Resource Center/Article12/28/2021

U.S. Supply Chain Ringing in the New Year! 2022

What’s in store for the LTL and larger supply chain markets in 2022? Jim Badovinac, VP of LTL Commercial Development has some ideas.

Believe it or not, 2021 is over and 2022 is upon us.  This last year seemed to be an extension of 2020 in terms of new ways to get work done as we navigate the ongoing COVID pandemic and as some call it, the post-COVID environment.  The challenges created by COVID have certainly impacted the supply chain… first beginning overseas, then to U.S. ports, to middle mile and ultimately to final mile deliveries.  Congestion, employment and capacity constraints put pressure on shippers, carriers, retailers and e-commerce in a way we’ve never quite experienced before.
While none of us have a crystal ball to forecast exactly what 2022 will look like, we’ve been examining trends and listening to what our clients and carriers are telling us.  Based on that, I’ve put together a short list of things to watch for in the new year that may help you navigate, or at the very least, have a better understanding of why the market is doing what it’s doing.
Here are the top five things we all should be paying attention to:
  1. Retailers are refining infrastructure investments that prioritize organizational agility and as a result, the outcomes are providing a significant return on investment. As companies reimagine distribution and fulfillment, they’re overhauling warehouses and DC’s with a focus on improved order fulfillment cycles, increased storage and throughput, and high tech robotics that speed processes and lift efficiencies.  Expect rapid and highly innovative new technologies to be developed and implemented in 2022.
  2. The rapid growth of new technology has fundamentally changed the way supply chains operate. Consumers are becoming more demanding, and this is leading the supply chain to change and evolve at a much faster rate. Cutting edge operations are focused on technology and innovations and as a result, supply chains are becoming more complex. With this, the boundary between skilled laborers and white-collared workers are diminishing and blending. Technology cannot operate in silos and it needs workers equipped with hybrid skills and capabilities. With that, supply chain and manufacturing operations need a blend of both physical and technological skills to adapt and grow as the market evolves to meet consumer expectations. The changes in demographics are also impacting the overall resource pool. Organizations should rethink their approach to recruit and engage Gen Z, who will increasingly become part of the active workforce in the near future. The motivations and aspirations of new generations should be considered to keep the younger cohort of workers inspired with a purpose.
  3. Capacity will remain constricted across all modes.  In particular, LTL carriers will continue to be constrained and with that they will remain in the “driver’s seat” when it comes to rates.  Shippers should expect to see higher than normal GRI’s with compressed windows on effective dates.  LTL Carriers will also continue to look to weed out non desirable profile freight that negatively impacts service and productivity measurements.  Shippers will need to work on understanding what fits their carriers’ networks to ensure they are responsive in putting the right freight in the right lanes to help mitigate cost increases throughout the year.
  4. Be on the lookout for continued carrier consolidation as TL carriers and other providers (wink wink….Amazon) look at LTL carriers as an opportunity to improve capacity, middle mile/final mile reach and overall margins.  Additionally, watch for the continued “parcelization of LTL”.  LTL carriers are investing in comprehensive dimensionalization of shipments in their networks.  Expect rapid enhancement of this transformation, with the end game being the ability to plan network capacity utilization better. Also, along with this change will be the ability for carriers to move away from the antiquated class-based rating system to a more modern and long overdue density based pricing model.  This will provide a much higher degree of rate certainty for both the shipper and the carrier.
  5. The LTL space is teed up for continued and rapid development of digitization.  As consumer visibility expectations increase, the need for digitization increases and shippers and carriers must work together to accomplish this.  Long gone are the days where carriers can rely on paper BOL’s and paper manifests.  From API’s to digital BOL’s, there’s no doubt that digitization is key to cost containment and visibility. Most importantly, visibility is what consumers are demanding.
The 800 pound gorilla, however, is when will we see some relief in the congestion at the ports…in particular the west coast ports?  Where’s that darned crystal ball?   Unfortunately, none of us have one of those, so I’ll give my best guess based on a few factors.  One, retail imports surged to historic highs in 2021.  My guess is that retailers will have backup plans in 2022 that are slightly less reliant on goods from Asia.  Two, many ports have gone to a 24/7 schedule and as long as they can find people to work, this will provide some slight relief; and three, I do believe that if there is no relief in sight, the U.S. government will provide emergency resources on a scale unlike anything we’ve ever seen.  Based on all of that, I predict that we will start to see some wholesale relief by end of Q2 or early into Q3.  There’s no magic wand to fix this issue.  It will take time and unfortunately, it will be well into mid 2022 before we can expect to see anything that resembles normalcy at our U.S. inbound ports.
These trends and likely scenarios will most certainly impact the U.S. supply chain in one way or another. Whether you’re looking to ensure the most effective and flexible network possible, or simply trying to develop better, longer lasting relationships with your carriers, Green Mountain can help.  If you have any questions, or would like more information, please reach out to us for a brief meeting where can we provide more detail on potential solutions.
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