What’s on Tap for Logistics in 2021?

As we turn the page over to a new year and leave 2020 in the rearview mirror, here are a few key logistics trends that all shippers should be keeping an eye on over the next few months:

A stronger focus on safety stock and other inventory buffers. If 2020 taught us anything, it’s that “lean” supply chains can quickly fall apart when disruptions like global pandemics emerge. The inventory management lessons of 2020 hit hard for some, with many companies spending the entire year (or longer) trying to get their inventories back on track (by the end of the year, paper products, cleaning supplies, and other necessities were still in big demand and in scarce supply in some regions). “Suddenly, safety stock is no longer a bad thing,” JOC points out. “Supply chains that were designed to be lean are fatter than ever after gorging on inventory like hungry guests at a holiday feast.” Expect that trend to continue in 2021 as companies replace lean inventory management approaches with those focused on safety stock and other buffers. “Safety stock may increase inventory carrying costs, but that’s nothing compared to the potential cost of a stock-out, as many logistics managers discovered last year.”

Smarter supply chain control towers. Supply chain visibility is more important than ever, yet many companies are settling for less than 100% visibility across their supply chain networks. Smart supply chain control towers think beyond shipment visibility and help shippers find alternative ways to satisfy customer demand if a shipment is late; use detailed dock and yard information to prevent late shipments in the first place; understand customer inventory levels and demand forecasts; and manage the inherent challenges of complex supply chains. IntelliTrans’ visibility platform also integrates on-asset monitoring hardware, mapping solutions, and proactive exception notice delivery.

New transportation market constraints. In 2020, land, sea, and air transportation got more expensive as enhanced freight demand and the need for medical personal protective equipment (PPE) absorbed capacity in the ocean container, air freight, rail, and trucking markets. According to JOC, vaccine distribution will add another layer of complexity to a market that already has more layers than an onion. “Shippers won’t find shelter in the decisions and strategies of past years,” it points out. “Shippers have to be open — more so than ever — to utilizing different ports, different ways of moving their freight,” C.H. Robinson’s Mike Short told JOC. “There are simply more choke points today than there ever have been. This disruption started with the pandemic and will continue. Shippers will have to be as agile as possible and use different services, changing the flow of goods on the fly.”

Airfreight makes a comeback. The pandemic took its toll on the world’s airlines, but 2021 could be a comeback year for many of them as airfreight bounces back. According to IATA’S most recent forecast, airfreight capacity is on track to return to 2019 levels at some point in 2021. The industry is also in the midst of a massive, worldwide vaccine distribution program just as it prepares to manage an uptick in global trade. IATA says improved business confidence and the crucial role that air cargo should play in vaccine distribution is expected to boost cargo volumes to 61.2 million tonnes in 2021 (just lower than the 61.3 million tonnes it carried in 2019). “Cargo is performing better than the passenger business,” IATA’s Alexandre de Juniac told Air Cargo News. “It could not, however, make up for the fall in passenger revenue. But it has become a significantly larger part of airline revenues and cargo revenues are making it possible for airlines to sustain their skeleton international networks.” 

More emphasis on supply chain agility and resiliency. Supply chains need flexibility and agility in order to function at their best, and to quickly respond to changes. “The agile trend in supply chain management has shifted from traditional supply chain methods,” Manufacturing.net states. “As we have seen in recent times, unforeseen events do occur. With agility, companies can prove they can cope with natural disasters or pandemics.” An agile supply chain also helps companies navigate scarcity and disruption, it adds, and helps them better predict and identify potential problems and solutions. According to Supply Chain Quarterly, companies also need to build flexibility into their organizations that can help them react and adjust to short-term supply chain disruptions. “For the longer-term, companies should focus on adapting to any permanent changes that result from those disruptions.” 

Sustainability becomes a must-have. The advancement of green logistics (i.e., more sustainable packaging, more eco-friendly fuels, etc.) is another notable trend to watch in 2021. “Besides its benefit to us and our environment, [green logistics] is cost-effective, promotes brand goodwill, and increases customer loyalty,” Manufacturing.net points out. For example, it says 66% of millennials are more likely to patronize a company with sustainable and eco-friendly culture. Furthermore, brands that advocate for sustainability grow 5.6 times faster than brands that don’t.