Updated on 2 March 2021
Driving Force Behind Logistics & Supply Chain Trends in 2021
In the last few months, the global pandemic has affected almost all aspects of the world economy. One industry that has seen particularly noticeable changes over the past few months is e-commerce. As self-isolated consumers turned to online shopping, it has created immense pressure on the supply chain logistics industry to keep up with the increasing demand.
As a result, logistics companies are stepping up with innovative strategies to respond to these rapidly shifting logistics trends in 2021. From automated warehousing technology to last-mile delivery solutions, here are the top 15 emerging trends in the supply chain logistics Industry you need to know in 2021.
In this report, read about:
- E-commerce Logistics
- Reverse Logistics
- Digital Training
- Elastic Logistics
- Warehouse Automation
- IoT – Internet of Things
- Cloud Computing
- Last Mile Delivery
- Sustainable Supply Chain Management
- Social Sustainability
- Logistics Industry Investment Trends
- Risk Management Framework
- Lean Logistics
- What Does it Mean for Logistics Companies?
In 2019, worldwide spending on blockchain solutions was at 2.7 billion; before 2022, this number is expected to climb all the way to 11.7 billion (DHL and Accenture, 2018). Blockchain has been one of the most steadily increasing industry-reshaping global logistics trends through the last few years, and its rise shows no signs of stopping.
As data becomes more and more crucial to optimize logistics operations, so do the security risks and efficiency challenges associated with processing data through the 3PL industry. To address this need for solutions, logistics technology trends in 2021 will likely be characterized by the success of companies like Koopman Logistics, a Dutch company that uses the bitcoin blockchain to regulate the logistics of automotive delivery. Koopman is the first company to deliver automotive vehicles through an entirely paperless, data-driven system (Daley, 2019). In 2021, expect more logistics companies to cut out waste with blockchain processes.
2. E-Commerce Logistics
The e-commerce boom that has been shaping the logistics industry in 2021 was developing for several years before the COVID-19 situation skyrocketed online purchasing. E-commerce logistics are projected to be worth US$ 524.1 billion by 2025 (Business Wire, 2019). According to recent polling conducted by Peerless Research Group (PGR), 10% of respondents saw their company’s e-commerce channel grow by 60% or more since the pandemic began. Additionally, a combined 28% of respondents saw e-commerce growth of 40% or more in the same time period (Michel, 2020a).
3. Reverse Logistics
Related to the rise in e-commerce is the need for good reverse logistics management in 2021. Reverse logistics includes all the value-added services that companies provide after the point of sale. This includes post-sale services such as returns, refurbishment, repairs, reselling, and recycling services (Supply Chain Game Changer, 2021). The reverse logistics supply chain is expected to be worth US$ 603.9 billion by 2025, with a CAGR of 4.6% between 2018 and 2025. In the growing Latin American market, the CAGR is projected to reach 17.9% by 2025 (Sawant & Sonpimple, 2019).
Currently, sellers are fighting to stay competitive in the e-commerce era by offering fast and free return shipping. With up to 30% of e-commerce products being returned compared to the 9% typical of traditional brick-and-mortar stores, good reverse logistics management is crucial to protect profits (Saleh, 2019).
In 2020, return delivery costs were estimated to reach US $550 billion (Mazareanu, 2021). With returns making up as much as 50% of some e-commerce seller total shipments, good reverse logistics management will become an even bigger part of the logistics and supply chain industries.
4. Digital Training Solutions
Though the beginning of the novel coronavirus pandemic raised concerns about disruptions in supply chains, the associated e-commerce created unprecedented new demands. For example, Amazon hired 175,000 temporary workers at the beginning of the pandemic and has hired 2,800 new workers every day since July 2020 (Kaur, 2020).
To cope, Amazon embraced digital training methods to handle the major onboarding challenges this 2020 hiring spree posed. The e-commerce giant employs 1,000 technology professionals who create digital tools to automate the recruiting, hiring, and training processes (Kaur, 2020). As more millennials enter the workforce, they bring their technological habits along with them. Modern warehouse workers are used to the interactivity and ease-of-use they associate with their cell phones and other devices, and respond well to digital training (Robinson, 2018). Digital training can be an excellent companion to a modern blue-collar workplace.
You can avoid the failures caused by insufficient training and onboarding practices by requesting a free demo and consultation for digital training options in your warehouse.
