11 Supply Chain Predictions for 2021
We got through 2020 with creative pivots and operational adjustments. In 2021, Many supply chain challenges will persist—from capacity constraints to increasing complexity. the prognosis? A year ahead with ample opportunities for addressing inefficiencies with renewed creativity and digital directives. Experts weigh in on 11 prognostications.
1. Transportation Capacity Remains Tight
With unemployment numbers trending downward and COVID-19 vaccines shipping, truck freight will experience significant growth on the supply side in 2021. With an overall driver shortage expected to continue, recruiting drivers will be a major challenge for trucking companies throughout the United States.
These trucking companies will need to place emphasis on technology solutions, operational improvements, and branding campaigns to recruit drivers in what will continue to be an industry-wide battle for capacity.
This shortage in capacity raises a bigger question: How can companies in the space work together—or autonomously—to make the truck driving profession a more attractive career choice? More importantly, how can companies make truck driving a more enjoyable, rewarding, and financially reliable profession while removing the pains frequently associated with the career?
There is a huge opportunity for companies to make the profession more attractive for younger generations.
Head, Product Marketing
As COVID-19 continues to impact people throughout the world and the United States, its effect on consumer behaviors is forcing companies to rethink their inventories, create supply chain flexibility, and consider more elastic pricing constructs for their transportation in 2021.
In 2020, we went through an 18-month freight cycle in just a few months, which no one could have predicted. This year, we will continue to see tightness in the market due to COVID-19.
Transportation makes up approximately 10% of GDP. With many consumers not traveling, going out, or spending money on things they typically do, they are buying more products. This bodes well for the transportation industry as well as manufacturers, distributors, and retailers.
Another factor that could impact capacity is the possibility of extreme weather throughout the year, which can further change market conditions. In addition, we saw some carriers close, go out of business, or downsize in 2020, which has put some pressure on the market.
Chairman of the Board of Directors and CEO
Echo Global Logistics
The global shipping meltdown of congestion, backed-up ports, and cargo trapped in factories without containers or vessels to ship the goods to buyers in overseas markets was a full-fledged conflagration in late 2020. This is expected to remain until Lunar New Year in February 2021.
Regardless of origin and destination points, the container imbalance will persist well into 2021. Chinese container factories cannot manufacture their way out of this imbalance for the country's exports and the number of containers terminated at ports of arrival translates into zero available equipment for inland exporters for agricultural and manufactured goods, regardless of destination.
Carriers who have profited handsomely from soaring rates in 2020 will need to ask whether or not such sky-high levels can remain in 2021 and from what part of their profits the cost to reposition containers globally will come—and shippers and forwarders alike will strongly voice their opposition to being the financial vehicle to foot the endeavor.
2. A New Supply Chain Workforce Emerges
"We will continue to see the growing adoption of hybrid automation for some time. This is the utilization of both workers and robots—or the use of collaborative robots—for the majority of workflows."
Chief Technology Officer
Keeping workers safe will top priority lists. While companies have already adapted to the social distancing and sanitizing protocols necessary to keep workers safe, they will also place a greater emphasis on traditional workplace safety concerns, like those involving ergonomic and repetitive stress issues, and other potential injuries that may be caused by working with equipment and pallets.
Amazon hired hundreds of thousands of workers in 2020, an average of more than 2,800 per day between July and December, and both UPS and FedEx staffed up as shipments soared over the holidays. Many of these new workers had been impacted by unemployment spikes in other sectors, such as retail and hospitality.
Although these companies have strong training and safety programs, many workers with less experience in physically demanding supply chain environments will inevitably face challenges.
President and CEO
Empowering the Warehouse Workforce
Businesses will invest more in solutions to support automation and next-generation technologies in the warehouse. One factor is a changing workforce: Be it materials handling equipment, robotics, or voice, vision, and mobility solutions, businesses must be prepared to augment and empower the workforce.
This is to handle potential labor shortages or an influx of new employees without prior warehousing experience from industries affected by the pandemic.
