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Plan for These Supply Chain Challenges in 2020

Plan for These Supply Chain Challenges in 2020

Many logistics players hope to leave at least some of the instability and unpredictability of 2019 behind them. From unsteady international relations to roaring wildfires, shippers were forced to test the resilience of their supply chains over the last year. Of course, successful supply chain stakeholders have learned by now that the key to resilience is agility and adaptability.

In this vein, news media and supply chain experts often speak of frequent disruption and instability as “the new normal” for the logistics realm. While 2020 has arrived with its own set of challenges—some new, some familiar—proactive and prescriptive behavior is always preferable to knee-jerk reactions. This blog will help our readers to understand some of the obstacles ahead in 2020 and what they can do to plan for them.

Challenge #1: Industrial Real Estate Capacity

Reports throughout 2019 warned that industrial real estate availability was nearing all-time lows, and this issue won’t go away in 2020. In 2019, retailers were making large purchases in advance of retaliatory tariffs, then filling available storage space with those goods.

While capacity constraints may ease slightly throughout the year, continued growth in e-commerce and online grocery sales will maintain a high demand for warehousing and cold storage space. Additionally, all e-commerce businesses will strive to compete with Amazon by providing fast shipping to key markets. This has not only impacted warehousing capacity in primary markets, but in secondary markets as well. Reaching e-commerce customers in 2020 will require creative solutions from shippers logistics providers alike.

Challenge #2: Shrinking Labor Supply

Much of the U.S. has record low unemployment rates, under 3% in many markets. This coupled with an aging workforce and reduced worker mobility is putting a severe strain on many companies looking to expand. The lack of available labor is both pushing wage rates up. Over the past year, wage rates have increased by more than twice the rate of inflation for some sectors of the labor force.

To counteract the lack of available workers, many firms are increasing workplace perks and flexibility to attract and retain quality employees. Many companies are also investing heavily in automation to reduce their dependence on labor.

Challenge #3: Economic Downturn

Recessions are notoriously difficult to predict and often go unnoticed until they are already happening. Some economists still believe a recession is on the way in the next 12-18 months, while other economists say the chances of a recession are declining. Still, it’s better to prepare for a recession than to get hit by one unawares.

Here are some issues that may impact the economy moving further into 2020:

• Sectors such as agriculture and manufacturing were hit hardest by tariffs, and the long-term consequences of these impacts are not yet known.
• The national debt topped a record $23 trillion in 2019. Continued growth of our nation’s debt could trigger a recessionary environment.
• The stock market hates uncertainty, and political instability around the world may eventually push the global economy toward recession. Examples include Hong Kong protests, impeachment proceedings in the U.S., and Brexit.

To ride out political unrest and economic uncertainty, supply chain stakeholders should focus on building agility and redundancy into their supply chains now to ensure that future disruptions won’t catch them off guard.

In the meantime, keep a close eye out for key indicators of a recession, such as:

• Consecutive quarters of declining U.S. GDP
• Rising inflation
• Rising unemployment

Phoenix Logistics: Your 2020 Logistics Partner

At Phoenix Logistics, we’re prepared to help you find solutions to the above challenges and any others that come your way. Our portfolio spans warehousing, distribution and fulfillment, freight brokerage, supply chain technology, and much more. For more information about our services and capabilities, please give us a call at 414-253-8010 or contact us online.