The Supply Chain in 2018: Trends That Will Define the New Year
Previously we looked back at 2017 and the disruptions that rocked the transportation industry. Now let’s take the time to analyze the trends that will most likely play a huge role in the upcoming year. There are a great many factors that supply chain managers will have to consider for 2018, some being a carryover from 2017. However, for this article, we will focus on three: e-commerce growth, labor shortages pushing a shift towards automation and increased technological innovation and accelerating industry consolidation.
Current estimates indicate that e-commerce is growing at a rate of 23% every year. Furthermore, more than 50% of consumers polled indicated that they prefer online shopping over traditional retail. E-commerce is expected to control over 20% of the retail market by 2028. We have discussed the rise of e-commerce in previous articles, but it remains an important factor in the future of the global supply chain. There are unique demands on supply chains required by e-commerce retail. Faster fulfillment times, quicker and more frequent deliveries, as well as more streamlined and efficient networks, are just a few of the requirements for success for operating an e-commerce compatible supply chain. These requirements may seem to be very demanding, but the benefits in capturing market share in this segment offer incredible lucrative potential. For example, Amazon controls almost half the amount of U.S e-commerce. This control has resulted in staggering revenues and several massive capital expenditures and acquisitions that have transformed Amazon in THE standard in e-commerce retail. Unfortunately for some supply chain companies, Amazon prefers to insource most of its operational processes. This means that Amazon could transform itself into a dominant player in the freight industry which will create intense competitive pressures on more established firms.
We have spilled a lot of ink on the driver shortage and the lack of other blue-collar labor workers in the freight industry. At this point, most players should be quite familiar with the growing constriction of the freight industry talent pool. However, more should be said about the possible ramifications of this shortage. As companies struggle to fill positions, they will look ever increasingly towards other means of fulfilling demand, particularly through technological innovation. Technologies such as automated trucks and smart warehouses can cut out the need for human employees and are not limited by work hours or other human inefficiencies. Technology, many feel, is the answer to the capacity crunch that industry experts have been predicting. The question on many supply chain manager’s minds is how much the labor shortage will push the industry towards technological solutions. 2018 may be the year we find out.
A final factor to consider going into 2018, is the apparent acceleration of consolidation in the freight industry. More companies are engaging in merger and acquisition strategies in a bid to improve their industry footing and increase their potential market share. While overall, the industry remains comparatively fragmented, some sectors are becoming increasingly consolidated. LTL, for example, is considered partially consolidated at this moment. There are many reasons behind this push for consolidation other than simply increasing their market share. Some companies are working to diversify their service offerings or expand their geographic coverage. Economic conditions are very favorable for expansion, however, the labor shortage discussed above, is a large factor impeding the process.
2017 has come and gone, and 2018 is looking like an equally challenging year in freight. If you have any questions regarding the state of the freight industry, or are interested in partnering with LTX to take the next step and revolutionize your supply chain, then please contact us below today.