Chief Technology Officer
Körber Supply Chain Software
An Assist from AI
In 2021, we'll see manufacturers, logistics companies, and other human-workforce-heavy industries turn to artificial intelligence to speed the adoption of technologies aimed at assisting humans in their tasks.
I predict quality inspection, already in the top 5 applications for AI in manufacturing, will see even greater adoption and widespread deployment.
We'll see AI deployed in the form of inexpensive and lightweight hardware. The economic outlook is such that capital-intensive, complex solutions will be sidestepped for lighter-weight, perhaps software-only, less expensive solutions. This will allow manufacturers to realize ROIs in the short term without massive up-front investments.
It will also give them the flexibility to respond to supply and demand fluctuations—something that we've seen play out on a larger scale throughout the pandemic.
Humans will turn their attention to "why" AI makes the decisions it makes. When we think about explaining AI, it has often been talked about in the context of bias and other ethical challenges. But as AI comes of age, gets more precise and reliable, and finds more applications in real-world scenarios, we'll see people start to question the "why?"
The reason? Trust. Humans are reluctant to give power to automatic systems they do not fully understand. For instance, in manufacturing settings, AI will need to not only be accurate, but also "explain" why a product was classified as "normal" or "defective," so that human operators can develop confidence and trust in the system and let it do its job.
—Dr. Max Versace, PhD
CEO and Co-founder
Spotlight on Worker Health and Wellness
COVID-19 has spotlighted the need for the warehousing industry to focus on the health and wellness of workers. Workers who helped move food, personal protective equipment, and supplies to the public are essential, and companies will continue to innovate in this area.
Improving efficiency—for example, updating and streamlining processes—and exploring new technology—such as robots, exoskeletons, and wearables—will serve as ways industry can continue to keep workers healthy and optimize their workflow.
Founder and CEO
Supply chain organizations will undergo a revamp. As businesses find efficiencies and adopt new supply chain software technologies to boost resilience and competitiveness, including greater workflow automation and new AI capabilities around prescriptive analytics and autonomous agents, these new technologies will essentially remove dozens of roles across the organization through technology leverage. Decision making will become far more data driven, AI-assisted, and automated—rather than through tribal knowledge.
3. Disruption Will Be a Constant
Disruptive natural disasters continue to significantly impact business operations, worker safety, and transportation. In the western United States, close to 3 million more acres of forest were burned over 2020 due to wildfires in California alone, causing significant business operations and environmental impacts.
Similarly, the Australian continent experienced severe wildfire outbreaks. Additionally, flooding presented a persistent threat in Southeast Asia throughout the year.
With persistent dry conditions in the western United States and Australia and prolonged monsoon seasons in Southeast Asia, as well as a record number of named storms in the Atlantic and Gulf of Mexico, there will likely be continued disruptive natural disasters complicating business operations in 2021.
Additionally, regulatory changes focused on eradicating threats to sustainability, human rights, smuggling, and other issues from business operations will play a large role in 2021. Due to trending issues in human rights violations across the globe, with forced and child labor contributing to a large part of the workforce, regulatory bodies are focusing efforts on imposing sanctions and other standards.
Global Intelligence Program Manager
Supply chain disruptions are common and the rate of disruption seems to be increasing. Weather events, tariffs, labor strikes, manufacturing issues, and more happen all the time—the pandemic being the largest in modern history.
Businesses must be flexible enough to respond quickly when disruptions occur. A fixed logistics model is not designed to be flexible or fast.
The rise of e-commerce and omnichannel retail presents another type of variability: fast change and ongoing uncertainty. Consumer expectations around shipping speeds and costs changed significantly and are still in flux. Making multi-year investments in the face of this uncertainty is highly problematic.
Flexible logistics models, which complement fixed logistics infrastructure with flexibility, will enable resilience. They support variability and uncertainty from supply chain disruptions of all shapes and sizes from high-growth environments to fast-changing consumer preferences.
The combination of fixed and flexible logistics will enable retailers and CPG brands to be efficient, responsive, and resilient.
