The Emerging Trends That Will Redefine Logistics Outsourcing in 2023
- May 23, 2023
- 9 min read
- By Soham Roy
TABLE OF CONTENTS
Disruptive forces are continuously at play, transforming how industries embrace technology, conduct businesses, and evolve with time. The last few years have been particularly difficult for the logistics sector as market trends have had a significant impact. From large-scale supply chain interruptions brought on by Covid-19 to the infamous Ever Given saga, the shipping and logistics industry has seen it all. Nevertheless, the logistics industry has to keep moving forward since it is the backbone of the global economy. The industry leaders are preparing to usher in a new era of logistics outsourcing, with technologies, new practices, and evolving regulations showing the way.
Top 6 Shipping and Logistics Industry Trends Dominating 2023
Here are the top 6 shipping and logistics industry trends disrupting the sector.
#1 Skills Gap and Logistics Outsourcing
New technology has transformed the way supply chains operate, and it has blurred the distinction between white and blue-collar jobs. Now, supply chain leaders are looking for new collar employees, candidates who bring the right mix of technical and physical skills to succeed in a digitally transforming logistics environment.
The shortage of such candidates has created a skills gap. Couple that with the ongoing labor shortage and it adds up to 2.1 million critical jobs by 2030 (if not more). To address that, employers in the shipping and logistics industry are scrambling for new avenues of recruitment and talent acquisition.
A smart strategy is to collaborate with virtual staffing companies that employ the best remote new-collar employees all set to sync in with logistics organizations. From logistics coordinators to data entry specialists to order management experts, a virtual staffing company makes hiring a cakewalk!
#2 Cloud-based Systems and Integrations
Cloud services in logistics are applications that help manage and optimize various aspects of the supply chain, such as transportation, inventory, and warehousing.
It can provide real-time visibility of goods movement, inventory levels, and order status across the supply chain network. This enables logistics managers to monitor and control their operations more effectively and efficiently. For example, UPS uses Google Cloud's smart analytics to save $400 million a year by optimizing routes, reducing fuel consumption, and improving customer service.
Moreover, cloud services can dramatically improve collaboration and integration with freight partners, carriers, customers, and suppliers through cloud-based platforms and APIs. Oracle, for example, has already demonstrated capacity enhancement with Uber Freight by connecting shippers with carriers on demand.
Cloud services in logistics have proven to deliver significant value for supply chain management. According to a report by DFreight, cloud computing can save up to 40% of logistics costs and increase revenue by 25%.
All of these benefits will drive wider cloud adaptation in the logistics industry in 2023.
#3 Real-time Analytics and Tracking
Supply chain processes face many challenges, such as fluctuating demands, changing routes, major disruptions, and compliance issues. Therefore, they need to be monitored and optimized continuously.
RFID (Radio Frequency Identification) is an emerging technology to decode big data in supply chains since RFID tags are used throughout the supply chain process. This includes scanning through raw materials, transporting/relocating goods, and warehouse management, with accuracy and speed. Real-time analytics utilizes this live information to provide insights, leading to improved decision-making.
To improve delivery procedures, more and more shipping businesses are collaborating with data scientists. They can leverage key information to gain a clear understanding of important influencing elements like traffic, weather, etc, to further optimize delivery systems and provide precise arrival times to warehouses and customers.
#4 Environmental Sustainability
The logistics and shipping industry accounts for over 80% of world trade and more than one billion tons of greenhouse gas emissions per year.
Well, that is roughly equivalent to the emissions of the top five emitting countries combined. Yes, you read that right!
The industry also emits other greenhouse gases, such as methane and nitrous oxide, which have a higher global warming potential than CO2.
Reducing Scope 3 emissions has been a key part of corporate ESG goals for a long time.
In 2023, this will likely become more important as regulators and other stakeholders will probably require more action and transparency on this issue. Global banking institutions, private equity, and venture capitalists are increasingly aligning their portfolios with sustainable organizations.
One way to get around this is that transportation and logistics operations transform their modus operandi and adopt greener solutions. The use of parcel collection-point networks, which reduce the distance between consumers, is one of the burgeoning strategies being used by logistics companies to reduce carbon emissions.
#5 Automation & Predictive Analytics
Automation and predictive analytics are emerging techs that are radically transforming the logistics and shipping industry. They enable the industry to optimize its operations, reduce costs, improve customer satisfaction, and enhance sustainability.
Automation can increase efficiency, accuracy, safety, and productivity while minimizing human errors, labor costs, and resource wastage. For instance, Amazon has already started robots to move goods around its warehouses and drones to deliver packages to customers.
On the other hand, predictive analytics can help the logistics industry use data and artificial intelligence to predict demand and supply shocks, plan routes, monitor performance and quality, and minimize risks and disruptions. For instance, UPS has demonstrated the fact that predictive analytics can optimize its delivery routes while saving fuel and time.
Burgeoning Challenges for the Logistics Industry - How to Mitigate Them?
1. Increasing Implementation of Blockchain - Should You Join The Bandwagon?
Blockchain technology is a game-changer for logistics, as it offers secure and efficient management of supply chain operations. Blockchain solutions can provide complete transparency, prevent fraud, enhance the safety of products, simplify verification processes, minimize paperwork, and enable real-time traceability.
Imagine letting the customers know where their organic food was cultivated. Or, what if you can trace the source of affected products and choosing not to order them next time? These are small examples of what blockchain technology can do for the logistics sector.
Verifiable credentials, for instance, are a modern method of safely storing and disseminating product and confidential business information. These are digital certificates that utilize blockchain technology and encryption to make them instantaneously verifiable and fraud-proof.
