Following years of high volatility for supply chains, 2024 is likely to present a more stable picture, with many industry indicators returning to 2019, pre-COVID levels. Lower customer demand and challenging economic conditions will certainly play a role in the logistics market. Shippers have grown accustomed to building a resilient approach to their supply chains, and this agility will be important again in 2024. Already in the first two weeks of the year, the industry has witnessed how quickly the global supply chain can change.
Environmental effects related to climate change, as well as on-going geopolitical instability, are impacting the global supply chain. Low rainfall in the area surrounding the Panama Canal and on-going conflict in the Middle East could continue to threaten strategic major shipping passages. The pressure will be on logistics providers to work effectively with carriers and suppliers to achieve the best rates while maintaining long-term relationships.
Here are some of the key trends or influences to look out for in the coming months.
Evolving sourcing strategies
Nearshoring has emerged as a prominent trend, with companies re-evaluating their supply chain strategies to bring production closer to end markets. This shift towards nearshoring is primarily aimed at reducing lead times, enhancing flexibility, and mitigating risks associated with global disruptions. The trend has led to the strengthening of certain markets and the emergence of others onto a more global stage. For example, in 2023, Mexico became the U.S.’s largest trading partner, with a large percent of trade coming from the automotive sector.
Automotive industry recovery and lithium-ion battery recycling
The automotive industry experienced a delayed resurgence from the COVID-19 pandemic thanks to a mixture of high inflation rates and raw material prices. Current information and projections point to a new vehicle market that is poised to recover from years of underperformance. Global demand is expected to continue increasing to 101 million light vehicles in 2028. The supply of parts to global car manufacturing sites from across the globe will likely ensure a strong automotive logistics market for years to come.
The growth in demand for electric vehicles brings new dynamics to the automotive logistics industry, making it an important trend to watch. With higher numbers of electric vehicles in circulation, there are an ever-growing number of used batteries available. Depending on their state, batteries can be reused, reconstituted or stripped down for reconstruction into new products. But they are dangerous goods and need careful transport, storage and handling. CEVA is involved in the RESPECT program in the EU, to establish a value chain for the recycling of Li-ion batteries, and there are similar programs being set up in the U.S. and elsewhere.
Another sector that looks set to buck the somewhat gloomy economic trend is eCommerce. Global retail eCommerce sales nearly doubled from 2019 to 2023 ($3.3 trillion up to an estimated $6.3 trillion) and it is becoming a major driver of certain freight sectors, particularly air freight.
This continued growth calls for increased focus on digitalization, enhanced customer experience and the optimization of last-mile delivery. System interoperability—between marketplaces, online retailers, fulfillment management and logistics operations—opens up a major opportunity in the market for true end-to-end e-Commerce fulfillment and logistics solutions.
Industry 4.0 refers to the technological revolution taking place in the manufacturing and warehousing world. Cyberphysical systems, or intelligent computers, are reshaping manufacturing, with a combination of AI-powered manufacturing, the industrial Internet of Things (IoT) and cloud computing. At CEVA, we’re embedding AI and machine-learning across our systems to improve operational oversight and allow our experts to make more informed decisions.
One example of this in action is the Dynamic predictive visibility tool, which uses advanced AI to increase the accuracy of estimated vessel arrival times, allowing customers to know in advance when shipments are likely to experience delays or even arrive ahead of time and therefore mitigate any associate costs related to storage or customs processing. We’re going to see more examples across the industry, and we should see performance improvements across the board as a result.
Sustainability in all its facets is undoubtedly the most important trend for 2024 and beyond. There’s demand from all sides to reduce carbon emissions and operate in a more sustainable way. The historic agreement at the recent COP 28 summit to decarbonize shipping between major shipping organizations shows the willingness to change from within the industry itself.
Within Europe, changing EU regulations around emissions reporting will also require companies to report their Scope 3 emissions, i.e., those generated from within supply chain operations. As a result, there is increased interest and growing awareness on these topics. We all need to work together to find better ways of transporting goods.
There are positive signs at the start of 2024 that the logistics industry is moving in a more sustainable direction. At CEVA, we are participating in a large number of pilot programs around the world to develop and promote the use of low carbon solutions. One of these pilots, a two-year program, involves running low carbon trucks between the north and south of France through a terminal-to-terminal relay network concept designed to decarbonize long-distance road freight.
Let’s hope for further advances in 2024 as we watch these trends continue to shape our industry.