Co-Founder and CEO
4. Cold Chain Heats Up
With vaccines front-and-center, the cold chain will take on new importance in 2021.
Supply chain is hard enough, but keeping the entire chain continuously temperature controlled and refrigerated is much more challenging. Yet, that's required for many temperature-sensitive products, including vaccines, medicines, foods, and even chemical products.
Companies need full monitoring, track-and-trace, chain-of-custody, and point-of-origin information across all sites and multiple parties—a challenging task, yet essential for these critical products.
In 2021, business network platforms with these capabilities will increasingly become "must haves" for firms that handle such product movements and are charged with monitoring from order to delivery, across all tiers of supply and distribution, to ensure product requirements are met and remain in compliance.
The good news is that by adopting this technology they will help suppliers, manufacturers, and logistics providers too, as all parties can lower costs and boost service levels by managing resources across storage and multi-modal movements throughout the cold chain.
A Push for Refrigerated Temperatures
The number of viable, approved COVID-19 vaccines will continue to grow in 2021. All else equal, it is likely the market will favor vaccines that require refrigerated temperatures of 2-8 degrees Celsius (35 to 46 degrees Fahrenheit).
Existing infrastructure exists to more easily transport and store these vaccines around the world. Additionally, refrigerated temperatures eliminate concerns around shortages of dry ice and how it reduces the amount of available cargo space on aircraft.
This preference for refrigerated vaccines could push pharmaceutical companies with deep frozen vaccines to determine how to maintain efficacy of the vaccine at a refrigerated temperature.
Pelican BioThermal, a division of Pelican Products
5. Supply Chain Complexity Increases
Businesses that relied on single-source suppliers for key components will look to spread the risk over multiple suppliers in different locations. That adds cost to the product since you're transforming business models away from simple bulk purchasing.
There's also a knock-on effect in terms of how products are designed and built. For example, companies may need to be able to accommodate variations in terms of the sub-components they use from a variety of suppliers, which adds an element of complexity.
—Mikkel Hippe Brun
Co-founder and Senior Vice President, APAC
Pandemic-Driven Shifts Add Complications
Early in the pandemic, companies sought suppliers and manufacturing capacity elsewhere—moving from China to Vietnam, for example. The challenge with this is every other company was doing the same thing.
However, Vietnamese ports are not designed to handle the volume of their Chinese counterparts. This actually increases complexity and, therefore, risk. Companies will need to tackle these massive shifts and resulting complexities in 2021.
Additionally, supply chain's white whale—the last mile—grows even more complex. The last mile has always been the most expensive, long-bemoaned challenge of the supply chain.
The "homebody economy" created by the pandemic means more of everything—from hot food to furniture—is being ordered online for delivery, including things that are harder to deliver.
6. E-Commerce Redefined
One thing is clear: The future of e-commerce has arrived. The acceleration of e-commerce will be defined by three factors in 2021 and beyond:
1. Shoppers. The constantly lowering tolerance threshold of shoppers is same-day, and it is headed toward one- to two-hour delivery windows. Research shows that what will keep people shopping online in the long term is not safety, but convenience.
2. Stores. Will the rise of digital commerce mean the end for physical retailers? The data says no. Adobe reports more than half of online shoppers prefer retailers that have both physical and online stores. What will define the future of stores is the experience.
Brands need to take the lessons they've implemented in their e-commerce environments and bring them into the retail space.
The future of malls, for example, could be "dark stores" (fulfillment engines for retailers' e-commerce sales) and branded experiences like pop-up shops, which draw inquisitive traffic out of their homes and into the shopping environment.
Post-COVID, retailers will have to consider how to make the in-store shopping experience feel innovative and fresh, but also comfortable and safe.
3. Supply chains. Creating a true omnichannel fulfillment infrastructure will prove critical to ensuring efficiencies in the supply chain that supports brick-and-mortar, click-and-collect, and home delivery.
Margin pressures have made automation a requirement, not a choice. Unable to pass costs on to their customers in this hypercompetitive environment, retailers will need automation to support and bolster margins.
