The logistics sector spent most of 2022 trying to rebalance following the COVID-19 pandemic, only to be forced to deal with inflation, higher interest rates, a decrease in consumer spending, and rising fuel costs.
For shippers, however, it wasn’t all bad news. An uptick in consumer spending for much of 2020 and 2021 meant capacity was increasingly hard to come by. However, now capacity is increasing. This change gave shippers the leverage they didn’t have for nearly two years, leading to lower carrier prices.
How will all that affect the upcoming year? What are industry forecasters predicting for 2023?
What to Expect in 2023
Inflation and Interest Rates Will Remain High
Rising inflation and interest rates continue to be a global concern following the pandemic. In particular, the United States saw consumer prices increase to a 40-year high of 9.1%, according to the U.S. Bureau of Labor Statistics. To cool demand, the U.S. Federal Reserve raised interest rates, hoping to tame inflation.
As we head into the new year, inflation is still high (consumer prices jumped 7.1% in November from 2021), but there are signs that it is cooling. Per CNBC reporting, consumer prices rose less than expected in November.
A Looming Recession
The point of raising interest rates during high inflation levels is to cool spending and economic growth by helping to move inflation back to acceptable levels. However, this practice could lead to a recession, although that’s not always the case.
Either way, executives should already be preparing for a potential recession. A recession could affect labor markets that have struggled to bounce back after the pandemic. Additionally, the trend of workers seeking greater pay to keep up with inflation and labor issues (such as the nearly avoided rail worker’s strike in December) will likely continue.
Carriers Will Lower Rates
During the pandemic, a combination of higher consumer spending, labor shortages, and transportation gridlock lead to a lack of capacity and higher carrier rates across the board. Those conditions led to highly profitable times for carriers. But, as we enter 2023, demand is leveling off and capacity is increasing.
Why? One reason is lower consumer spending because of inflation. But the loosening of tight COVID restrictions worldwide continues to ease some of the transportation gridlock.
This is all excellent news for shippers and less so for carriers. Shippers will now be able to negotiate more favorable rates. However, carriers, must compete for business and customer loyalty by lowering rates.
Moving From Reactive to Proactive
The supply chain and transportation industry have been thrown one curve ball after another throughout the past couple years. Businesses have had to become incredibly agile to deal with challenges and sometimes pivot the direction of their business depending on the situation. Now, however, companies can begin to rebalance and plan for the future.
It’s important during the rebalancing period to reflect on what works for your business and what does not. Consider the following four topics:
Is your business facing issues with one or more of these? Then it’s time to redevelop a long-term plan going into the new year. As you implement your new plan, remain patient and try not to hit the panic button too quickly.
Visibility, Data, and Digitization Is Not Going Anywhere
All supply chain managers want to track goods and shipments through their respective supply chains, and they know that data and visibility benefit almost all aspects of a business. Added data helps companies meet customer demand and improve the bottom line.
BGL’s own tech solutions can give your company the data and visibility needed for moving into 2023. Our solutions reduce human error, increase efficiency, and accuracy.
Speaking of logistics tech, a new technology trend to watch in 2023 is the greater use of artificial intelligence (AI) and machine learning, specifically for demand and sales forecasting, and product inspection. AI removes human error from some operations and can save businesses time and money while providing a significant return on investment.
The Russia conflict in Ukraine was a significant factor in supply chain complications throughout 2022, specifically the price of fuel. As the conflict continues into 2023, it will likely continue to cause supply chain issues.
The United States’ trade relationship with China is also worth monitoring as members of the U.S. congress are pushing for stricter policies with the nation.
Consumers Continue to Demand Greener Practices
Whether it’s government regulations or consumer pressure, there’s a continued push for companies to become greener. Businesses must continue to search for and adapt sustainable efforts affecting their entire operation, whether sourcing raw materials or evaluating greenhouse gas emissions during product transportation.
A trend to watch in 2023 will be circular supply chains. Circular supply chains are created when manufacturers refurbish old products to be made into something new or refurbished and returned to the shelves to be resold. This means more recycled and refurbished products will come to consumers in the next few years.
Utilize a 3PL
No matter what 2023 brings, using a 3PL like Best Global Logistics can help take the logistical burden off your shoulders. Get a quote and see how our resources and carrier network can help you get your freight to its destination on time.