2016 was a milestone year for the supply chain and logistics industry. From Uber’s push into the space with its acquisition of Otto and plans for an Uber-like digital freight matching solution to myriad investments into supply chain tech startups to the well-documented Hanjin shipping collapse, it’s safe to say the multi-billion dollar supply chain industry was a mainstay in global news.
The year ahead appears to be just as colorful. With the continued growth of the $800 billion trucking industry and new entrants into the market, like Amazon—which recently made headlines for secretly building an Uber for trucking app—we can expect 2017 to be another big year.
Here are three of my predictions for what will most notably impact the logistics industry:
1. The 3PL and Brokerage Market Will Need to Increase Efficiencies via Technology Investments to Oppose Shrinking Margins and Growing Competition
Uber and Amazon’s push into the logistics sector will create massive margin compression for third-party logistics (3PLs) providers and traditional brokers. These large tech companies have a greater vision that enables them to lose money now in pursuit of a bigger goal.
Whether you are a $1 billion or $50 million company, you’ll have to work much more efficiently in order to remain competitive. Over the next few years, your normal gross margin is going to be significantly lower. The only way to offset that is by gaining internal efficiencies (while raising prices is not an option in today’s market).
The traditional brokerage model could become a thing of the past as automation seeps further into the age-old processes that many brokerages still utilize. Pricing, booking and tracing—for example—will require significantly less human interaction and management. We’ll see major advances toward this in 2017, and by 2020, the traditional brokerage model will resenbke only minor remnants of the processes it used to be built on.
2. Dynamic Startups Will Continue to Attract Attention from Investors as Funding Climbs
According to a CB Insights piece on companies disrupting the supply chain and logistics industry, projections show over $5 billion will be invested across 315 deals in 2016 alone. There are eight primary supply chain and logistics categories that are garnering attention, including:
- E-commerce logistics.
- Freight and supply chain visibility.
- Sensors/asset tagging.
- Last-mile delivery.
- Enterprise resource planning (ERP).
- Inventory management.
Deals to supply chain and logistics tech companies will continue to spike on the heels of a record year in 2016 for money invested into the industry.
3. Transportation Management System Vendors Will Adapt to Offer More Seamless Multimodal Offerings as Multimodal Transportation Becomes the Norm
The efficient combination of transportation modes has traceable benefits to the tune of reduced inventory costs, contained freight costs and optimized lead times. Multimodal aspirations have been top of mind for some time now as industry players seek to solve complex supply chain issues.
Mode-agnostic technologies that can support this approach will see higher demand in 2017 as shippers and their logistics providers look for systems that support multi-leg, multimode shipments. In 2017, we’ll see transportation management system (TMS) vendors invest more in expanding their TMS suites to accommodate global and multimodal optimization within a single platform.
Dozens of predictions can be made for what will likely shape the industry in 2017 and beyond. These are only four of them, but I think they will have the most impact in the near term. Come year-end 2017, we’ll see how accurate I was. I’d love to know which predictions you’re tracking. Feel free to share your thoughts in the comments section below.
Tommy Barnes is the president of project44, an enterprise software-as-a-service (SaaS) platform connecting every aspect of the global supply chain through on-demand visibility. For more information, please visit www.p-44.com.