In 2021, engaging your workforce through interactive and motivating productivity boosters like gamification is a great way to enhance warehouse worker training and boost productivity (MacPherson, 2020). Gamification offers employees stimulating skills practice with real-time feedback that inspires and guides them towards improved performance (Bjorkqvist, 2020). It makes the work into a kind of video game or digital challenge that the workers can interact with to understand and build up their skill level. Additionally, gamification can be integrated into real warehouse processes and digital tools to track employees’ speed, accuracy, and progress over time. Gamification techniques can even reward workers with positive reinforcement like virtual badges, automated messages of encouragement, and easy-to-understand feedback about their performance (Bjorkqvist, 2020). Two major benefits of gamification are:
- Constant real-time evaluation of skills, knowledge, and productivity ensures workers and management have easy access to hard data tracking the worker’s performance. This means there are fewer surprises during employee review periods and leaders can intervene early and often to ensure employees have the training they need to succeed (MacPherson, 2020).
- Gamification fosters healthy competition for the ‘top spots’ and makes repetitive tasks more fun and interactive. Amazon found that with gamification of work tasks, workers can take pride in the bragging rights they earn through good performance and see where they can still improve (Green, 2019). Seeing these connections helps employees visualize how their role contributes to the success of their team, warehouse, and the company overall.
6. Elastic Logistics
In the industry 4.0 era, responsiveness to unexpected consumer demands can make or break a supply chain strategy. As a result, 2021 supply chains need to be ready to expand or shrink capacity depending on an ever-changing demand of industry variables (Shih, 2020). This practice is called “elastic logistics,” and it is one of the most crucial logistics and supply chain management trends in 2021.
Elastic logistics highlights the benefit of using 3PL companies to react quickly to high-volume periods, since many 3PL companies use highly elastic temporary workforces to meet rising and falling production needs. With a projected worth of US$1,789.94 billion by 2027, 3PL companies have the flexible infrastructure and labor capacity to quickly take on warehousing and processing needs for online retailers (Sonpimple, 2020).
7. Warehouse Automation
A 2019 report predicted the warehouse automation market will grow at a CAGR of 12.6% over the next five years, making automation one of the leading trends in supply chains in the foreseeable future (MH&L, 2019). Moreover, over 70% of blue-collar executives feel technology is the most significant factor impacting the future (Davis and Mathew, 2019).
Warehouses are cutting costs by boosting their productivity and efficiency with pick and place technologies like robotic arms, automated guided vehicles (AGVs), and automated storage and retrieval (ASRS) (StartUs Insights, 2021). Looking again at Amazon, the company is investing heavily in automation. It will likely save around $18 billion in warehousing operating costs in 2021, despite record hiring in 2020 (Hall, 2020). Beyond the warehouse, automated vehicles will become more popular for on-demand businesses, reducing overall delivery costs by up to 40% (Dekhne, Hastings, Murnane & Neuhaus, 2019).
8. IoT – Internet of Things
According to McKinsey, investment in warehouse automation will continue to grow 3-5% by 2025, with the pharmaceutical logistics industry investing as much at 8-10% in that time (Dekhne, Hastings, Murnane & Neuhaus, 2019). Accurate and optimized data management will be one of the most vital logistics industry trends in 2021. This is where the Internet of Things (IoT) comes in.
Companies will need more and better-embedded software to quickly develop data transformations to ensure good logistics and transportation management. IoT connects the multiple physical devices logistics companies use to digitally monitor and transfer data.
9. Cloud Computing
Cloud computing is one part of the thriving global digital logistics market. The global digital logistics market is set to grow 21.7% annually between 2020 and 2025, at which point it will be worth US$ 46.5 billion (Malhotra, 2021).
As the logistics industry digitalizes in the coming years, cloud-based software-as-a-service (SaaS) solutions will become an integral part of logistics companies’ IT infrastructures. Cloud-based logistics solutions minimize communications hurdles and lift the data security to enable safe remote collaboration between manufacturers and logistics providers. Furthermore, cloud computing allows companies to collect and analyze data from their management systems. As a result, leaders in warehousing and logistics roles can more easily find pain points and develop strategies to optimize processes. For example, e-commerce companies and 3PL players can enhance warehouse fulfillment accuracy, product labeling, and delivery services for online consumers (StartUS Insights, 2021).
10. Last Mile Delivery
The World Economic Forum anticipates that by 2030, 60% of the earth’s population will live in cities (World Economic Forum, 2020). This number is set to increase to 70% by 2050 (The World Bank, 2021).
