Going into the new year, the logistics sector faces fierce headwinds that include an ongoing labor shortage, freight-rate volatility, and economic uncertainty. New technologies and strategies may be key to weathering the storm.
Ben Ames has spent 20 years as a journalist since starting out as a daily newspaper reporter in Pennsylvania in 1995. From 1999 forward, he has focused on business and technology reporting for a number of trade journals, beginning when he joined Design News and Modern Materials Handling magazines. Ames is author of the trail guide "Hiking Massachusetts" and is a graduate of the Columbia School of Journalism.
The ongoing labor shortage is one of the most pervasive trends to sweep the logistics industry in years. With the U.S. unemployment rate at its lowest point in half a century, businesses are scrambling to stay fully staffed even as they search for ways to scale up and cope with new challenges.
That balancing act gets even harder in tricky economic conditions. Heading into 2020, the market faces headwinds like a global manufacturing slowdown, shifting tariff rates, red-hot e-commerce growth, and the "Amazon effect," as online shoppers seek ever-faster and cheaper home delivery. So as logistics leaders prepare to navigate those dangerous waters, they are increasingly turning to new strategies and technologies.
To better understand how this will all play out in 2020, we consulted with experts from different corners of the industry. Their overall advice for the new year? Buckle up; it could be a bumpy ride.
ROBOTS CUT WASTE, NOT JOBS
Automation is a crucial tool for helping organizations cope with a shortage of workers, especially for jobs that are located far from population centers, such as in rural warehouses. In the year ahead, that labor shortage will help accelerate the adoption of robotics and artificial intelligence (AI) for many supply chain functions, according to the Framingham, Massachusetts-based analyst firm IDC.
As for how quickly that will happen, the firm offered some estimates in a recent report titled IDC FutureScape: Worldwide Supply Chain 2020 Predictions. Among other predictions, the firm forecast that by 2022, manufacturers and retailers will dedicate 35% of their business process budgets to "process automation," focusing on order, inventory, and shipment tracking. It also predicted that by 2023, 65% of warehousing activities will use robots and situational data analytics to enable storage optimization, increasing capacity by over 20% and cutting work order-processing time in half.
Despite the rising tide of automation, technology is not expected to slash the total number of jobs in the logistics sector, but rather to replace some unskilled jobs with more productive, less redundant work, according to the IDC report's author, Simon Ellis, who is program vice president for the Supply Chain Strategies practice at IDC Manufacturing Insights.
As companies prepare to incorporate robotics and AI into their logistics operations, they will need to reconcile the contradictory notions of technology replacing jobs with the overall talent shortage that is driving that trend, Ellis says. Just as Henry Ford's production line ultimately created far more jobs in the automotive industry than it displaced, technology will drive long-term growth in logistics, he says.
"There are dual perspectives around this. Will certain jobs be replaced by technology? Yes. And will certain people be disenfranchised by robots that are more productive? Probably so. But will technology have a net negative impact on the job market? I don't think so," Ellis says. Instead, many displaced workers and managers will be retrained for new jobs, such as maintaining the new technology or servicing the robots, he predicts.
Despite the pressing need for change in 2020, the transformation from older analog processes to newer digital processes will not happen all at once, according to the IDC report. Rather, companies sailing toward "digital transformation" goals will need to manage hybrid environments for years to come. For example, IDC pointed out that most new supply chain software exists on cloud-based computing platforms, but older logistics applications will continue to run on local, on-premise servers for at least another decade.
WAREHOUSES WOO WORKERS WITH FLEXIBLE HOURS
As companies seek to boost productivity in the stormy business conditions expected to prevail throughout 2020, they will also need to adopt a new approach to managing labor, experts say. For example, one of the keys to attracting ideal workers during the labor crunch will be to offer more flexible schedules, according to Scott Sureddin, CEO of third-party logistics service specialist DHL Supply Chain, North America.
"Flexibility may be one of the most important supply chain issues heading into the next decade—and it has nothing to do with the actual movement of goods," Sureddin said in an email. "Associate expectations are changing, and they are demanding greater flexibility at work. Companies are going to need to rethink traditional HR practices if they hope to continue to attract and retain top talent."
In fact, hourly workers favor flexibility above traditional compensation like pay and perks, according to the Chicago-based on-demand staffing technology platform provider Bluecrew. In a recent analysis of more than 10,000 job-offer rejections, the company found that a quarter (26%) of the jobs were rejected due to the hours, compared with just 10% of jobs that were rejected due to pay.