The future of supply chain automation will include more solutions that span the supply chain ecosystem, connecting supply, demand, inventory optimization, fulfillment optimization, and so on. Warehouse automation solutions will depend on software to provide the flexibility to handle fluctuations in demand.
President & CEO
Sectors on the Rise
Prepare for a new e-commerce. We can expect expansion in realms such as food and home materials to continue in e-commerce. Online grocery shopping, curbside delivery, dark kitchens, and microfulfillment centers have become and will continue to be a norm. Key to this is a warehouse management system to properly manage goods.
Chief Technology Officer
Körber Supply Chain Software
"Distribution centers and transportation hubs will move closer to key retail partners to speed shipping, enable better real-time tracking and logistics optimization, and meet customer expectations for efficiency."
—Abe Eshkenazi, CSCP, CPA, CAE
Association for Supply Chain Management (ASCM)
Tracking Gets Traction
The acceleration of e-commerce buying behaviors spurred by the pandemic will necessitate soft asset tracking and a new digital standard to enable more agile supply chain operations.
The e-commerce boom has completely changed last-mile distribution and how products are distributed to customers. The sudden increase in online shoppers will fuel the need for supply chain entities to adopt new digital touchpoints to help deliver products both safely and efficiently.
In 2021, last-mile distribution will see larger retail sellers move from operating through large distribution centers to utilizing stores as drop-off points and leveraging them as micro warehouses to complete microfulfillment operations.
However, unlike distribution centers, stores are not equipped with the necessary software to track assets, which is vital for products that require cold chain storage, such as grocery items.
In 2021, supply chain organizations will require continuous, real-time visibility to gain access to valuable insights—such as the location, environmental conditions, and temperature of products—in order to optimize inventory, planning, and logistics, as well as keep up with ever-increasing e-commerce demands and mitigate risk.
FedEx in a Prime Position
In 2019, FedEx made the seemingly bold decision not to renew its contract with Amazon and seek volume elsewhere instead of continuing to take the virtually guaranteed growth of the behemoth.
Turns out, FedEx made a wise decision because Amazon had been filling more and more FedEx equipment with lower margin packages. When the pandemic created a serious acceleration in e-commerce, FedEx showed it could find other shippers that would pay more per cubic foot.
In 2021, FedEx will refine its current products and services and build new ones that meet the needs of a broader swath of e-commerce shippers that may not have the financial, supply chain, or technology resources of Amazon.
7. Collaboration Is Key
Transparency and trust will need to be present in global supply chain management. The future of the industry will begin with partners and their APIs that will help improve the sourcing ecosystem.
It's not about developing your own, but rather collaborating with experts including trade insurance specialists, freight solutions providers, 3PLs, recommendation engines, etc.
Co-founder and CEO
All About Networking
Supply chains are out. Supply networks are in. In 2021, companies will focus on strengthening their business networks after seeing firsthand the importance of supplier, co-manufacturer, customer, carrier, and distributor collaboration.
In 2020, companies discovered their legacy enterprise-centric systems no longer were good enough so in 2021 they'll look to modern technology approaches to support tight collaboration around plans, forecasts, orders, shipments, ETAs, and inventories in real time.
Multi-enterprise business networks support collaboration and provide real-time information flows, thus reducing errors and inefficiencies. This allows all sides to work together to satisfy consumer demand at the lowest landed cost and improve their competitiveness. It also provides the ability to on-board suppliers more quickly, as needed to avoid any disruption in supply.
Whether 5 or 105, almost every company runs separate ERP systems to support the business. The massive inefficiencies of these self-imposed business barriers have come to light, and firms recognize they need to be eliminated.
These silos have artificially propped up costly inventory buffers, as companies carry the burden of excess inventory, information delays, and the enormous IT costs of interfaces, maintenance, and upgrades.
Most supply chain professionals inherited this problem, rather than caused it—and now they are desperately trying to fix it.
