Supply chain challenges have been making headlines for more than a year now, and production, shipping, and fulfillment challenges are expected to remain for months to come. Plus, the pandemic revealed vulnerabilities in global logistics networks, which has changed the way merchants plan, produce, ship, and deliver products.
Even still, consumers still want goods delivered fast, free and on time. Businesses must embrace new shipping and logistics strategies, and many are working to digitize their supply chains, improve transparency and invest in sustainable business practices to minimize the risk of losing customers.
Shopify’s Future of Shipping and Logistics report has identified what lies ahead for 2022 and the strategies businesses can use to increase success. The report drew on global, data-backed insights from hundreds of businesses and thousands of consumers. Here are seven key takeaways.
1. Supply chain vulnerabilities force merchants to permanently modify their fulfillment and shipping strategies.
Merchants are rethinking where their stock is, and how to get it into the hands of customers, especially as shipping costs and shipping and manufacturing delays are the top supply chain–related concerns for businesses. According to Shopify’s report, companies are revising their manufacturing and shipping strategies, creating opportunities to lower costs, and improve customer service. At the same time, businesses and their logistics providers are building more resilient supply chains with renewed focus on digitization and decentralization.
2. Supply chain disruptions will continue to happen with increasing frequency and severity.
According to a commissioned study conducted by Forrester Consulting on behalf of Shopify, shipping delays, shipping costs, and manufacturing delays are the top supply chain concerns brands expect to encounter well into 2022. Some experts predict that systems won’t normalize until 2023 at the earliest. Even once they do, the pandemic has exposed global logistic network vulnerabilities to future political instability, natural disasters, and regulatory changes. McKinsey reports that significant disruptions to manufacturing production now occur every 3.7 years on average.
McKinsey reports that significant disruptions to manufacturing production now occur every 3.7 years on average.
3. Social and environmental impact will define the next era of shipping and logistics.
Today’s consumers are demanding socially conscious and environmentally sustainable businesses. As more and more consumers purchase products from sustainably operated businesses, merchants are focusing on improving their sustainability, including both their environmental and social impacts. Shopify’s report found that businesses that invest in sustainability through their supply chain will reap returns in customer and employee retention.
4. Consumers have rising expectations of how quickly goods will be delivered.
Shopify reported that 60 percent of global consumers expect same-, next- or two-day delivery. Plus, customers will switch to competitors to get their goods when products are delayed or unavailable. The pressure to provide quick delivery is only intensifying, as established brands make bold moves to meet customer demands.
5. Customers choose to shop with brands that are transparent around delivery times.
Clear communication will help set expectations and retain new customers during a period of high distrust and data legislation changes. Customers expect fast, free, on-time delivery and will abandon their carts if it’s not available. They also want access to delivery timelines at checkout. Merchants reported that they plan on improving transparency into shipping and deliveries in 2022. The opportunity to build trust and transparency through delivery-related communications will be key to creating long-term relationships resilient enough to withstand the industry’s continued challenges.
6. Revisiting supply chain strategies is a chance to build resilience, reduce carbon emissions, and get products to customers faster.
Shopify’s survey found that 43 percent of companies are changing their shipping strategies to reduce the impact of global shipping delays, and 45 percent intend to improve their manufacturing capacity. However, re-examining strategies shouldn’t just be a preventative exercise. It’s an opportunity to innovate how goods are procured and shipped, benefiting customers and businesses alike.
…43 percent of companies are changing their shipping strategies to reduce the impact of global shipping delays, and 45 percent intend to improve their manufacturing capacity..
7. Data is key to supply chain decisions.
Supply chain management was once based on past years’ sales trends, but merchants now have technology at their fingertips to better forecast their inventory needs. According to McKinsey, early adopters of artificial intelligence-enabled supply chain management can improve logistics costs by 15 percent, inventory levels by 35 percent, and service levels by 65 percent, compared with slower moving competitors. The growing use of cloud-based software, which allows supply chain partners to share real-time data, is also hugely beneficial, Shopify reported.
The full report, which features additional shipping and logistics insights is available here.
Kasia Wenker, Director of Supply Chain Solutions