In a tight labor market, offering flexibility around scheduling and hours is a strategic way to attract and retain workers without raising wages, according to the company.
"Not only are employers facing unemployment [that stands] at a 50-year low, [but] they're also going head to head with gig companies that offer workers a level of flexibility [that's] unprecedented," Bluecrew CEO Adam Roston said in a press release. "To compete in 2020, we'll see employers continue to shift their hiring and retention strategies. More employers will offer flexibility ... to lure hourly job seekers."
Still, job flexibility isn't the whole story, Bluecrew says. As the labor landscape changes, employers will likely adjust their HR practices in other ways as well, the company says. These include offering career growth opportunities through new training, also known as "upskilling," and the use of machine learning (ML) and artificial intelligence to enhance hiring effectiveness by focusing on objective job-performance data and eliminating inherent biases such as appearance.
FREIGHT-RATE VOLATILITY AHEAD
Even if your digital transformation is underway and your DC is fully staffed, a logistics operation still has to move physical inventory. Shippers have enjoyed low trucking rates in recent months, but a turbulent freight market will likely continue to churn in 2020, swinging the compass needle in new directions, according to the Portland, Oregon-based loadboard operator DAT.
In its most recent forecast report, 2020 Freight Focus, DAT notes that 2018 was a peak year for freight pricing in the trucking sector, as a surging economy generated more demand for service than the truckload sector could supply. In response, motor carriers rushed to add capacity, placing record numbers of new-truck orders and raising wages in a bid to attract more drivers.
But then the picture changed. Demand for motor freight services softened in 2019, leading to a glut of capacity and driving truckload rates back down. Pushed to the brink by those falling rates, a number of carriers closed their doors in the first half of 2019, causing capacity to shrink again, DAT says.
Now, continuing consumer spending and hot e-commerce sales are on pace to drive demand back up again. That could trigger a rebound in spot-market truckload rates in mid-2020, unless they're held in check by external factors like severe weather, uncertainty caused by trade wars, or the outcome of the presidential election, according to DAT.
Given the potential for sudden squalls in the 2020 forecast, even the most experienced logistics executive could run afoul of volatile business conditions this year. But applying new technologies and new strategies could help these leaders and their companies survive—or even thrive—as they navigate the tumultuous times ahead.
Editor's note: This article was revised on Jan. 14 to say that DAT is located in Portland, Oregon. An earlier version listed the wrong location.
Supply chain planning (SCP) leaders working on transformation efforts are focused on two major high-impact technology trends, including composite AI and supply chain data governance, according to a study from Gartner, Inc.
"SCP leaders are in the process of developing transformation roadmaps that will prioritize delivering on advanced decision intelligence and automated decision making," Eva Dawkins, Director Analyst in Gartner’s Supply Chain practice, said in a release. "Composite AI, which is the combined application of different AI techniques to improve learning efficiency, will drive the optimization and automation of many planning activities at scale, while supply chain data governance is the foundational key for digital transformation.”
Their pursuit of those roadmaps is often complicated by frequent disruptions and the rapid pace of technological innovation. But Gartner says those leaders can accelerate the realized value of technology investments by facilitating a shift from IT-led to business-led digital leadership, with SCP leaders taking ownership of multidisciplinary teams to advance business operations, channels and products.
“A sound data governance strategy supports advanced technologies, such as composite AI, while also facilitating collaboration throughout the supply chain technology ecosystem,” said Dawkins. “Without attention to data governance, SCP leaders will likely struggle to achieve their expected ROI on key technology investments.”
The British logistics robot vendor Dexory this week said it has raised $80 million in venture funding to support an expansion of its artificial intelligence (AI) powered features, grow its global team, and accelerate the deployment of its autonomous robots.
A “significant focus” continues to be on expanding across the U.S. market, where Dexory is live with customers in seven states and last month opened a U.S. headquarters in Nashville. The Series B will also enhance development and production facilities at its UK headquarters, the firm said.
The “series B” funding round was led by DTCP, with participation from Latitude Ventures, Wave-X and Bootstrap Europe, along with existing investors Atomico, Lakestar, Capnamic, and several angels from the logistics industry. With the close of the round, Dexory has now raised $120 million over the past three years.