Moving supply chain processes onto a collaborative business network platform cuts across all these silos and enables a focus on generating value at each step along the way. It's the only option for large enterprises saddled with stitched-together legacy systems. In 2021 more global enterprises will see network solutions as the only viable way to pave a profitable path going forward.
"To remain competitive, manufacturers need to shift from the traditional linear contracts in the supply chain to multi-party collaborative partners with greater focus on services the end customer demands. This will help all parties better manage capital while also offering creative solutions to customer needs."
VP, Product Marketing
8. Increased Focus On Building Resilience
If 2020 taught us anything, it demonstrated that to maximize resilience and ensure business continuity, companies need to utilize every available channel—e-commerce, direct-to-consumer, retail, distributors, and Amazon. That way, if one channel is disrupted, whether by natural or man-made causes, the show will go on.
In 2021, companies will need to rely even more on supply chain networks to consolidate demand across every channel, and have a view into every point of supply (even containers on ships) to be able to satisfy customer demand, grow revenues, and minimize costs.
Well before 2020, manufacturers, consumer goods companies, and even food producers were already trying to sell directly to the end consumer. Those who have yet to figure out how to maximize this channel find themselves falling behind their peers.
What early adopters learned was the need to determine "lot size 1" production and delivery, the needed last-mile logistics, a returns process, and e-commerce technology capable of handling the proliferation of choice and SKUs customers demand.
Resiliency Supports Risk Prevention
The pandemic demonstrated to the world how important resiliency is in the supply chain. Supply chains are complex, global, and increasingly interconnected. When one part of the network is exposed to risk, the rest is vulnerable to disruption.
Consultancy firm McKinsey & Company published a report in 2020 detailing the exact steps that supply chains need to take in order to rebound from the uncertainty of the pandemic and come back stronger, including estimating available inventory to account for a major supply disruption and assessing realistic final-customer demand during the production phases.
In 2021, companies in the supply chain will need to focus on resiliency, in conjunction with risk prevention, to mitigate adverse events faster than the competition, take market share, and outperform.
—Abe Eshkenazi, CSCP, CPA, CAE
Association for Supply Chain Management (ASCM)
We can anticipate predictive analytics to help create a more resilient supply chain in combination with a robust carrier portfolio that will enable prompt response to changes, allowing for better planning and forecasting.
Managing Director, Air & Sea Logistics Americas
9. High-Value Goods Will Be Targeted
The pandemic added new and complicated threats to pre-existing supply chain risks. With lockdowns, diminished supplies, and transportation restrictions, drug introduction and smuggling trends shifted. As a result, cargo theft trends changed to focus on newly high-valued targets and locations.
Shifting drug smuggling trends in the Americas will create challenges for operators in port security and other drug introduction points to cargo across the globe.
Additionally, as business operations slowed during COVID-19, cargo criminals shifted operations to target high-value supplies, including medical equipment and warehouse and facility locations for theft. Criminals will likely continue to target high-value commodities, and warehouses and facilities, especially if lockdowns continue to occur globally.
Global Intelligence Program Manager
10. Supply Chain Digitaization Accelerates
The pandemic highlights the increased need for digital transformation within the industry, as vaccine distribution wouldn't have been possible without technology such as IIoT sensors to monitor temperature or provide real-time insight into location.
As distribution of the COVID vaccine continues in 2021 and is top of mind for people across the country, we'll see companies make substantive updates to their technology capabilities to improve agility across the supply chain. The vaccine marks a potentially defining moment with such high, mainstream visibility into our industry.
Getting the vaccine quickly shipped and distributed to high-risk populations, and doing it well, will be a proof point of what can be done with an agile supply chain.
In 2021, we'll also see a push behind guaranteeing the chain of custody to ensure genuine products versus counterfeit products in the marketplace. We'll see IoT and technology like blockchain combined for end-to-end counterfeit assurance, to ensure everything from vaccines to retail products are authentic and safe.
Sr. Global Industry Director
Developing a Complete View of the Product Journey
Technology advances like digital twins, AI/ML, and IoT enable more granular tracking and impact the end-consumer experience.
