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December 22, 2021

2022 Supply Chain Trends to Seize, According to Flexport Leaders

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For many in supply chain, 2021 has been a year of relentless pressure, as the world faces fierce winds of change.

Logistics begs for solutions to restore predictability. Economic and regulatory shifts redraw the shape of opportunity. Covid’s dogged march spotlights where we must adjust our responses to demand of all types.

As we enter 2022, a theme of resilience emerges. Here, ten Flexport leaders share their insights and advice, in their own words. Their perspectives are designed to help fortify and guide you into a new era of supply chain—one with abundant opportunities.

Read, share, and follow Flexport on LinkedIn to join the conversation.

Anders Schulze

Global Head of Ocean & Trucking

Our new normal comprises events that used to be considered thousand-year storms. The resiliency of every aspect of our lives has been tested, from our homes and relationships to our economy—and our supply chains.

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We are forced, repeatedly and ruthlessly, to prioritize what matters most. As backwards as it is, major trade lane rates had to rise 5 to 10 times for our industry to understand that price is not everything.

Read More: Import Demand Is Changing the World’s Busiest Trade Lane

Now, the industry’s number one priority is having factories producing, warehouses distributing, and, ultimately, getting products on shelves.

If you’re too dependent on a given routing, rely on traditional procurement tactics, or don’t understand where your cargo is—those are threats to your resilience. Those are problems that need solutions.

Entering 2022, planning, procurement, and visibility have never been more important to resilience.

Neel Jones Shah

EVP and Global Head of Airfreight

Over the course of the past two years, significant new demand and supply trends have emerged—like international ecommerce fulfillment, which will reshape the air freight market over the coming years and change the traditional interaction between shippers, forwarders, and asset owners.

Ecommerce giants are building massive airlines, and ocean carriers are jumping headfirst into air freight. Both will result in many new permutations of relationships that will be required going forward.

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On the supply side, as dedicated ecommerce networks expand, there will be opportunities to partner with these companies on backhaul segments. As ocean carriers venture headfirst into air freight, negotiating multi-modal cooperation will become more important.

Read More: Balance Speed and Cost with New Ways to Plan Your Modal Mix

Learn More: When speed is critical, rely on air freight

Since the pandemic began, cargo literally saved many airlines from extinction. It provided much needed cash flow and kept airline operations functioning, so capacity would be available as people began taking to the skies.

Within traditional belly and combination carriers, this newfound respect for the importance of cargo will lead to cargo being a strategic priority over the coming years. Cargo has found its way back onto airline boardroom agendas.

Konstantina Georgaki

Director, Ocean Platform Partnerships

Tough market situations have shattered trust among industry participants—but it’s precisely trust that we need to restore the health of the logistics ecosystem and drive innovation.

Taking ocean contracting as an example, you need three critical things to build trust: clarity, symmetry, and consistency. That is, clarity of what the obligations are. Then, symmetry of incentives to fulfill the obligations and consistency in fulfillment.

Historically, we haven’t seen this kind of mutually committed contracting in ocean logistics, due, in part, to a lack of good data on demand forecasting and supplier output. However, these factors have evolved, and so will contracting.

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In 2022, I urge companies to further layer their approach to freight procurement. We already see early adopters doing this.

Go for long-term contracts for base cargo, mixed in with shorter terms for other cargo. Engage in agreements at different option levels, like high, medium, or low commitment or enforceability. Blend fast and slow service levels.

Though it’s significantly more work to plan, it can have multiple benefits. First, it can help provide clarity around your needs as the customer. Equally, it can be the driving force for your ocean freight providers to come to the table with the same mindset.

Over the arch of many such structured engagements, trust will start to re-emerge.

Ignacio Conde

Director, Global Ocean Consolidation Solutions

Looking forward to 2022, flexibility will be key to keeping businesses afloat.

Flexibility to combine and consolidate cargo. Flexibility to ship as soon as the cargo is ready. Flexibility to access different types of services and reliable options.

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The rules of fulfillment have changed completely in just under two years. Consumer expectations are much greater, supplier bases have become larger, and regulations are more complex.

Read More: Restock Before You Run Out: Smaller Shipments Move Crucial SKUs

With evolving consolidation solutions, companies can prioritize their most important SKUs, maintain inventory levels to serve customers, and work through the pressures of keeping up with a huge surge in demand.

Paul Rombeek

Head of Airfreight, EMEA

In 2021, we experienced a severe imbalance between supply and demand across the globe due to exacerbated market conditions. Air and ground constraints have been unprecedented in Europe, which has impacted transit time and supply chain cost for all organizations.

Even as we see aircraft conversions and freighter capacity being injected in the market, we don’t expect the market to go back to pre-pandemic levels in 2022, because we don’t foresee international business and passenger travels to pick up.

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As we enter into 2022, shippers will have to remain agile and mode-agnostic to solve challenges.

Tom Gould

VP, Global Customs & Trade

In 2022, customs authorities around the globe will increase scrutiny of international traders and rely more heavily on analysis of data to support their enforcement and trade facilitation efforts.

