David Maloney has been a journalist for more than 35 years and is currently the group editorial director for DC Velocity and Supply Chain Quarterly magazines. In this role, he is responsible for the editorial content of both brands of Agile Business Media. Dave joined DC Velocity in April of 2004. Prior to that, he was a senior editor for Modern Materials Handling magazine. Dave also has extensive experience as a broadcast journalist. Before writing for supply chain publications, he was a journalist, television producer and director in Pittsburgh. Dave combines a background of reporting on logistics with his video production experience to bring new opportunities to DC Velocity readers, including web videos highlighting top distribution and logistics facilities, webcasts and other cross-media projects. He continues to live and work in the Pittsburgh area.
For supply chain professionals, 2022 turned out to be a classic good news/bad news kind of year. On the up side, the well-publicized port backlogs cleared up, inventory shortages started to ease, and the transportation capacity headaches all but vanished. On the down side, there were the macro-economic woes: runaway inflation, rising interest rates, a slowdown in economic output, and, of course, the prospect of recession.
So it’s no surprise that the question on everybody’s mind is, How will 2023 play out? Will the Fed manage to pull off a soft landing? Will the employment picture improve? Can we get inflation under control?
Members of the supply chain community most likely have a few additional questions: Will we get inventories back in balance? Where are freight rates headed? And is this the year long-delayed material handling projects finally get off the ground?
To get some insight into these and other questions, we turned to someone who’s uniquely qualified to weigh in on such matters. Gary Master, publisher of DC Velocity and COO of Agile Business Media, has an extensive background in business economics and more than 30 years’ experience in supply chain/logistics. As an executive at a supply chain-centered media company, he keeps close tabs on the economy in general and the supply chain/logistics market in particular.
As 2022 drew to a close, Group Editorial Director David Maloney sat down with Gary to get his take on what lies ahead. Here’s what he had to say:
Dave: 2022 was certainly a roller coaster ride for most supply chains. As we look ahead to 2023, what is the general health of our supply chains and the material handling industry?
Gary: If you start at the 30,000-foot view, material handling and supply chain are doing very well. The general economy has taken some lumps but overall is pretty healthy, too. We broke records for Amazon and for online retail spending over the Black Friday holiday. Retail is still pretty strong, even though consumer confidence is showing some signs of weakening. And that is good for material handlers and good for the supply chain. Right now, you’ve got a lot of material handling companies that still have backlogs for a lot of reasons, which means they’ve got the cash to invest in further research and development, and to fund their operations and keep them strong.
Dave: As you mentioned, consumers continue to spend and online sales remain brisk. Although consumer confidence is starting to wane, the strong holiday sales were good news for retailers trying to work down excess inventory and normalize things.
Gary: I am glad you brought up inventory because that is a hot button issue right now. We couldn’t get certain things for so long. There are still some things we can’t get. We continue to have that whole idea of a scavenger-hunt economy, but as retailers and some manufacturers stocked inventory, they stocked it across the board. Now they have inventory that they’ve got to burn off.
Dave: Unemployment remains below 4%, which is quite low historically. However, recent Labor Department job reports show job losses in transportation and warehousing. Do you foresee layoffs in those sectors even though it’s still difficult to find workers for frontline jobs?
Gary: It is really interesting because you have the Amazons of the world and others that have said they’re laying off several thousand people. However, a recent study showed that there are 0.52 workers for every frontline supply chain job. That means that with the labor market as tight as it is, there is going to be a continued need for automating and for reducing touches in fulfillment operations. So, supply chain and logistics is very well positioned for continued strength.
I would say you’re going to continue to see layoffs across some of the high-tech companies and across some upper management positions. But the individuals being laid off tend not to be the frontline workers in supply chain.
Dave: Those continuing labor constraints bode well for the material handling and automation sectors in 2023. Could you talk a little bit about what you see coming up this year?
Gary: Anything that can limit your exposure to the labor ups and downs will continue to be hot this year. Whether we’re in a recession or not, there’s no indication that the shortage of frontline workers will ease anytime soon. DC leaders have to make up the difference somewhere, and it has to be through productivity gains achieved through automation and advanced technology.
Dave: In the last couple of years, many automation projects were delayed due to parts shortages, shipping problems, and other factors, with timelines stretching out as much as two years. Is the situation easing, and do you think things will be better in 2023 for people who want to tackle automation projects?
Gary: I think that the situation with some of the critical components you need for a highly automated system is getting better, but it hasn’t gotten better yet in some areas, and that is a topic for its own discussion. But overall, there are still backlogs in the material handling industry. While normally a backlog is a bad thing, it is now becoming a good thing because it is going to fund and fuel further growth in our space.
