As supply chains reshape with changing geopolitical and trade conditions, transportation evolves. Although there was quite a lot of business instability and disruption as tariffs and trade deals transformed the global supply chain, transportation and goods movement systems remained largely intact. Yet as supply chain networks evolve and artificial intelligence (AI) takes hold, transportation infrastructure and related networks will transform to provide superior customer value in an efficient and profitable manner.

Reshaping of Supply Chains

Geopolitical risks, tariffs, trade deals, and the advent of AI and advanced technologies have transformed supply chains. As geopolitical risks surged with wars and potential threats around the world, companies started reevaluating their end-to-end supply chains to mitigate risk and ensure reliability. Tariffs heightened the impacts and spurred companies to accelerate the reshaping of their supply chains. As trade deal frameworks are established, companies are reevaluating how to best support customers profitably. Add the advent of AI and advanced technologies into the picture with enhanced visibility, efficiency, and predictability, and companies are positioning for future success, growth, and scalability as they pull away from their competition. Logistics and transportation systems adjust with changing conditions.   

Transportation Impacts & Forecasts

As global supply chains reshape, transportation infrastructure adjusts to changing conditions. For example, when the tariffs were expected and rolled out, the West Coast ports responded resiliently to dramatic peaks and valleys. Overall, although there was significant consternation, the ports had a record-breaking year because they prepared to scale rapidly. Trucking companies had a less robust year as their business follows commercial and consumer demand, which were negatively impacted with volatility and uncertainty.

There will be vast opportunities for companies and transportation systems prepared to scale and evolve rapidly and proactively. For example, companies are expanding domestic production, supported by regional supply chains. As these changes ramp up, rail and trucking will move and expand accordingly. The corridors from Mexico to the United States will gain momentum as well as the routes from manufacturing hotspots to consumer clusters, whereas global shipping routes from China will diminish. Thus far, the shipping lanes have remained robust as other Southeast Asian countries increase production and fill the gap; however, this type of transformation takes time. Shifts will occur over time as global shipping transfers to regional shipping lanes. As Latin America absorbs additional volume and supplies materials and commodities to the United States, container shipping lanes will go directly to the closest port, and supply chain chokepoints will evolve.

Forward-thinking executives will take advantage of the opportunities associated with the reshaping of supply chains. For example, since volumes have been down in trucking, proactive companies will take advantage of the market and confirm carrier agreements, thereby securing reliable capacity at reasonable rates before trucking needs increase with reshoring and significant investments into mining and manufacturing. Large companies have been investing proactively to secure reliable ocean freight and will invest in the appropriate infrastructure to support changing conditions.

Companies will also take advantage of AI and advanced technologies to mitigate risks and increase predictability, visibility, and scalability. For example, as disruptions emerge, supply chain visibility and advanced planning systems will crowdsource potential events, re-route shipments, dynamically optimize service and cost factors, reallocate production and recommend sourcing alternatives to maximize customer value at the lowest cost, carbon footprint, and lead-time impact. Advanced technologies such as GPS, IoT, and geofencing are transforming how transportation systems can support customer needs. Successful companies will embrace AI and advanced technologies to power smart supply chains and smarter decisions.

A building products manufacturer set up a significant network of service centers across the country to provide quick deliveries to support customer needs. As the pandemic caused delays at the ports, created capacity bottlenecks with carriers and carrier blockades emerged at the border, their transportation networks were negatively impacted. They quickly pivoted to address and re-route around bottlenecks and renegotiated agreements with their carriers to ensure the availability of trucks to run standard lanes to their distribution network to ensure sustained service at the lowest cost. In combination with the rollout of advanced processes and related technologies (SIOP, CRM and forecasting, MPS/DRP, and TMS), they brought OTIF service levels up from the 40%s to the 90%s while keeping costs intact.  

The Bottom Line

As global supply chains are reshaping, the companies that stay ahead of changing conditions and prepare for growth will thrive. As global trade and transportation systems evolve, smart companies will follow the goods and consumer demand. There will be vast opportunities for forward-thinking companies that are ready to pivot, scale, and embrace technology to ensure supply chains and supporting transportation systems best support future customer needs at the lowest cost.

For more information, contact the author at landerson@lma-consultinggroup.com or visit www.lma-consultinggroup.com.