implementing sustainable practices throughout the supply chain.
Governments and regulators around the world increasing pressure to meet the United Nations' Sustainable Development Goals.
Consumers are demanding sustainable operations, and profit becoming increasingly linked to purpose.
Most shipping customers willing to pay a premium for zero-carbon shipping (6)
9. 2023 Predictions
In 2023 the economic situation will continue to highlight the need for an efficient and resilient supply chain.
Many companies will focus on cost control as opposed to growth.
As the The Reserve Bank of Australia (RBA) works to curb high inflation, supply chains will be carefully monitored as businesses try to reduce costs.
Penalties for Poor Delivery Performance
Customers becoming less tolerant of poor delivery performance and choosing to do business with other companies as a result.
Businesses needing to provide a better customer experience and improve the accuracy of their delivery services. Real-time shipment tracking will be a valuable and highly sought after feature.
The Descartes Buying Habits report of poor delivery performance noted the following:
Furthermore, the impacts of these metrics are likely understated, given the speed with which these experiences can be shared through social media and messaging platforms. (7)
Supply Chain Sustainability
The trend will continue: more customers will be making purchases based on the brand sustainability efforts.
Sustainable logistics: traditionally, the main focus has been on the sustainability of products or packaging; however, in greater emphasis will be placed on sustainable logistics practices that reduce the carbon footprint of transportation and distribution.
As the labor shortage continues to be a major challenge in 2023, logistics companies can benefit from investing in digitalisation to increase the productivity of their existing workforce and reduce the need for additional labor during peak seasons.
By partnering with digital freight forwarders like Explorate, businesses can find ways to reduce costs, improve efficiency, and enhance the customer experience, all while remaining competitive in a rapidly evolving market.
We're here to help you develop a comprehensive freight forwarding strategy for 2023 and beyond. If you're not with us yet but are interested in seeing how we can help you, get in touch!