The only real downside risk, Dave, is that companies may decide that, since they’ve already waited two years for their systems and may now have to wait another year, their original designs are becoming outdated and they need to go back to the drawing board to redo them. That is the only thing that concerns me there.
Dave: Do you have any predictions as to when those system availability problems might be resolved and the situation might begin to normalize?
Gary: July 11, 2023. No, just kidding, Dave. That is a great question. I would say you’re going to see more normalization in the middle of the year. I do believe we will have a mild recession, but I also think it will start to balance some things out. I think the chip situation is going to get much better and that supplies of other components will continue to improve, and that is going to allow us to get back to more-normalized supply chains across the board.
Dave: What do you see for the transportation industry? We’ve already seen some consolidation, and the industry continues to feel pressure from interest rates, capacity fluctuations, truck driver availability, and the price of fuel.
Gary: The transportation side is a lot murkier. Given the current global unrest, transportation could be in for a rocky 2023 as it adjusts to the new normal after the post-Covid rush.
Dave: So, prediction time: Where do you think the economy is going in 2023, and what does the future hold for the supply chain sector specifically?
Gary: Well, let’s start with the overall economy. We had two consecutive quarters of GDP recession, which means we were in a recession. But when the Q3 numbers came out, they showed positive GDP growth, breaking the streak. But are we going to have a couple of more soft decelerations in GDP growth in 2023? We probably will in Q1 and Q2, and maybe in Q3.
I think that folks have to be realistic about where we’re at right now. I think if you look at it, we have some things that are really going well for us. During some of the previous recessions, we had some bad things happening around the recession itself. In this particular economy, the housing market remains strong. And when I say housing market, I’m not just talking about pricing—the pricing is holding its own. Some of the heat is coming out of it, yet the credit ratings of the individuals who have purchased houses are much better than they were in past recessions. That is a good thing for us.
The backlog with material handling equipment manufacturers is a very, very good thing for us. We had record online sales for the recent holiday. So, Dave, I think that 2023 is going see a slight recession, but I think our industry is going to have a healthy year. The rate of growth is going to be lower than it has been, but we are coming off a record year. It is good news, bad news. The growth is going to be slower, but it is still going to be a great year in my opinion.
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 U.S. manufacturing sector has become an engine of new job creation over the past four years, thanks to a combination of federal incentives and mega-trends like nearshoring and the clean energy boom, according to the industrial real estate firm Savills.
While those manufacturing announcements have softened slightly from their 2022 high point, they remain historically elevated. And the sector’s growth outlook remains strong, regardless of the results of the November U.S. presidential election, the company said in its September “Savills Manufacturing Report.”
From 2021 to 2024, over 995,000 new U.S. manufacturing jobs were announced, with two thirds in advanced sectors like electric vehicles (EVs) and batteries, semiconductors, clean energy, and biomanufacturing. After peaking at 350,000 news jobs in 2022, the growth pace has slowed, with 2024 expected to see just over half that number.
But the ingredients are in place to sustain the hot temperature of American manufacturing expansion in 2025 and beyond, the company said. According to Savills, that’s because the U.S. manufacturing revival is fueled by $910 billion in federal incentives—including the Inflation Reduction Act, CHIPS and Science Act, and Infrastructure Investment and Jobs Act—much of which has not yet been spent. Domestic production is also expected to be boosted by new tariffs, including a planned rise in semiconductor tariffs to 50% in 2025 and an increase in tariffs on Chinese EVs from 25% to 100%.
Certain geographical regions will see greater manufacturing growth than others, since just eight states account for 47% of new manufacturing jobs and over 6.3 billion square feet of industrial space, with 197 million more square feet under development. They are: Arizona, Georgia, Michigan, Ohio, North Carolina, South Carolina, Texas, and Tennessee.
Across the border, Mexico’s manufacturing sector has also seen “revolutionary” growth driven by nearshoring strategies targeting U.S. markets and offering lower-cost labor, with a workforce that is now even cheaper than in China. Over the past four years, that country has launched 27 new plants, each creating over 500 jobs. Unlike the U.S. focus on tech manufacturing, Mexico focuses on traditional sectors such as automative parts, appliances, and consumer goods.
Looking at the future, the U.S. manufacturing sector’s growth outlook remains strong, regardless of the results of November’s presidential election, Savills said. That’s because both candidates favor protectionist trade policies, and since significant change to federal incentives would require a single party to control both the legislative and executive branches. Rather than relying on changes in political leadership, future growth of U.S. manufacturing now hinges on finding affordable, reliable power amid increasing competition between manufacturing sites and data centers, Savills said.
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.