2021 Logistics Outlook

Here are the top logistics trends that shippers should be watching during the year ahead. 

The global pandemic, U.S. presidential election, supply chain disruptions, and year-end vaccine rollout were just some of the high-level events that impacted logistics, supply chain, and transportation in 2020. With the calendar page now turned over to 2021, it’s time to look at some of the latest trends and how they could impact logistics in the coming months. Here are the top areas that shippers should keep an eye on.

Bigger emphasis on safety stock. The days of running “lean” and stocking only what will sell within a short period of time are gone, at least for now. As companies prepare for a recovery year in 2021, many are using safety stock tactics to ensure that their supply chains don’t run short on critical goods and supplies. “Suddenly, ‘safety stock’ is no longer a bad thing,” JOC states. “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.”

Higher transportation prices. Shippers have relied on “core carriers” to handle the vast majority of their contractual freight shipments across transportation modes. In 2021, JOC says more managers are adding new carriers and new modes after the contractual capacity on which they previously depended abruptly vanished in 2020. Ocean carriers are expected to push for double-digit rate increases (perhaps as high as 40%), in the trans-Pacific trade this spring, it adds, and truckload carriers are looking for high single-digit to low double-digit percentage rate hikes.

Logistics partners help to bridge the gaps. JOC says that shippers will need more options, more information, more partners, and more agility to react to supply chain changes that come not once or twice a year, but every week. “Ultimately, logistics managers will need to make decisions quickly, and even more importantly, convince their CFOs and CEOs to support those decisions when disruption rears its head, launched by additional waves of COVID-19, natural disasters, or even distribution of COVID-19 vaccines,” it adds.

E-commerce continues to drive up demand for parcel. According to JOC, FedEx and UPS reported double-digit year-over-year percentage growth in small parcel volumes in each of their respective quarters in 2020. “U.S. parcel volumes are forecast to remain elevated as e-commerce continues its own double-digit year-over-year growth over the next couple of years. Investment firm Stifel expects total parcel volumes to increase 8 to 10 percent in 2021 and 4 to 6 percent in 2022,” the publication reports. “We now project that the U.S. domestic parcel market will hit 100 million packages per day by calendar year 2023,” a FedEx spokesperson said, “pulling volume projections forward by three years from the previous expectation, and 96 percent of the U.S. growth is expected to come from e-commerce.”

Airfreight moves into recovery mode. According to IATA’s most recent forecast, 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 advanced technologies to support logistics. Artificial intelligence (AI), robotics, machine learning (ML), and blockchain are just some of the advanced technologies that are making their way into supply chains worldwide. “AI and ML technology has brought about several new processes in supply chains. Large scale automation is one of them,” Manufacturing.net reports. “Machine learning can read, identify, and replicate complex content, patterns, and procedures. Rather than have your employees stuck on doing repetitive tasks, AI automation handles all that.” Other benefits companies see when they implement advanced technologies include improved inventory management, higher staff productivity, a more streamlined supplier selection process, and a better overall customer experience.

As organizations continue to shake off the events of 2020 and look to a positive future, these and other trends could impact their activities over the next 12 months. Here at Odyssey Logistics, we’re keeping a finger on the pulse of the logistics market and will keep you updated on the changes as they happen.