Supply Chain Snags or Full Speed Ahead? What Logistics Looks Like in 2023

Supply Chain Snags or Full Speed Ahead? What Logistics Looks Like in 2023
By Lauren Pittelli

Now that 2022 is in the rearview mirror, it’s time to consider the top global logistics trends that will impact manufacturing businesses in 2023. Here are the issues and trends that we have in our headlights.

Carrier Market Disruption 
Rapid supply and demand changes during the pandemic reshuffled team rosters and altered every carrier playbook. The ocean carriers were flush with pandemic profits and invested in vertical integration. Two of the largest global carriers, Maersk Lines and CMA CGM, expanded into air cargo and contract logistics. Mediterranean Shipping Company (MSC) purchased the African logistics division of Bollore.

Non-traditional players decided to get into the logistics business, too. Retailers such as Home Depot took supply chain matters into their own hands, chartering vessels to overcome supply chain snarls. Amazon increased its air-service offering and expanded its fulfillment services to companies not selling on the Amazon platform. TikTok announced plans to offer U.S. fulfillment services.

Now the bloom has faded off some of these initiatives – demand for space has fallen precipitously and transportation rates have gone south with the missing demand. Carriers have responded by scaling back or eliminating their new services. For example, Amazon is subletting excess warehouse space while CMA CGM suspended all its U.S. cargo flights.

Lauren’s advice: To avoid service disruptions in 2023, avoid the flash-in-the-pan by strengthening ties with established carriers.

Geopolitics Interrupts Business as Usual 
We’re in a new era of industrial policy, one that considers protecting national security and minimizing climate change when setting the rules businesses operate by.

Export controls are being used to advance broad national security objectives. To protect U.S. leadership in the high-tech sector, the Biden administration restricted the sale of advanced semiconductors and chip-making equipment to China. Additional actions will follow that protect our dominance in biotech and clean energy development. Russia has been shut out from purchasing U.S. high-tech in reaction to its invasion of the Ukraine. TikTok has been banned from government cellphones over privacy and security concerns.

Trade policies are also considering climate impacts for the first time. The Biden administration is working with Europe on a proposed global consortium to promote trade in “green” steel and other metals. The Global Arrangement on Sustainable Steel and Aluminum is designed to bolster domestic production of steel and aluminum while also reducing environmental impacts. The proposed consortium would jointly impose tariffs against metals produced in environmentally harmful ways in countries such as China.

Lauren’s advice: Will these policies result in a tit-for-tat with China or a decoupling of our economies? We don’t know, but tensions can flare unexpectedly. Today’s more muscular trade policy is yet another reason to evaluate where companies make and sell their goods. Outsourcing or offshoring decisions taken years ago may no longer make sense.

Investment in Green Logistics Brings Opportunity and Challenge 
In the last 12 months, Congress passed three substantial bills to rejuvenate our industrial base, upgrade U.S. infrastructure and transition the U.S. to a clean energy future. The Inflation Reduction Act and the Infrastructure Investment and Jobs Act include green transportation incentives supporting the development of EV cars and trucks, EV manufacturing, battery production and sustainable aviation fuel (SAF).

These investments and tax credits come with U.S. sourcing and content requirements, a boon to U.S. manufacturers and their employees.

Concern about the negative health impact of tailpipe pollution is also spurring the transition to green logistics. Tighter emissions requirements set by California, Illinois and other states take effect in January. These new requirements will take older trucks off the road. In California, it’s estimated that 25% of the port drayage trucks do not meet the new requirements and will have to be retired. The need for newer equipment will improve carrier dependability at the expense of capacity. Trucking rates may increase as well.

The EPA just released revised emission standards for heavy trucks. Our current emissions limits are over 20 years old. Effective in the 2027 model year, diesel trucks will have much stricter emissions standards. The new limits are designed to spur diesel engine performance improvements, providing a pathway to the envisioned zero emission trucking future.

Lauren’s advice: Whether it is because of federal investments, new regulations, or customer demand, green initiatives will be a top logistics trend for industry in 2023. While we undergo the hard work of transitioning to a green economy, position your company for success by taking advantage of all the available investment incentives. The Dept. of Energy publishes a link to a national database of state incentives for renewables, energy efficiency and EVs. This database is a terrific tool to ensure your company benefits fully from all the financial opportunities arising from the transition.

Changing Worker Expectations in a Tough Labor Market
3.5 million Americans left the labor force since the beginning of the pandemic. Workers over 65 are a large share of the still missing workforce. One million older workers accelerated their retirement plans and are unlikely to return to work.

At the same time, those still working are re-evaluating their priorities and expectations. This is seen most clearly in the push for unionization. A recent Gallup poll showed that the share of Americans who approve of unions is at its highest level since 1965. The NLRB reports that there were over 1200 union elections in 2022, a 50% increase over 2021. These union drives were successful three quarters of the time.

In addition to challenges on production lines, every warehouse and transportation department is short-handed and looking for workers. Even manufacturers that have direct carriers or own trucking fleets have challenges filling openings.

Lauren’s advice: For manufacturers to thrive in what will be another tough hiring year, companies must take a proactive approach to staff retention. Focus efforts on enhancing positive work relations rather than just developing a union avoidance strategy. Investments in training, good working conditions and advancement opportunities are critical for success.

As the economic outlook for 2023 is uncertain, these logistics trends can take hold in unanticipated ways. Plan for multiple scenarios, outline specific actions and be open to a more fluid environment in 2023.