Six Trends that will Shape Shipping & Logistics Industry by 2023
Logistics has been the economic growth driver in many countries. US, Japan, and China are some great models that accelerated post World War II with favourable EXIM policies and efficient supply chain management.
An excellent example is how the trend of container usage for ocean shipments came into existence that transformed the entire shipping industry. Such changing trends help the industry evolve, especially when logistics have become a part of the just-in-time inventory system.
The past couple of years had some extreme challenges for the industry due to the pandemic, geopolitical and economic crises some countries face. While the circumstances have continued to adapt to the constant fluctuating global crisis, the ripple effect will aggravate this financial year.
While the global trade bodies and governments are relentlessly working towards smoothening the trade dynamics and assuring seamless international trade, it will undoubtedly experience some hiccups in the coming year.
A sustained rise in freight prices
Ocean shipments witnessed high freight rates constantly throughout 2021. A host of reasons led to the trend of the rising freight rate.
For instance, during the second half of 2020 and the first half of 2021, the changing consumer preferences and drastic surge in demand for goods worldwide strained the logistics cycles across every sector.
Lockdowns affected procurement and other supply chain processes, indicating a global demand and supply gap. Simultaneously, other factors such as container shortages, and supply-side capacity-related issues, were collectively responsible for high shipping costs.
Also, it is expected that the internal trade costs, including inland water transport and truckload rates, may rise by 2 to 3%, eventually increasing the overall shipping cost.
The implications of the Russia-Ukraine crisis have created a huge demand-supply gap in the global trade market. The lack of export from these two economies and rising prices of necessities like grains and fuels would eventually reduce global GDP growth.
Global GDP growth is expected to decline by 0.7-1.3% points, bringing it to somewhere between 3.1% and 3.7% in 2022.
Labour and Logistical challenges
The rise of the pandemic in early 2022 and the subsequent lockdowns imposed across the nations created an acute labour shortage in all the major global ports, resulting in increasing loaded vessels, cargo queues, and container shortages.
Just as the world had started adapting to the volatile situations, global commodity price rises and fuel cost surges have further impacted the already weak global trade situation.
Enhanced delivery timelines
Of late, several healthcare experts worldwide have begun forecasting that COVID-19 may go endemic this year. It has been possible due to the efforts of the healthcare sector around the world and the high number of vaccinations administered globally.
The pandemic turning into an endemic would be a significant development as it would mean that COVID-driven lockdowns and movement restrictions would be eased by governments everywhere.
That, in turn, will smoothen and speed up the global supply chains, thereby bringing delivery timelines back to pre-pandemic normal.
Rise of Automation
Despite various challenges the world had expected to weaken technological development, the advancement in the utilization of deep tech in logistics and global trade has surprised the EXIM community.
Connected logistics is significant for shippers today and will continue to do so. It has a vital role among the MSME exporters who manage shipments cost-effectively and timely.
Examples of digitization improving shipping and other logistics processes are computer vision-powered tools in a connected logistics network to monitor inventory and loss or theft of goods during shipping.
Similarly, IoT-based sensors can detect the pressure or temperature of cargo that can be managed while on the go.
So, you can use technologies such as AI, machine learning, computer vision, connected IoT networks and, especially, blockchain creatively and strategically to simplify shipping-related operations.
When implemented, blockchain-powered tools can save the shipping sector $38 million every year.
Focus on Sustainable Shipping
Keeping the mission of becoming a carbon-neutral industry and reaching the target of a 50% reduction in CO2 emissions by 2050 has encouraged all the stakeholders to start implementing sustainable trade practices.
A recent report highlighted that over 70% of consumers are willing to pay 5% more for sustainable products. This trend is expected to pick even more pace, forcing businesses worldwide to adopt green infrastructure that may bring initial challenges but eventually reap rewards.