Today, IoT is a ubiquitous technology for supply chain tracking. Applications for AI/ML and digital twin technology have also risen in relevance for the industry.
In 2021, companies will start to employ a concerted strategy around these technologies to construct a complete and real-time picture of products as they move through the supply chain, as well as to obtain prescriptive and predictive analytics to make informed business decisions.
In this strategy shift, we will see the gaps of visibility close where the supply chain has remained most weakened even with the use of IoT alone, such as in low coverage areas when product is in flight, adding critical value to pharmaceutical and food supply chains, which lose billions annually in spoiled products.
Additionally, we can expect to see this visibility get even stronger as 5G takes complete shape most likely in 2022, offering more connection and even more to-the-minute information.
Companies often experience a mess of silos and fragmentation due to being acquired by large companies that have different systems. In 2021, supply chain stakeholders will look to deploy digital twins across all modules as an extra layer of visibility and to ensure synchronization between a existing systems and new technology, such as sensors and nanosensors, which are coming to market in increasingly larger volumes.
"Three digital technologies will move the needle for the industry: data science, blockchain, and omnichannel distribution strategies."
ACTIONABLE DATA HOLDS THE KEY
“Data, collected in real time, allows shippers to excel amid the unknowable challenges of the next few years. Stakeholders will benefit from supply chain technology that allows them to quickly react to growing adversity. Shippers need digitally empowered operating platforms that leverage data to efficiently make informed decisions.”
11. Sustainability Factors In
"A circular economy is an economic model that encourages continuous reuse of materials to minimize waste, as well as drives demand for natural resource consumption. This concept requires a complete shift in how we view supply chains, from a linear to a circular model, as companies will need to be able to access and reprocess end-of-life products. Companies such as Maersk and Caterpillar are already developing circular economy initiatives and in 2021 we predict many more will begin exploring this concept."
VP of Applications
Rate changes, re-negotiations, and reactive spot bidding are occurring with greater frequency and urgency for many companies. It reveals the need for sourcing teams to rapidly adapt.
Carrier and supplier decisions increasingly involve factoring in sustainability and environmental impact, such as CO2 emissions. Prioritizing climate impact requires analyzing that data in relation to other business operation needs and costs to find the optimal sourcing outcome.
Logistics procurement professionals need more assistance from their software solutions to support these heightened demands.
CEO and Founder
Sustainability in the Resilience Equation
Issues of sustainability in supply chains will play an increased role in how companies operate as governments and regulatory bodies crack down on companies, creating an environment where vetting suppliers and understanding each level of the supply chain is crucial for a resilient organization.
As industry leaders contend with these challenges in 2021, leveraging supplier management and risk intelligence platforms will allow them to understand and proactively manage risk.
Global Intelligence Program Manager
Supply Chain Traceability Becomes a Necessity
Tracing chain of custody of materials throughout the supply chain identifies the digital thread for every product and creates a compliance certificate that summarizes each exchange of products and materials from origin to final destination.
This is one option that importers can submit as proof of admissibility and will become critical in the coming months.
Traceability and transparency will continue to gain momentum in 2021. One technology that can help solve this challenge is blockchain.
A blockchain network can track materials and products from source to end customer and, ultimately, the consumer. As more business partners join the blockchain platform, they provide a new level of visibility and connectivity across the supply chain.
The next phase of traceability is assessing the environmental impact of companies' supply chains, from component origin to final delivery to the consumer.
Every facility and supplier in the supply network will be evaluated on criteria such as greenhouse gas emissions, use of renewable energy, waste disposal methods, and water consumption. Retailers will prioritize investing in sustainability tools as consumers demand this from their favorite brands.
President and Chief Strategy Officer
"Coming out of the pandemic, businesses of all sizes will face pressure to commit to greater transparency across value chains by publicly disclosing sustainability data that allow stakeholders to hold them accountable for performance. The only way to gain sufficient visibility over supply chains to meet these obligations is through digitization."
Chief Product Officer