Coupled with growing e-commerce needs, expanding urbanization means that a major transportation and logistics industry trend will be last-mile delivery initiatives (Mordor Intelligence, 2021). Last-mile delivery costs account for more than half of companies’ overall logistics costs (Mordor Intelligence, 2021)
Traffic congestion in city centers caused by the increase in last-mile delivery initiatives in logistics is an environmental issue that companies must deal with (Fuldauer, 2019). According to a study by research and consultancy firm Forrester, a fifth of businesses across the world will use commercial drones to automate business operations in 2021 (Dai, O’Donnell, Barber, Bao & Nagel, 2020). Additionally, temperature-controlled smart lockers offer customers flexibility by reducing delays and costs associated with returned deliveries due to unavailability (StartUs Insights, 2021). This last mile initiative is especially useful for perishable goods like food and medicine.
11. Sustainable Supply Chain Management
The buying consciousness of the modern consumer is changing. Sustainability is now a top concern of buyers and companies alike, with many buyers pushing for more transparency into supply chains and rewarding brands who showcase their progressive political stances and green behavior. At the same time, consumers are demanding increasingly fast and convenient fulfillment and shipping that requires highly reactive manufacturing and logistics processes (Amed et al., 2021). As consumer needs drive the market in a greener direction, logistics technology trends will prioritize efficiency while keeping environmental sustainability in mind. With new national and international regulations concerning shipping emissions and other potential environmental risks associated with distribution, green tech is sure to lead the way in 2021 logistics innovations.
12. Social Sustainability
Along with environmental sustainability, social sustainability will be a key topic for warehousing trends in 2021. High employee turnover rates coupled with a competitive labor market have forced warehouses and third-party logistics companies to focus on the warehouse workers at the core of their operations. Social sustainability is about how effectively leaders empower workers and give them the knowledge and skills they need to succeed in their jobs so the workers are less likely to quit or be fired. Constantly hiring and training new workers is costly, social sustainability is an incredible tool for reducing labor costs and boosting productivity in 2021. This is an especially important topic when looking at 3PL industry trends. 3PL companies often rely heavily on temp workers to ensure they can increase and decrease their capacity on-demand to meet manufacturers’ or partner warehouses’ output needs.
13. Logistics Industry Investment Trends
When asked about broad investment goals over the next 18 months, companies told Peerless Research Group (PGR) that the biggest spending area would be in maintenance, up from 5% to 42%, and outsourcing/ 3PL services, which stayed steady at 13%. Enterprise investments were only 20%, down 9% from 2019 (Michel, 2020). This does not mean that the logistics industry’s digitalization journey is stagnating. Instead, experts note that investments in equipment like new life trucks, dock equipment, or basic IS areas like barcoding are all logical improvements to outdated equipment or methods like paper/based pick lists (Michel, 2020).
14. Risk Management Framework
Risk management is a big topic for logistics and supply chain management trends in 2021 is a big topic. PGR found that the the top three risks being planned for in 2020 were:
- In-house production or operations risks (60%)
- Logistics risks (57%)
- Supplier risks (47%)
In 2019, the percentages were higher for logistics risk (69%) and supplier risks (62%). The same report found that “economic and financial volatility as a risk factor” declined from 34% in 2019 to 30% in 2020, equal to its 2018 level (Michel, 2020). However, the effects of the pandemic are still being evaluated. It is likely this number will increase for 2021, with many companies working to minimize economic risk factors sensitive to large-scale disruptions like COVID-19.
Areas where companies report/reported risk management concerns for the coming year between 2018 and 2020 are represented below.
15. Lean Logistics
The backbone of the biggest logistics and supply chain trends in 2021 is constant improvement. This approach is best implemented by adopting lean logistics as the core of your warehouses or supply chain operations. Lean logistics is a highly reactive management philosophy based on empowering workers and optimizing processes. Leaders regularly engage with workers and warehouse floor operations to encourage constant, open dialogue about how to reduce waste and boost efficiency (Minghini, 2020). As a result, leaders can evaluate increasingly standardized output to discover where they can make positive changes that lead to lower operating costs and happier customers and employees (See: Lean logistics is the only way to stay competitive in the industry 4.0 era – Here is why).
What Does it Mean for Logistics Companies?
Industry experts agree that an increase in freight and warehousing demand coupled with technological data advancements means that 2021 holds immense promise for logistics expansion (Shih, 2020). At the same time, the continued economic disturbances left in the wake of 2020 will cause logistics professionals to face tough decisions in the coming year.
These changes and challenges will impact the supply chain at all levels of distribution. For warehouses and blue-collar workers, this means empowerment through comprehensive training that will prepare them to rise to the challenges that the new year brings. Make sure you have the best-in-class digital training so you can equip your team with the tools they need to respond flexibly to the future of logistics in 2021.
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