Over the last thirty months, shippers and their suppliers have been through a lot. Tumultuous change and disruption stemming from the COVID-19 pandemic permeated all facets of life, impacting companies, customers, providers, teammates, and international supply chains. For some, costs spiraled out of control, while customer needs were impacted by elongated transit times and deteriorating service levels.
As we head into 2023, the market, economy, and supply chain landscape are poised to change yet again. Waning consumer demand brought about by inflationary pressures and the reality of a recession have dampened consumer demand and reversed the historical bull run of transportation spot rates.
For shippers, a decline in ocean rates is a welcome relief, but is this decline a signal that the supply chain impacts endured were just an aberration? Were industry insiders who spoke of paradigm shifts, new norms, or black swan events all incorrect?
The lasting truth we should take away from this experience is the sage counsel of the Greek philosopher Heraclitus, who professed that change is the only constant in life. Supply chain design must incorporate the necessity to be both resilient and flexible concurrently in the face of future disruptions.
For shippers, this requires the ability to remain constantly informed on changing market dynamics and to create a procurement strategy that forms strong bonds with providers while safeguarding the ability to be nimble in the face of changing market conditions. These paradoxical requirements are not easily achieved but are paramount to success. Part of this endeavor requires building and, in some cases, rebuilding relationships and trust between shipper and providers. While this industry steadily moves toward digitization, the previous years have reinforced the value of strong relationships between shippers and providers. Trust and partnerships have been tested, but the reality is that shippers and carriers coexist in a symbiotic relationship dependent on the other to succeed. Transparency in procurement, forecasting, and service offerings must improve for both sides to benefit. Mutually beneficial procurement leaves both parties constructively dissatisfied and does not create a binary win-lose outcome.
The next step toward the decarbonization of the international supply chain begins in 2023. For carriers, the rollout of the EEXI and CII measures creates an opportunity to document the carbon impacts of their fleets. Carriers need to be fully transparent with shippers on the true costs and service impacts they expect due to these changes to ensure their customers become invested partners in their decarbonization journey. Shippers need to better understand the future milestones of decarbonization in the intervening years until 2050. Against the reality of a massive orderbook, carriers need to inform customers about their decarbonization plan, including an understanding of the benefits and risks of alternative fuel choices including liquefied natural gas (LNG), ammonia, methanol, and green hydrogen.
For shippers, the path to decarbonization cannot wait for, or rely solely on, the actions of carriers. We can only manage what we can measure, and shippers should take immediate action to measure their direct and indirect emissions. This measurement must rely on the latest GLEC framework methodology applied holistically across their transportation modes and providers. Shippers should take steps to actively reduce Scope 3 emissions and go beyond waiting for carriers to adopt new clean fuel technologies on their vessels. An end-to-end supply chain view of decarbonization should explore network design, carbon offsets, and container optimization and densification through order management and packaging design.
Domestic and drayage decarbonization is also critical, and shippers should look at ways to reduce empty miles by increasing dual transactions and the street turn of equipment. A focus on emission measurement, offset, and mitigation will put shippers in a competitively advantaged position with their customers, prepared for upcoming SEC and governmental regulatory changes, and create a clear signal to providers of their commitment to join them on their decarbonization journey.
Supply chain leaders in 2023 will need to balance all of these challenges, remaining nimble, informed, and prepared to adjust operational and procurement strategies to meet their customers’ changing needs and react to industry short-term disruptions in real time while maintaining focus on creating a long-term resilient and sustainable supply chain.