Trend Report: 5 Things Shaping Transportation and the Food Supply Chain
As 2015 comes to an end, the supply chain industry is experiencing big changes. Here are five of the top trends impacting shippers today:
1. More Automation
Rising labor costs, technological advancements, and increasing global market demand are pushing more companies to adopt automated solutions to gain a competitive edge. Many are looking to advanced warehouse execution systems to automate workflows, making adjustments based on the status of orders, inventory, and throughput capabilities (Logistics Viewpoints). Self-driving trucks, or autonomous vehicles, may also be closer to reality than many think. Well beyond the initial testing phase, driverless trucks have the potential to increase highway safety, reduce human error, and help combat the driver shortage that plagues the industry.
Minimum wage increases across the country continue to impact food service, an industry where salaries amount to more than 30 percent of costs (The Washington Post). Fast food companies in particular are considering big changes because their low-price, high-volume, low-margin operating models don’t easily accommodate large cost increases. In states like New York where the mandatory minimum wage jumped from $8.75 to $15.00, members at all levels of the food supply chain started looking at cutting jobs and shifting investments to automation—think self-service kiosks, online ordering, and even robots—where efficiencies scale without adding headcount (Inbound Logistics).
2. Private Label Price Pressure
Retailers are increasingly turning to private labels to control prices and costs, bolster their brands, and increase profits. According to a recent survey from Deloitte, approximately one in six dollars spent in this country now goes toward the purchase of private label goods. Supporting this trend, the study identifies a greater retailer focus on quality assurance programs, including their collaborations with vendors, as well as a move toward consolidating and deepening relationships with suppliers in general. Not surprisingly, these companies are also investing more in technology to manage sourcing and operations, aligning their metrics and systems to promote more cooperation in the supply chain. The upshot? Cost is no longer the only focus for retailers. Quality and speed-to-market matter as much, which may account for the shift from offshore to domestic production among private brand retailers, up to 70% of whom claim success with reshoring efforts (Inbound Logistics).
3. Effects of the Food Safety Modernization Act
Shippers continue to focus on food safety due to ongoing FSMA updates, including produce safety, foreign supplier verification, and third party accreditation rules set to be finalized this month (FDA). Expected areas of focus for food safety include processes to mitigate spoilage and cross contamination during transport, temperature monitoring and control, and sanitation practices for handling, loading/unloading, and packaging. Other FSMA requirements center on the administrative side of shipping, such as food safety training for employees, food safety plans for employers, supplier verifications, and ongoing monitoring to verify the effectiveness of safety programs (Food Logistics). Shippers that don’t make compliance with the FSMA a priority now could face product recalls, fines, and even criminal prosecution in the near future.
4. Worsening Truck Driver Shortage
The transportation industry is still grappling with a lack of qualified drivers. An October 2015 report from the American Trucking Association put the shortage at 48,000 by the end of the year and projects a need for a whopping 890,000 more by the end of the next decade. While the current healthy economy has created demand for more shipping services, the longstanding problem stems from the need to replace an aging workforce and raise driver wages. Experts say that improving other factors can help, such as elevating an inferior job image, better treatment of drivers throughout the supply chain, and improving a lifestyle that requires too much time away from home (Food Logistics).
5. Intermodal Industry Growth
Transportation volume in intermodal rose by 4.8 percent in 2014 and another 4.5 percent in the second quarter of 2015, according to a report from the Intermodal Association of North America (Inbound Logistics). In addition to reducing road congestion, lowering costs, and mitigating carbon footprints, intermodal is also becoming an integral part of railroad businesses, which recognizes that connectivity and communication are critical to success in this area. In fact, managing a seamless supply chain has led to investments in equipment, technology, and infrastructure across the entire transportation industry. Ports have also seen tremendous growth on both coasts, in Canada, and in Mexico, largely due to the improvements in efficiency and cycle time that just-in-time companies desire. More shippers are also looking at temperature-controlled intermodal as an integral part of their portfolio.
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