The last few years have been dominated by economic uncertainty and supply chain challenges that range from the all-encompassing COVID-19 pandemic to more individualized problems like container ships getting stuck in the Suez Canal. While we can't predict all the issues that will affect the supply chain outlook, we can make some guesses as to what will happen.
Some things remain true no matter the current economic climate: the need to be agile, adaptive, and properly manage your supply chain will make it more resilient to disruptions. Warehouse managers must be ready for anything. This article will discuss critical trends, including technological advancements such as AI, sustainability initiatives, global trade dynamics, and changing customer behavior. It will also discuss specific ways warehouse managers can prepare, even in volatile markets and with labor shortages and supply chain disruptions.
Our 2024 Predictions
We predicted many trends for 2024. For example, we predicted that warehouses would use more robots, and we are seeing that through retrofitting forklifts for automation and the increased use of AI.
We also predicted that warehouse workers would use more wearables. This has been a trend for several years and continues steadily through 2024.
Another prediction was that the need for improved last-mile logistics would lead to increased warehouse construction and, significantly, an increase in micro-fulfillment centers. However, construction is normalizing, which may result in tight space availability.
As we see more of these trends play out across the remainder of 2024, here are some additional trends that we foresee in 2025.
Key Trends Shaping Supply Chain Outlook in 2025
Several trends are likely to dominate the supply chain through 2024 and into 2025. Economic trends include a slight slowdown in 2024, followed by growth in 2025, particularly in Asia.
But there are some other things to consider:
Technological Advancement
Over the last year, artificial intelligence, more accurately called machine learning, has been the technology on everyone's minds and lips. Much of the hype has been around large language models. The bubble may already be bursting on that front, but computer manufacturers are adjusting to support AI.
Companies have many practical uses for AI in logistics; warehouse automation with robotics is only one aspect of this. AI can process more data faster than human analysts. Accurate inventory tracking throughout its entire journey is already something that has been incorporated by many distribution center managers and retailers using AI to predict demand. The actual transformation is likely to be predictive analytics, which can anticipate demand patterns, inventory fluctuations, and potential disruptions. AI can also quickly assess the impact of a disruption on your operations. Automation may also help alleviate the global shortage of warehouse workers and increasing cost of labor.
Sustainability Initiatives
The ROI of sustainability is increasing constantly. Consumers are starting to expect that the companies they buy from work sustainability into their operations, including the supply chain.
The supply chain outlook for light industrial companies is evolving, and some have started implementing initiatives to shorten the distribution. "Buy local" can both demonstrate sustainability by reducing fuel costs and limiting disruption risk.
However, there is a growing tendency to see sustainability as part of a system. This means they need to become more collaborative instead of keeping relationships with suppliers purely transactional. Rather than pressuring suppliers to cut costs, many companies are turning to more sustainable suppliers and/or pressuring suppliers to make critical changes to improve their methods, such as reducing water use.
Furthermore, with increasing awareness, sustainability as a movement is becoming less about only the environment as a single-minded cause and starting to encompass globally broad initiatives like:
- Anti-slavery initiatives and respect for human rights
- Respect for labor and collective bargaining
- Abolition of child labor
- Anti-corruption initiatives
In other words, 2025 may be the year when sustainability comes into focus in a broader sense.
Changing Customer Behavior
In the U.S., the death of the mall has been predicted for decades. The global pandemic made this seem even more likely, and 43% of Americans currently shop mostly online. However, that's not a majority.
It seems more likely that the mall will be transformed into more of an entertainment destination, with most people ordering routine products, especially clothes, for home delivery. This means that logistics companies will have to implement last-mile delivery to individuals' homes and businesses. Expanding warehouse locations to cover as many geographical areas as possible helps speed up delivery times and improve customer satisfaction.
The economy also affects customer behavior, and inflation has dominated conversations in many places. Many people are experiencing housing costs that increase faster than their income, for example, squeezing discretionary spending and lowering demand for some items. With the overall economy anticipated to strengthen in 2025, consumer confidence and spending are likely to improve. People also already feel they have more stability, with U.S. retail sales increasing by about 1% in the first quarter of 2024.
One key trend in customer behavior is in the automotive sector. Vehicle purchase intent is trending down as more young people eschew cars. For those who purchase a vehicle, electric vehicles (EVs) are starting to take market share from traditional internal combustion vehicles. This includes commercial fleets, resulting in significant investment over the next few years.
