In a sea of so many predictions, what are the best lessons for last year and insights for the coming year?

By now, 2 months into 2023, you’ve probably been inundated with “year in review” and “predictions for the year ahead” articles. In a sea of predictions, tips and hunches, we decided to sift through dozens of these, so you don’t have to. We discovered some gems being touted from different vantage points and polished them to reflect a few major themes that will influence the next 12 months.

Planning for a new year is like driving a car. You need to spend more time looking forward then backward, else you may run into an obstruction on the road ahead. In a car, the rear-view mirror takes up about 5% of the front windshield – with the remaining 95% for looking forward. We think that percentage looking backward and forward is spot on. Keep your eyes on the road ahead when driving and keep your focus on what’s coming when planning.

A look back at 2022

After nearly three years of pandemic-influenced economics, the world's supply chains are still in a turbulent landscape. A few of the most significant stories to impact our industries included:

  1. FedEx terminated delivery agreements with smaller carriers and the domino effect was profound, creating what some people called a real David vs. Goliath story.
  1. As peak pandemic shopping demand began to cool off, Amazon was hit with $6B in costs due to excess labor and warehouse inefficiencies.
  1. Ocean shipping rates plunged 60% in 2022. Market conditions made a sharp reversal after freight rates had increased by almost 10-fold in 2021 due to port backlogs and surges in cargo.
  1. Inventory glut: Port backlogs contributed to a backlog of excess inventory. Warehouses and retailers alike found themselves overstocked with goods, and consumer demand could not keep up. This problem is sometimes described as the "bullwhip effect" - a magnified ripple of demand that travels up the supply chain.

A look forward at 2023

Trend 1: Gen Z is coming of age and businesses need to take note.

More and more industries are starting to prioritize the Gen Z demographic as they come of age and their spending power grows. The supply chain sector is no different. Gen Zs are the first generation to grow up entirely in an online world that transcends borders. Born between 1997 and 2012, there are 2 billion Gen Z worldwide and their buying potential is vast.

Gen Z will continue to drive digital trends like TikTok’s rise and mobile eCommerce.

It is expected that Gen Z will surpass Gen X in the number of digital buyers by 2025.

Consider this when you invest in new technology, markets, clients, and products. How best should you position yourself for the savvy demographic that wields trillions of dollars in disposable income worldwide? They will be shopping for themselves now, and soon for their new families.

For eCommerce sellers, this requires reaching these emerging consumers in the places where they spend their time – online and on mobile devices.  This means shippers will need to adapt new eCommerce fulfillment processes, whether they are retailers shipping online orders from decentralized fulfillment centers, 3PLs taking on B2C fulfillment, or manufacturers shipping orders directly to consumers (D2C).

Trend 2: Artificial intelligence (AI) is coming to a supply chain near you!

AI has been around for decades, and we interact with it daily – whether we notice it or not. Sometimes it works well and is subtle and seamless — other times it is obvious and cumbersome. The sophistication of AI technology is growing exponentially these days as evidenced by the recent hype around ChatGPT, Bard, Lensa, and other tools.

How will this impact the supply chain? Predictive AI is another tool that will help humans crunch and analyze vast amounts of data beyond human capacity. Banks are well aware of this and are already working on adopting AI to develop new FinTech for the future.

AI’s power also lies in its ability to think outside of human bias paradigms. A robot recently won a chess game against a chess master by making a strange “wrong” move. The move was so counterintuitive that the human player who had not experienced the move could not respond quickly to this unpredictable situation. Ultimately the robot won a game which was considered “unwinnable”.

Many “companies are currently scrambling to add resiliency to their supply chain programs, but ironically they are taking actions that may lead to more fragile and rigid supply chains based on outdated ‘steadier models’,” says Tim Payne, VP Analyst at Gartner. A focus on improving accuracy may unfortunately simply reinforce vulnerabilities within supply chains. Meanwhile, uncertainty metrics and KPIs may prove to be much more powerful. AI will find new and powerful ways to predict uncertainty in supply chains.

Supply chain trends from across the world

Increasingly, the whole world is connected and the best-practices of one country or industry can invariably inform other nations - or even continents. Here are some valuable predictions from supply chain experts across three continents.

Asia: Chinese consumers are increasingly moving towards newer digital subcategories of eCommerce.

Livestream eCommerce is expected to outgrow regular eCommerce by 19% this year - and  social eCommerce is set to expand about 13% year over year

You are probably familiar with social eCommerce, but what exactly is livestream eCommerce? Essentially, it is a fusion of interactive video with online buying / selling. It lets customers watch a live video on a platform while buying goods at the same time. Imagine watching a live cooking show, interacting with the chef, and then purchasing a set of knives they are selling - all without even leaving the platform. Now imagine the sales potential of a platform like TikTok with 775 million users.

Companies that are ready for cross-border eCommerce fulfillment into the Chinese market will reap substantial rewards when these consumers come online.

Latin America: Primed for explosive eCommerce growth

As the world’s second fastest growing eCommerce market, Latin America is set to expand 25% per year for the next decade (outpacing the US, Europe, and East Asia).

From retail to travel to digital goods, improved internet connectivity and mobile adoption means that Latin America is primed to expand quickly. The challenge here is that only 19% of Latin Americans own credit cards and of those, only 6% have cards enabled for international transactions.

Smart online sellers should look to offer local payment methods that entire populations rely on to expand into Latin America. They should also look for regional carrier options for final-mile deliveries into those countries. 

Europe & N. America: No recession in sight for luxury brands

Wealthy consumers are fueling a boom in the ultra-luxury market this year. High-end brands are spending freely and will remain unscathed. Mid-tier brands, however, are going to take a hit if they cannot reposition themselves.

“What we’re seeing now is a re-bifurcation between higher- and lower-income consumers, while the middle-income consumer is hollowing out.” This means, value-based and discount retailers are thriving (think Walmart and Dollar General) but mid-tier stores (e.g. Macy’s and Kohl’s) are the most at risk to lose sales.

With the Covid-19 pandemic seemingly receding into the rearview mirror for most of the world, many of the dynamic market shifts and sudden supply chain disruptions we lived through look to stay with us for the foreseeable future, continuously redefining what is the new “normal”.  Increasing digital buying and direct-to-consumer fulfillment look to remain a constant as we emerge into the post-pandemic world. Transtream powers eCommerce fulfillment by perfecting final-mile delivery, whether down the street, to the other side of the nation, or across borders into other countries.