Supply Chains will Lead Sustainability
We are starting off with an interesting prediction for 2021: supply chains will lead sustainability efforts. Our answer for if that actually played out: yes and no.
According to EY, a vast majority (85%) of supply chain executives were more focused on improving supply chain sustainability at the beginning of the year. As good as intentions may have been, this year shows that getting products to customers took precedent over going green.
If the shipping industry were a country, it would be the sixth-largest contributor to global CO2 emissions; and as we all know, shipping has been a key player, and key disruptor of 2021 supply chains.
Then comes air transport. Nike, Walmart, and many other big retailers are circumventing the port congestion and transporting their goods via cargo plane. Not only is the price per flight astounding, but so is the environmental impact. The cost to charter a Boeing 777 will run a company about $2 million, nearly triple what it would cost pre-pandemic.
Although 2021 clearly has not been the model year for sustainability, this has renewed conversations about carbon neutrality and reducing emissions and how technology can aid this. For example, Maersk, the largest cargo shipping company in the world, recently unveiled plans for methanol-powered cargo ships.
Warehouse Rents will Slow Their Climb
This prediction did not pan out to be true. Cushman and Wakefield, a global real estate firm, confirmed that warehouse capacity is at an all-time low, resulting in rapidly rising rents – demonstrating the basic economic principle of supply and demand. Warehouse rent prices will also finish the year 8.5% above 2020 rates.
The lack of capacity and subsequent high rates has led companies to search for alternative solutions to storing their items in popular coastal cities such as Los Angeles. Inland ports, like Salt Lake City, that can access coastal ports by rail are gaining in popularity due to having more available space and slightly lower warehouse rent costs.
Supply Chain will Increase in Importance
This prediction was absolutely correct. Supply chain has increased in importance, so much so that consumers are adapting their habits to cater to it as seen through retailer messaging and the shift in Q3 and Q4 shopping data.
Not to mention that prior to 2020, supply chain was a back-office function that hardly saw the light of national news coverage. Now, all national news outlets have stories covering supply chain issues, and “supply chain” is a topic of conversation over Thanksgiving dinner.
New Capacity will Enter the Trucking Market
This prediction yields a ‘not really’ outcome. Yes, there are empty trucks that could be used to transport goods. However, either these trucks are sitting at a port with an empty shipping container that needs to be returned to its port of origin, or there is nobody to drive the available trucks.
According to the American Trucking Association, 80,000 truck drivers are needed at the moment. Others have said that it is not so much a shortage of individuals with the skill to drive that are lacking, but more so the difficult lifestyle and unappealing pay of being a truck driver that is fueling the shortage.
Although every player in supply chain wishes they had a crystal ball, the best thing they can do now is prepare now for Q3 and Q4 of 2022.
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