Global Trade Dynamics
China remains a powerhouse, but the war in Ukraine has impacted food shipping patterns across Europe, and the impact of the war in Gaza remains uncertain. Global trade is, perhaps, the thing most likely to be affected by unexpected events, which might include natural disasters and conflicts in various parts of the world. While the impact of the pandemic on trade has mostly been resolved, the global scene may continue to be dominated by "unforeseen" events.
Climate mitigation has a prominent impact on global trade patterns and tends to be unfavorable for lower-income countries. If not handled properly, it might also affect other sustainability initiatives.
Global trade has been at record-high levels for decades, but these influences may slow it down in the future.
Challenges Faced by Warehouse Managers
How do we narrow this all down to what might challenge a specific warehouse manager at a particular company? You do need to be aware of everything from customer behavior to global trade, but there's little you can do about the volatility itself.
All you can do is build resilience. Some things to think about:
Inventory Management in Volatile Markets
During the first months of the COVID pandemic, there was an infamous shortage of flour. It was blamed on individuals staying home and "stress baking." There was never actually a shortage of flour. The problem was more subtle than that. As people stopped eating out and started baking their bread, the quantities of flour people needed changed. With restaurants closed, nobody was buying 50-pound bags of flour. Everyone wanted 5-pound bags, and that was the real shortage.
This demonstrates that a volatile situation can cause unexpected shifts in demand that operations managers have to be ready for. For a while, just-in-time management had been king, but it caused shortages in this new and uncharted environment for the supply chain.
Of course, there has to be a balance. Using data to predict demand helps you avoid telling downstream suppliers you don't have enough inventory or have an overflow of products in your warehouse. The key is to develop resilient and agile systems that allow you to increase and decrease orders rapidly and bring in new suppliers as needed.
Labor Shortages and Workforce Management
Many in the media have claimed that "nobody wants to work anymore," but the unemployment rate continues to drop, and the U.S. economy continues to increase jobs. However, the supply chain outlook over the last few years has limited pay raises in some areas, and many warehouse workers have left the workforce or sought jobs in other industries. Another issue affecting the light industrial sector is a shortage of truckers, with self-driving trucks not predicted to be ready for mass market rollout shortly.
The labor market is only expected to decline due to worker shortages, triggering an increase in automation to fill the gap. Some predict that by 2028, there will be more robots than humans in our warehouses. There is also a skills gap in working with automation and overseeing robots. This permanent labor shortage only worsens when you need to rapidly increase supply to meet a sudden spike in demand, and the robots will only be able to do some of the jobs. Using On Time Staffing can help mitigate this by giving you easy access to contingent labor to help with both seasonal and unexpected spikes.
Disruptions in Transportation and Logistics
The Key Bridge's collapse after being struck by an out-of-control container ship was devastating in the short term for the port of Baltimore. But it's only the latest in a series of incidents that cause unexpected disruptions to transportation.
As mentioned, a shortage of truck drivers, caused by more people retiring or leaving the industry rather than entering it, can cause ongoing disruption. Many supply routes rely on road transportation.
As we've also seen over the past few years, weather can also affect the supply chain outlook. Wildfires, floods, landslides taking out roads, and disruptive weather elements are becoming more common, forcing drivers to seek alternate routes and sometimes delaying shipments significantly. Preemptively creating a map of alternative routes can help when a particular route is blocked.
Compliance and Regulatory Changes
As a warehouse manager, you're already aware that regulations change frequently on a national and state level, and it is challenging to keep up with every change. Fortunately, however, in 2023, the U.S. made specific regulatory changes to help improve long-term resilience. These include promoting domestic manufacturing, requiring the federal government to prioritize domestic suppliers, and funding infrastructure upgrades at ports.
There are likely to be more changes, particularly impacting companies that do business with the federal government.
Future Outlook
It's no longer possible to think on a local level, yet considering more locally could be essential to future resilience.
Logistics administration will move from maximum efficiency and just-in-time to resilience, multiple routes, and a focus on sustainability in every sense of the word.
Warehouse managers need to start thinking a little differently. Some of our recommendations are:
- Invest in automation
- Leverage the contingent workforce to change staffing levels as needed
- Employ AI to analyze data and improve demand forecasting
- Diversify supplier networks as much as possible and try to shorten supply chains
- Collaborate with suppliers instead of merely purchasing from them
- Understand changing customer behavior and trends
- Focus on sustainability and resilience
Over the last few years, it's important to maintain a positive supply chain outlook, even in the face of unforeseen challenges or disruptions. Warehouse managers can help prevent vulnerabilities by becoming more agile and resilient. On Time Staffing can help by providing on-demand staffing to handle predicted and unpredictable surges in demand.
If you need help with your staffing, contact us. We can support you through supply chain fluctuations and help you become more agile and resilient in the future.
