This was a challenging year in our industry.
From January’s disruptive winter storms to Hanjin’s summer bankruptcy and the annual struggle to meet holiday delivery deadlines, not many months went by without significant upheaval. It’s enough to have fulfillment managers breathing a sign of relief as we head into a New Year.
Supply chain trends rarely adhere to the calendar, of course. Some of the advancements that we expected in 2016 took longer to develop, while others arrived more quickly than anticipated.
Anticipating what comes next is never easy, but that’s our job and we’re happy to give you the best insights we can as another year comes to a close.
Supply Chain Trends: What to Expect in 2017
Effective supply chain strategy demands that managers consider the road ahead for obstacles and opportunities. As the calendar flips to another year, it’s natural to look at the trends that will influence our industry in the next twelve months.
Below are six factors that we expect to play an important role in and around the supply chain during 2017.
1: Post-election Investment
It’s tough to look beyond politics when we consider the events of 2016 and how they will influence the year ahead. With the uncertainty of an election year behind us, companies are looking to the next administration to provide commitments that will benefit their business sectors.
For the supply chain that means a focus on one word: infrastructure.
Much has been made about the country’s crumbling roads and substandard transport links. The subject took center stage at times during the election campaign and the President-elect has pledged to invest an eye-watering $1 trillion in infrastructure over the next decade. Combined with a promise to catalyze manufacturing at home, the prospects for a positive impact look good.
However, this optimism is tempered by the negative outlook for imported goods, which could harm areas of the shipping and transport sectors, as well as the general uncertainty around international trade positions.
Thankfully the picture should quickly become clearer after Inauguration Day on January 20th, at which point a flurry of legislative activity is expected in Washington D.C.
2: E-commerce Drives and Defines Retail
Online shopping is no longer the plucky young trend vying for the eyes of big box retailers. With Walmart’s acquisition of Jet.com and Target’s commitment to spend $2 billion on its e-commerce offering in 2017, activity this year confirms that digital will dominate retail strategies in the next twelve months.
Figures from this year’s holiday shopping only serve to underscore just how important e-commerce has become. Cyber Monday continued to usurp Black Friday as the Thanksgiving break’s biggest sales day, albeit with purchases more evenly spread across the weekend than ever before. This shouldn’t surprise anyone, as consumers take advantage of the ability to purchase at their convenience, on their own schedule.
Just as the deals reflected that digital-first mentality in 2016, retail strategies will be driven by it in 2017.
Expect more online promotions and a focused drive to make supply chains fit the needs of the consumers shopping on tablets and mobile devices.
3: Container Business Consolidation
Shipping lines didn’t have a great year and the outlook isn’t any better for 2017. Hanjin Shipping’s bankruptcy in September was the tip of a very sharp spear as far as some global trade analysts are concerned.
Carriers found it hard to maintain rates in 2016. With excess inventory in the supply chain as the year began and retailers unwilling to commit to long-term contracts, it was clients who held all the cards.
Even without so much inventory, that scenario remains as we head into 2017. Throw in the aforementioned uncertainty around global trade, plus a renewed drive to focus on domestic production, and there are very few positive indicators for the shipping industry at this time. That points to another year of contraction and consolidation, with the less profitable shipping lines nervously looking over their shoulders.
4: Commercial Storage Space Plays Catch Up (Slowly)
After a year in which storage space remained at a premium and commercial real estate costs continued to climb, many retailers are hoping that supply will catch up to demand sooner rather than later.
While it’s unlikely that the gap will be completely bridged in 2017, new warehouse and distribution centers coming online should start to ease the pressure.
Brands like Amazon and FedEx are building at pace right here in New Jersey, as everyone tries to get closer to customers in major metropolitan areas. Heavy competition in the e-commerce arena will drive tighter and tighter delivery deadlines, which will require every major retailer to get its facilities closer to customers — or outsource the task to a fulfillment partner already in place.
5: Disruptive Startups Struggle for Influence
The tech sector has its eyes on the agile delivery space, but its influence remains a far cry from the disruption Silicon Valley has inflicted on other industries.
Although it’s tempting – and entirely accurate – to call Amazon a disruptive influence, it hardly qualifies for the startup label. That’s why the trend towards less conventional freight solutions rooted in new technology has been labeled the “Uberization of freight.”
For its part, Uber fueled this fire quite considerably over the summer, when it acquired self-driving truck startup Otto. If any technology has the potential to revolutionize the way goods are delivered, it is vehicles that no longer require a driver.
However, in the true last mile of delivery the opportunities remain limited. Competing with carriers like UPS and FedEx on a national level that’s also profitable means scaling quickly to achieve major delivery volumes. While companies like Uber, Lyft, and even Google have some hardware on the road, its primary purpose is not rapid delivery. Competing for the scraps of that space in a business with thin margins and even thinner tolerance for errors doesn’t seem attractive for any of those players, let alone smaller startups with less capital investment on the roads.
It’s more likely that the tech sector’s biggest influence will be augmenting supply chain activities in 2017, whether it’s with more intelligent automation in the warehouse or software that improves tracking and efficiency.
6: Amazon Steps Further into 3PL Territory
It’s a slow burn to be sure, but Amazon’s continued march into the world of traditional logistics providers continues unabated.
The e-commerce giant’s reach is already vast. It now has more than 100 fulfillment centers in North America alone, with more slated to open in 2017 and dedicated facilities around Europe, Asia and India. This year saw the company takes steps into the world of shipping lines, while also expanding into air cargo and furthering its drone delivery program.
Amazon has the ability to offer fulfillment solutions to many online retailers in many guises, but delivery is the pivotal part of its business. Two-day shipping with Prime already attracts 20% of the US population, so it’s reasonable to expect the company’s appeal will only increase as it offers more in terms of mCommerce and enhanced shipping options.
For supply chain professionals, it will be important to closely watch the company’s expansion into logistics and understand how those moves will complement or compete with the existing solutions in place.
Position Your Brand for Fulfillment in 2017
We hope these supply chain trends give you an idea of what to expect in the world of logistics and order fulfillment during 2017.
If you need assistance preparing your operations for the challenges of a new year, our experienced and passionate experts are always a call or e-mail away!
Contact us on (732) 745-7770 (option 3) or simply fill out your details on the form below so that we can get in touch.