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9 supply chain trends to watch in 2022 and the companies powering these innovations
To say the last two years have been difficult may be the understatement of the century. The warehousing and logistics industries have seen a number of challenges ranging from empty grocery store shelves to fears of no toys under the Christmas tree.
The COVID-19 pandemic highlighted what we in the industry have been seeing for years: innovation in the supply chain is simply no longer an option. To supply modern life as we know it, the industry must continue to adapt and transform to the changes around us.
As we start a new year, we have compiled a list of nine supply chain trends we think will dominate the supply chain and logistics landscape in 2022. From the shift from “just-in-time” to “just-in-case,” to the innovations surrounding last-mile delivery, formidable startups and established companies alike are developing new solutions to meet these challenges.
In this article, we describe the trends we are seeing in the industry and highlight the companies innovating throughout the warehousing and supply chain space.
9 Supply Chain Trends for 2022
- Piloting new automation technologies
- Moving to the cloud
- Easing risk mitigation by moving to “just-in-case” thinking
- Trialing machine learning and artificial intelligence
- Increased use of fulfillment networks
- Constant improvement and use of last-mile services
- Going (and staying) green
- The continued redeployment of retail
- The need for more omnichannel
1. Piloting New Automation Technologies
For years, we’ve been hearing about autonomous robots taking over the world, and for the most part, those possibilities remain concretely in the science fiction world. But with innovations in both the autonomous mobile robot (AMR) space and the autonomous vehicles (i.e., driverless trucks) industries, robots may just take over your warehousing and logistics. These advancements can result in significant efficiency gains, and the number of use cases for robotics will continue to expand as the technology continues to mature.
Providers like Locus Robotics and Fetch Robotics are offering flexible automation solutions that can expand and contract immediately with your demand (a far cry from the large, inflexible warehouse conveyor and sorter automation systems many of us are used to).
Vendors like Embark Trucks and TuSimple are getting closer to autonomous trucks—a technology that promises to help ease the driver and labor shortage that experts predict to last until at least the end of 2023. With millions of autonomous miles driven—many in Texas and Arizona—these companies predict a fully autonomous freight network by the end of 2024.
2. Moving to the Cloud
The cloud as we know it has been around for the better part of 15 years now. But in an industry that has historically accepted new technologies, supply chain and logistics organizations have lagged in adopting the cloud. And rightfully so: supply chain software is mission-critical, and the hesitation of many to trial a seemingly new, unproven infrastructure is understandable.
But that is all changing, as shown by major software vendors like Manhattan Associates’ release of their Active Warehouse Management solution last year.
As an industry, we have reached the point where we have enough success stories to prove achieving the reported benefits of cloud is possible. Cloud technology itself has also continued to advance, and with the rise of accreditations like SOC2 and ISO 27001, data security and privacy concerns have largely been addressed. The supply chain’s acceleration into the cloud will continue exponentially over the coming years, and companies that don’t take advantage of cloud technologies will be left in the dust.
We would be remiss if we did not mention there is an obvious increased risk of cybersecurity threats when using cloud-based technologies, which makes it even more important to work with top-notch software partners who take security seriously.
3. Easing Risk Mitigation by Moving to “Just-in-Case” Thinking
While the 2010s may have been characterized by “just-in-time” in relation to risk mitigation and inventory levels, 2021 and beyond will be characterized by “just-in-case.”
Companies have been and are continuing to stockpile inventory in higher levels than seen in recent years to avoid letting demand go unfulfilled due to lack of product. Many companies have also deployed supply chain control tower and visibility solutions to have a more complete view of where their inventory is and to help identify issues before they arise.
And the use of these visibility solutions will continue to rise, but with an increasingly heavy focus on providing insights rather than just exposing data. Business leaders are realizing that while it’s great to see all their data, what they really need is the system to automatically identify potential problems and suggest fixes. Both major players, like project44, and startups, like CognitOps, are using machine learning and artificial intelligence to do just that.
Many companies will also continue to implement digital twins. Powered by sensors and Internet of Things (IoT) devices, digital twins create digital representations of the physical supply chain that companies can use to test a large variety of different scenarios. And with major players like Google entering the arena, digital twin technologies will only continue to accelerate.
4. Trialing Machine Learning and Artificial Intelligence
Machine learning and the broader artificial intelligence space have grown and morphed over the last 20+ years. Similar to how it took more than 10 years for the internet to harness the power of online commerce (from the early 90s through the dot com bubble), researchers and corporations alike continue to trial ML and AI initiatives with a wide span of use cases, searching for the most beneficial initiatives.
As we enter 2022, many companies will begin to realize when use cases may not be the right fit for machine learning. But for everyone in the supply chain and logistics world, we are seeing a variety of uses for AI/ML that are proving quite promising.
Purpose-built systems like FourKites intentionally integrate machine learning to glean insights from large amounts of both primary and contextual data. For example, by pairing weather data with container shipment data, software can predict when problems may arise, and even begin to offer automated corrective actions to solve the problem without human intervention.
One of the more interesting applications of ML and AI was BlueDot’s algorithm that identified changes in airline ticketing in regions of China in early 2020. The algorithm predicted the COVID-19 outbreak months before many officials, and accurately forecasted the next cities that would be hit with the virus in the early days.
The major trend in AI/ML for 2022 is this notion of self-healing, also known as autonomous corrective actions. While it is great to be able to predict something ahead of time, it is even better if that system can then automatically perform the corrective actions needed.