2. Cybersecurity and Data Breaches
2023 will witness cyber criminals increasingly using sophisticated tricks to infiltrate supply chains to damage/steal from businesses. Traditional supply chains are typically vulnerable to cyber threats. New-age cyber criminals can also hack through basic warehouse gear such as barcode readers or IoT (Internet of Things) devices.
This can disrupt the flow of goods, compromise data integrity, and expose sensitive information. According to a report by BCG, cyber attacks used to occur every few years in the transportation and logistics sector, but now there seem to be one or two each month.
In recent years, major cyber risks have plagued the sector including ransomware, sensor & industrial technology, and phishing. The cost of cyber attacks can be significant, not only in terms of ransom payments and business losses but also in terms of reputation damage and customer trust.
For the unversed, a cyber attack in May 2021 triggered a week-long shutdown of the Colonial Pipeline, which supplies gasoline to almost half of the east coast of the United States.
To mitigate this, the stakeholders of the industry must conduct a cyber assessment for all functions/activities within the supply chain using IoT devices (especially those with direct access to sensitive information and wider systems).
Another important aspect is to train employees on the risks of opening dubious emails or clicking unfamiliar URLs, links, or attachments since they will shape the future of global logistics. Criminals often imitate email addresses, and invoices, while using text messaging to get access to sensitive information. Logistics personnel must be alert to such nefarious attempts.
3. Embracing Creative Solutions with a Freight Forwarder
Freight forwarding is going digital. Imagine a future where advanced analytics, digital front ends, and robotics work in tandem with integrated back-end operations. Sounds exciting, right? But not everyone is ready for this change. How fast and how well the logistics industry embraces these technologies will depend on how much they understand the potential of streamlining and simplifying operations.
As per Allied Market Research on global logistics trends, the digital freight forward market will grow from $2.92 billion in 2020 to $22.9 billion in 2030, growing at a staggering pace of 23% per annum, with 2023 being a crucial year for innovation.
In another survey by McKinsey, it was found that 90% of supply chain leaders have invested in digital tech for advanced planning, and 80% will continue to do so in 2023 and beyond. GPS tracking and real-time data are becoming the norm in logistics to ensure that shipments are delivered within the stipulated time frame.
To ride this wave, industry leaders need to be agile, flexible, and visible – and digitalization can help them achieve that. They should not ignore this opportunity with freight forwarders.
4. Reducing Emissions by Adopting Greener Technologies
To reduce their environmental impact, logistics companies need to adopt greener technologies that can make their operations more efficient, economical, and eco-friendly. Some of the green technologies trends that are transforming the logistics industry are:
- Voyage optimization, which uses artificial intelligence and machine learning to plan the best routes and speeds for ships based on weather and maritime conditions
- Cargo delivery drones, can deliver packages faster and cheaper than traditional vehicles, while avoiding traffic congestion and emissions.
- Green cold chain, which uses renewable energy sources and smart sensors to power and monitor refrigerated containers.
- Electric cargo vehicles are ideal for urban deliveries, as they are emission-free, agile, and cost-effective.
By implementing these green technologies, logistics companies can not only reduce their carbon footprint, but also improve their customer satisfaction, profitability, and competitiveness.
5. Efficiently Handling Returns in Logistics
With surging e-commerce activities in the post-pandemic era, the volume of returned products has witnessed explosive growth. This is driving demand for efficient and cost-effective reverse logistics solutions that seamlessly handle returned goods.
However, this can pose a challenge for the logistics industry. According to a Salescycle report, 30% of shoppers consciously over-purchase and then return items. Retail giants like Amazon monitor accounts reaching concession limits and could reject returns on orders from habitual returners, but smaller retailers may not have the advanced systems in place to do the same.
The shipping and logistics industry has started to factor in such returns and invest in return logistics solutions and it is going to be a major trend in 2023 and beyond.
6. Russia-Ukraine War & Other Geopolitical Tensions
The war in Ukraine between Russia and its Western-backed opponents has created a major disruption in global trade and international supply chains. One unlikely victim is the logistics sector, disrupting the movement of goods and materials across borders as well as logistics outsourcing. The unwanted conflict has spiked freight charges and led to container shortages.
Similarly, the ongoing geopolitical tension between China and the United States is snowballing into trade policy changes and tighter regulations, (such as tariffs, sanctions, and embargoes). This can disrupt the logistics industry since they are the largest economies.
As importers observe and adapt, they are quickly learning that transacting from a single source is a lethal mistake in the long term. For example, during the Los Angeles Longshoreman strike (2012), many importers switched from the Port of Los Angeles to multiple East Coast ports to avoid detention fees (running into thousands of dollars). Similarly, as the United States decouples from China, the entire supply chain can transform with the incorporation of smaller countries.
The only problem?
Most of the supply chain infrastructure is still dominated by the US, China, and a handful of other developed economies.
Take this for example. The bulk shipping market expanded at a meager CAGR of just 1.3% between 2015-2020. The growth rates will hover around 0.8% until 2030, with declining Chinese demand for coal and iron ore being the prime factor.
Logistics Outsourcing Trends
Many companies in the global logistics industry are opting to hire third-party logistics (3PL) providers to handle their logistics functions. This reflects a surging trend in the logistics outsourcing demand.
According to Research And Markets, it is expected to grow at a 4.77% CAGR from 2021 to 2027. This report on the logistics outsourcing market examines the performance of the major regions such as North America, Europe, and Asia-Pacific.
Any multinational business' success depends heavily on logistics and how competent they are with logistics outsourcing. Despite challenges, the logistics industry has enormous growth potential for 2023 and beyond. With AI, IoT, blockchains, and other advance solutions dominating the shipping and logistics trends, the industry is on the cusp of ushering in a new era. Looking ahead, it is clear that blending with these emerging tech trends will help logistics businesses stay ahead of the curve top.