Dexory says its product, DexoryView, provides real-time visibility across warehouses of any size through its autonomous mobile robots and AI. The rolling bots use sensor and image data and continuous data collection to perform rapid warehouse scans and create digital twins of warehouse spaces, allowing for optimized performance and future scenario simulations.
Originally announced in September, the move will allow Deutsche Bahn to “fully focus on restructuring the rail infrastructure in Germany and providing climate-friendly passenger and freight transport operations in Germany and Europe,” Werner Gatzer, Chairman of the DB Supervisory Board, said in a release.
For its purchase price, DSV gains an organization with around 72,700 employees at over 1,850 locations. The new owner says it plans to investment around one billion euros in coming years to promote additional growth in German operations. Together, DSV and Schenker will have a combined workforce of approximately 147,000 employees in more than 90 countries, earning pro forma revenue of approximately $43.3 billion (based on 2023 numbers), DSV said.
After removing that unit, Deutsche Bahn retains its core business called the “Systemverbund Bahn,” which includes passenger transport activities in Germany, rail freight activities, operational service units, and railroad infrastructure companies. The DB Group, headquartered in Berlin, employs around 340,000 people.
“We have set clear goals to structurally modernize Deutsche Bahn in the areas of infrastructure, operations and profitability and focus on the core business. The proceeds from the sale will significantly reduce DB’s debt and thus make an important contribution to the financial stability of the DB Group. At the same time, DB Schenker will gain a strong strategic owner in DSV,” Deutsche Bahn CEO Richard Lutz said in a release.
Transportation industry veteran Anne Reinke will become president & CEO of trade group the Intermodal Association of North America (IANA) at the end of the year, stepping into the position from her previous post leading third party logistics (3PL) trade group the Transportation Intermediaries Association (TIA), both organizations said today.
Meanwhile, TIA today announced that insider Christopher Burroughs would fill Reinke’s shoes as president & CEO. Burroughs has been with TIA for 13 years, most recently as its vice president of Government Affairs for the past six years, during which time he oversaw all legislative and regulatory efforts before Congress and the federal agencies.
Before her four years leading TIA, Reinke spent two years as Deputy Assistant Secretary with the U.S. Department of Transportation and 16 years with CSX Corporation.
Serious inland flooding and widespread power outages are likely to sweep across Florida and other Southeast states in coming days with the arrival of Hurricane Helene, which is now predicted to make landfall Thursday evening along Florida’s northwest coast as a major hurricane, according to the National Oceanic and Atmospheric Administration (NOAA).
While the most catastrophic landfall impact is expected in the sparsely-population Big Bend area of Florida, it’s not only sea-front cities that are at risk. Since Helene is an “unusually large storm,” its flooding, rainfall, and high winds won’t be limited only to the Gulf Coast, but are expected to travel hundreds of miles inland, the weather service said. Heavy rainfall is expected to begin in the region even before the storm comes ashore, and the wet conditions will continue to move northward into the southern Appalachians region through Friday, dumping storm total rainfall amounts of up to 18 inches. Specifically, the major flood risk includes the urban areas around Tallahassee, metro Atlanta, and western North Carolina.
In addition to its human toll, the storm could exert serious business impacts, according to the supply chain mapping and monitoring firm Resilinc. Those will be largely triggered by significant flooding, which could halt oil operations, force mandatory evacuations, restrict ports, and disrupt air traffic.
While the storm’s track is currently forecast to miss the critical ports of Miami and New Orleans, it could still hurt operations throughout the Southeast agricultural belt, which produces products like soybeans, cotton, peanuts, corn, and tobacco, according to Everstream Analytics.
That widespread footprint could also hinder supply chain and logistics flows along stretches of interstate highways I-10 and I-75 and on regional rail lines operated by Norfolk Southern and CSX. And Hurricane Helene could also likely impact business operations by unleashing power outages, deep flooding, and wind damage in northern Florida portions of Georgia, Everstream Analytics said.
Before the storm had even touched Florida soil, recovery efforts were already being launched by humanitarian aid group the American Logistics Aid Network (ALAN). In a statement on Wednesday, the group said it is urging residents in the storm's path across the Southeast to heed evacuation notices and safety advisories, and reminding members of the logistics community that their post-storm help could be needed soon. The group will continue to update its Disaster Micro-Site with Hurricane Helene resources and with requests for donated logistics assistance, most of which will start arriving within 24 to 72 hours after the storm’s initial landfall, ALAN said.