One major challenge to implementing artificial intelligence projects, especially for supply chain organizations, can be the integration with legacy systems, but thankfully there are software vendors that provide intelligent integration solutions that allow companies to easily layer machine learning on top of existing systems.
5. Increased Use of Fulfillment Networks
When large-scale third-party logistics providers began emerging in the 1980s, many companies were quick to take advantage of the cost savings associated with outsourcing their logistics. Having an outside company handle your transportation and fulfillment can often make sense. And a single company handling logistics operations for multiple clients allows for efficient gains not possible when each company operates an independent network. And with the infusion of new technologies, the third-party logistics industry is on the precipice of a major disruption.
Enter the third-party fulfillment network. Pioneered by companies like Stord, Flexe and Ware2Go (and even with Shopify getting into the action), these companies handle all parts of your warehousing and distribution needs in a technology-integrated way that gives you complete flexibility and control.
Forget the month-long implementations with many 3PLs, these technology-enabled companies allow you to get up and running quickly and immediately offer services like two-day shipping to help compete with Amazon.
6. Constant Improvement and Use of Last-Mile Services
Last-mile delivery has always haunted supply chain professionals. It’s hard enough getting a package across the country overnight, but the last jog from the final fulfillment center to the customer’s doorstep is unquestionably the most difficult part. With any great challenge comes great opportunity, and there are many startups and established corporations alike rising to the occasion.
Final-mile delivery partners like DoorDash have been around since the early 2010s, but the industry has matured to the point of using crowdsourced delivery drivers for just about everything. DoorDash specifically has inked major partnerships with brands like Walmart to provide grocery delivery services. Amazon has entered the crowdsourced world with Amazon Flex, allowing gig workers to perform last mile deliveries on their own schedules. Even UPS is getting into the last-mile game through acquisitions like Roadie, which takes a unique, courier-based approach that uses people already driving between locations to make deliveries.
These major investments in improved last-mile delivery (like Bringg’s $100M Series E Round) are justified, as research shows that 84% of customers will leave a brand after just one negative delivery experience. The trend of innovation and disruption in this $30 billion industry is set to continue over the coming years, with an expected CAGR of almost 9% between 2019 and 2025.
7. Going (and Staying) Green
One trend that is not going anywhere—and that really shouldn’t be considered a trend at this point—is the continued investment in sustainability. The logistics industry as a whole contributes an astounding 7% of total global carbon emissions, but companies are stepping up to fight these challenges.
Electric delivery vehicles manufacturers like Rivian and BrightDrop are helping shape a sustainable last mile with their electric vans and trucks—a segment that is predicted to increase carbon emission by more than 30% over the next five years if the current pace sustains.
There will also be major pushes towards circular economy initiatives, including innovative reverse logistics solutions that cut down on the e-waste problem (the improper discarding of electronic devices), a problem that has surged over 20% in the last five years according to research from the WHO.
Finally, as both a green initiative and a risk mitigation strategy, companies will continue to push to source more locally. This can help reduce the carbon footprint associated with transporting goods, plus provide much needed infusions to many local economies.
8. The Continued Redeployment of Retail
The brick-and-mortar retail landscape has been evolving for years, but the COVID-19 pandemic sped up those changes dramatically. Many brands have experimented with redeploying their physical stores to bring more value to their customers, which could mean changing the customer journey and business operations.
Some companies are transitioning their physical stores into experience centers, where customers can feel and test products in-person before making a purchase (either in store or online). These experience centers help build trust between the consumer and the brand, working to convince some shoppers that may be hesitant to make a purchase completely online. This strategy also builds community and brand recognition among a company’s customers, helping to create sticky customers and increase revenues in the long run.
Another change in physical stores is companies’ transforming their physical locations into micro-fulfillment centers to more quickly serve their customers. Often located in dense population centers, many store locations can offer quicker service times for e-commerce orders compared to traditional fulfillment centers located in more industrial zones.
Rethinking physical locations of retail stories will continue, especially as more companies like Fillogic come onto the scene, offering innovative solutions to adapt retail space.
9. The Need for More Omnichannel
Customers interact with brands constantly and in different ways. No matter your business model (B2C, B2B, etc.), customers will experience your brand both on- and offline. It should come as no surprise that this trend will continue into 2022, as companies continue to unify their messaging and positioning across all channels.
Even if you think you’re just a small player, it is no longer acceptable to not have a modern website and robust online presence. And if your company has physical locations, your customer experience must be consistent with and throughout your digital footprint.
Customers may initially find you because of your product or service, but they keep coming back for the experience you offer. Companies must consider every aspect of their customer’s journey–for example, the delivery experience, which is likely handled by a third-party partner, but still reflects your brand to your customers.
And a positive customer experience will no longer be an option for businesses in 2022; it is a requirement. Offering customers flexibility through initiatives like buy online, pick up in-store (BOPUS) and buy online, return in-store (BORIS), as well as social commerce experiences like Instagram Shopping, are here to stay with the increased focus on what the consumer wants.
Looking Ahead: the Future of the Supply Chain
If the events of 2020 and 2021 have taught us nothing else, we are all now painfully aware of the challenges supply chain and logistics organizations face. We will never forget the empty aisles of toilet paper that plagued the world throughout much of 2020.
The trend of reducing risks and increasing flexibility for customers will continue, but companies will also focus on cost saving initiatives as the world regains a sense of normalcy. The pandemic may have accelerated commerce by 10 years, and we are in awe of the technologists and innovators that are rising to face the challenges.
Cheers to 2022!
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