The past year has brought many changes and challenges that impact the global supply chain. Raw materials shortages, shipping delays due to unavailability of containers and also, problems with containers stuck in canals, lorry driver shortages and the increasing switch to e-commerce as a shopping channel, being some of the most obvious. These trends and the issues they have created are forcing logisticians to think differently, to find new ways of operating, change their processes and maybe, invest in different technology. This is the first of two articles looking at key trends we can expect in 2022, with part 1 focusing on operational changes within the sector. Part 2 will focus on technology specific changes to expect.

What’s in store in 2022?

Expect things to get busier and busier

There was a time when warehouses would have business as usual and then a couple of periods in the year when things got busier. One clear trend to expect in 2022 is for things to keep getting busier in many sectors, with no clear slow down in order volumes after the holidays. In some sectors it will be like Black Friday every Friday.

Shorter supply chains

One of the most obvious impacts of Covid-19 was the effect the global shutdown had on long supply chains, with goods stuck waiting for shipping containers to become available. This is leading to a rise in near-shoring or re-shoring strategies, to help gain greater control over supply lines. Importers are also starting to look for ways to avoid congested trade lanes, for example by using more ports in the North of England or storing their goods nearer to the end points of consumption.

E-commerce will continue growing

Covid-19 has changed the way we buy goods permanently and we can expect 2021’s e- commerce boost to continue in 2022, presenting both an opportunity and a challenge for logisticians. One of the biggest transformations will be seen in the B2B sector, where more transactions will be completed digitally. According Gartner, up to 80% of B2B sales interactions will be done digitally by 2025.

Local rather than global expansion

When global supply chains were disrupted – due to the pandemic and Brexit – many companies turned their attentions towards local opportunities instead and this will continue to be a major trend in 2022. Aside from the obvious benefits of supporting local businesses and reducing logistics miles, sourcing locally can be less risky, because it removes the question of border restrictions and also means you are in better control of delivery times.

No such thing as a ‘free’ delivery

Many companies have used free delivery as a way to attract customers, but rising costs mean these offers could be re-evaluated. Instead, retailers will look for alternative options, like combining deliveries for individual customers or geographies to control their delivery costs and making the best possible use of available delivery capacity.

Difficulties with warehouse recruitment

Many warehouses are experiencing difficulties with their recruitment and either cannot get enough of the staff they need or have issues with employee retention. Wages in warehouses are increasing and apart from the extra money on offer, workers in 2022 will be expecting better working conditions and other incentives like increased training and development from their employers too.

Increased focus on sustainability

The issues of climate change and minimising carbon footprints will be more prominent in 2022, driven by consumers and business investors. Expect to see more interest in finding net zero and eco-friendly warehousing solutions, whether that’s in terms of resource utilisation, construction materials or low carbon footprint operations. Productivity enhancing technology like Warehouse Management System (WMS) software can help to ensure that supply chain performance is being continually improved – to achieve greater efficiency, reduced paper and energy consumption and ensure that other waste is minimised.

Micro Warehouses and last mile logistics

Last mile logistics is said to be the costliest part of the delivery process and in the same way that companies are looking for local solutions to minimise risk, the rise of local micro warehouses is going to be a big trend in 2022. The benefit of a micro warehouse is that it is situated in the heart of a community closer to the customer, which means the last mile logistics operation is more efficient and orders can be fulfilled more quickly. Micro warehouses are already widespread in the consumer goods sector and we can expect to see a rise in their use within cold chain environments too.

Last mile as a service

Staying on the topic of the last mile, one innovation we can expect to see a lot more of in 2022 is last mile as a service (LMaaS), a clever diversification strategy among some 3PL providers. Rather like what Amazon already offers through its fulfilment operations, this makes perfect sense for smaller companies who cannot justify the investment in their own micro warehouse infrastructure but want to ensure customers get the fastest possible delivery services.

Increased demand for outsourcing of 3PL and 4PL services

Just as companies will likely be outsourcing more of their last mile operations, we can also expect demand for 3PL (Third-Party-Logistics) and 4PL (Fourth-Party-Logistics) services to increase. This is almost exclusively being driven by the rise in e-commerce and according to a report by Allied Market Research, the global 3PL market is expected to reach US$1.1 trillion over the next six years. 3PL and 4PL outsourcing can be more a cost-effective and customer responsive model, but it does come with the caveat of lost control. Some companies will operate a hybrid model and when their own infrastructure hits capacity, they will look to an outsourcing partner to help with the overflow.

Circular supply chains become more common

We have all heard about the ‘circular economy’ where goods are re-cycled and pre-loved items are re-sold. Even Selfridges sells pre-loved items these days. In 2022, we can look forward to the emergence of the ‘circular supply chain’, where goods flow in the reverse direction to be reused, recycled or resold. Like reverse logistics processes, this requires careful management, but we can expect to see it grow in importance as an obvious way for companies to offset activities and minimise their carbon footprints.

It is clearly a very interesting time to be working in the warehousing and logistics sector. Long gone are the days when the warehouse was an inefficient cost centre, it is now the centre of many company’s supply chain operations and a very strategic function with lots of investment. To remain ahead in any sector, it’s important to be focusing on continuous improvement, which includes an ongoing review of key processes and technology.

If you are interested in exploring how a WMS solution can get your warehouse set for the challenges of 2022, talk to Indigo Software.