Read More: Read Tom Gould on the blog

Customs agencies are developing technology-based legal and operational changes to ensure a variety of priorities: national and economic security, enhanced data integrity, and alignment with changing business practices.

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All companies should have a deep understanding of their international trade data. Focus on activities that demonstrate a commitment to compliance.

Bernie Hart

VP, Customs & Trade Business Development

Businesses have become painfully aware that supply chains are inventory in motion. Knowing where products are, from purchase to delivery, has moved from a nice-to-have to a must-have.

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In 2022, we anticipate trends where supply chain data provides better predictive analytics to help build resilience. Predictive analytics have the potential to help purchasers anticipate exceptions, in turn supporting better exception management and easier logistics downstream.

Join the Waitlist: Flexport Visibility tracks cargo, even if other partners handle it

Further out, we could see decisions like changing from ocean to air or choosing alternate ports happening earlier, allowing supply chains to adapt and recover from volatility with more ease.

Tim Vorderstrasse

Head of Drawback

If your company imports and either exports or destroys merchandise, 2022 is the year to scope your opportunity and establish a drawback program.

Drawback is the refund of certain duties, taxes, and fees that are collected from your company when you import goods. More and more companies are beginning to take advantage of this program. Claim volume has almost doubled since 2019.

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Traditionally, hefty data and documentation requirements have kept some companies from pursuing even significant drawback refunds. That’s not a blocker anymore with digitized trade data. Structured data makes it faster and easier to submit claims.

Learn More: Duty drawback can result in a large cash return for your company

Available 2021 data from Customs shows, on average, a single drawback claim can net claimants over $115,000—and many companies file multiple claims each year, amounting to even higher sums of recoveries.

Make sure your import broker is capturing SKU-level data, so drawback can be a viable option for your company.

Julie Zimmer

Head of Insurance (TFS)

The events of the last two years have caused companies to shift their thought processes around cargo insurance.

Before, it was enough to insure the value of cargo. Now, companies are looking for insurance vehicles to protect their greater business investment.

As we move forward into 2022, we are seeing increased pricing for insurance coverage, but we are also seeing more creative and innovative coverage options being introduced.

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While large vessel incident losses have been a major focus, the reality is increased volumes, staffing shortages due to Covid, and a variety of other factors have driven up the incidence of cargo damage, as well.

Read More: A Salvage Master’s Life: Saving Ships, Restoring Trade, and Getting Paid

The right insurance strategy can cover the retail value of goods, as well as many of the indirect costs of a cargo loss—like expediting expenses, the cost of documenting claims, and other broadened coverages.

We are also seeing a move to digital and embedded solutions for cargo insurance procurement and claims settlement. New technology products will emerge and integrate with your logistics flow, making it easier than ever to cover your goods and track your claims.

Justin Sherlock

Director, Flexport Capital

In 2022, financing international supply chains will be a top concern for CFOs of physical products businesses.

Transit times and logistics costs have skyrocketed since a year ago. Material costs are rising as inflation takes hold. Large retailers continue to push longer payment terms to their vendors, while suppliers secure earlier payment terms in the face of excess demand.

Some companies are stockpiling inventory to prevent port logjams from inhibiting revenue, and some won’t be able to sell through all of it.

The result is that the size and length of working capital gaps is at all-time highs—a financial storm building ahead of rising interest rates.

Learn More: Access cash to grow your supply chain with Flexport Capital

The good news is that demand continues to be at all-time highs and is forecasted to remain so, even after the holidays are over and inflation persists. Some companies have been able to raise prices and still remain sold out online and in stores.

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Similarly, equity investors and senior lenders are increasingly comfortable with employing sub-debt for working capital, and equity funding at all levels remains strong, so long as companies are able to navigate threats to their gross margins.

It’s also likely we’ll see more logtech companies launch fintech strategies. But with so many startups entering the market, generic fintech value propositions will no longer be enough to win market share. Logistics customers will demand embedded or platform products.

Ultimately, my advice is to analyze how your supply chain is contributing to your working capital needs. Then, seek partners who are willing to finance in-transit inventory and logistics payables, not just landed inventory and accounts receivable. Find financial partners who understand the challenges of global trade.

Kaitlyn Glancy

VP, North America East

Anyone who has ordered furniture in the past year knows that it might take you six months or longer before you get your ottoman. Retailers are dealing with record low inventory-to-sales ratios.

Read More: Order Management Made Easy: Speed POs and Connect Data

Normally, this is a reflection of high sales, but in a mid-pandemic era, it’s a reflection of high sales and constrained logistics making replenishment difficult. Order-to-delivery cycle times are longer than we have seen in years.

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As a result, inventory management has never been so important. In 2022, orders need to be precisely managed upstream. Shipment visibility will remain critical for companies to match available inventory with demand.

My recommendation is to make the most of each product cycle using order management systems that integrate with the rest of your supply chain for end-to-end visibility.

Supercharge your supply chain in 2022. Watch a demo of the Flexport Platform.

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