We continue with our Supply Chain Matters series outlining in more detail, 2016 Predictions for Industry and Global Supply Chains. These predictions are provided in the spirit of assisting industry supply chain teams in setting management objectives for the year ahead as well as helping our readers and clients to prepare supply chain 
management and line-of-business teams in establishing meaningful programs, initiatives and educational agendas.
The context for these predictions includes a broad cross-functional umbrella of supply chain strategy, planning, execution, product lifecycle management, procurement, manufacturing, transportation, logistics and service management.
Our predictions series includes a re-look at all that occurred in the current year, a reflection of future implications, and soliciting input from clients and other supply chain and blogosphere observers. Unlike others, we incorporate a lot of thought and perspective into our annual predictions and take the time to actually scorecard our annual predictions at the end of the year.
Readers are welcomed to review our complete listing of all ten 2016 predictions for industry and global supply chains.
In our Part One posting, we dived into Prediction One that addressed what industry supply chains should anticipate in global chain activity and Prediction Two, what to expect for inbound commodity and component costs as well as unique challenges for sourcing and procurement teams in the coming year.
In this posting, we explore our next two predictions.
2016 Prediction Three: Turbulence and Continued Change Surrounds Global Transportation and Logistics
Both in 2014 and 2015, we predicted industry turbulence among global and certain domestic transportation networks. Our predictions turned out to be fairly accurate but then again, the signs were obvious. As industry supply chains enter 2016, we are again compelled to predict another year of turbulence and change and perhaps a few surprises.
The added dimension will be the third-party or fourth-party logistics (3PL/4PL) sector. In 2015, an outbreak of merger and acquisition events involving both small and large industry players will have even further implications in 2016 as industry players are compelled to consolidate in order to insure faster growth, additional industry expertise, more global scale and deeper technology capabilities. We concur with other industry watchers that M&A will become a new norm in logistics during 2016. We further anticipate that dominate online retailers, either Alibaba or Amazon will playout industry disruptor roles, either in expanding their own parcel logistics fulfillment and delivery capabilities, or participating in some forms of acquisitions themselves.
As observed in 2015, parcel logistics and transportation services providers FedEx and UPS may have pushed too far with their added rate hikes and surcharges both in 2015 and for 2016. We predict that larger shippers, especially those anchored in online B2C/B2B commerce will be pushing back at contract renewal time. When the dust settles after the 2015 holiday fulfillment surge, parcel services providers and online retailers will be pointing fingers at one another as to which party impacted business results. More accurate forecasting and misalignment of retailer and parcel carrier networks will be further discussion points.
In the global ocean container transportation sector, it became even more obvious by late 2015 that the industry’s overcapacity situation coupled with declining global demand would have meaningful impacts to carrier P&L’s. Some industry watchers peg current industry overcapacity levels at near 30 percent, others more than that. Additional, new and larger capacity vessels will again enter the global fleet in 2016, precipitating difficult decisions relative to more idling or scrapping of older vessels. Just as we pen these predictions in mid-December of 2015, second-ranked CMA CGM announced its intention to acquire Neptune Orient Lines and noted as the biggest event in shipping consolidation since 2005. China’s two state-owned shipping lines, Costco and China Shipping, have been granted merger approval but their shares were battered by Asian investors. We believe that further consolidation among lower-tiered players is a moderate possibility in the coming year as is the idling of more vessels.
The expanded Panama Canal is planned to open in April of 2016, but we predict that date will slip because of meaningful construction and repair delays. Many major ports on the eastern side of the canal continue to make significant investments in upgraded infrastructure and deeper shipping channels to prepare for direct Asia to North American and South American east coast ports. Thus a delay to the expanded canal may be favorable for Americas east coast ports.
In July of 2016, a new regulation is scheduled to go into effect among 171 countries requiring ocean containers shippers to certify the weight of a container before they are loaded onto ships. This regulation was adopted to insure more safety of vessels and to avoid container overloading abuse leading to accidents at sea or in ports. We predict that this new weight certification regulation will add significantly to port congestion in 2016, especially among ports ill prepared to deal with controlling and auditing enforcement.
For global air freight, the International Air Transport Association (IATA) predicted in early December that 2015 overall anemic demand for air cargo services is expected to continue into 2016. Average airfreight load factor is at six-year lows and are described by an IATA economist as presenting a “dismal picture” for this segment. Here again, an industry capacity glut continues to manifest itself principally because of the introduction of more passenger planes which are serving as air cargo transport
In the North American railroad sector, U.S. and Canadian based railroads remain negatively impacted on the demand side by significant cutbacks in North America crude oil transport needs, as a result of the current historic low costs of fuel and glut of global inventory. Railroads that experienced a boom period in crude transport were suddenly forced to shed headcount and idle tank car inventory as a consequence. A new development that will potentially occur in 2016 is the additional linking of continental rail networks. In late November, Canadian Pacific Rail (CP Rail) made public overtures to merge with Norfolk Southern, which was rebuffed on at least two occasions by Norfolk management. The move can be considered strategic in that it opens a rail transit network from U.S. east coast ports into Canada. By mid-December, industry leading BNSF Railway indicated that it would be open for a competing bid for Norfolk Southern, no doubt to offset any inter-modal volume that shifts to the east. Considering these ongoing developments, we would not be surprised the at least one significant North America based railroad network merger is consummated.
2016 Prediction Four: Widening of Supply Chain Talent and Skill Gaps Require Organizations to be More Innovative and Purposeful in Recruitment, Training and Career Planning
We predict that the existing widening skill gaps will compel industry supply chains to be more creative and purposeful in recruitment and training. That includes facing the realities of competitive compensation and purposeful career planning for individuals. We expect organizations and recruiters to more broadly define and recruit employees from skill based dimensions and in expected performance parameters for both current and future organizational needs. Individuals who possess required cross-functional hard and soft skills, including in-depth technology prowess will continue to experience a seller’s advantage.
We expect manufacturers, retailers and supply chain services firms to encourage broader training, benchmarking, multi-business and multi-geography opportunities. We trust that supply chain leaders will confront or at least influence the other elephant in the room, namely that of compensation plans related to required supply chain management skills and roles. Now is the time for more creative compensation planning, tied to performance, teamwork and skill achievement objectives. We are hopeful that there will be more of such innovative compensation programs unveiled in the coming year.
We anticipate that in the coming year, more and more individuals will take on their own personal responsibility to self-train in the various skills desired by the most attractive employers, which will place more demands on universities, supply chain professionals and community colleges for up-to-date and timely adult training geared to industry skill needs. The Internet will continue to play an important role as the preferred delivery platform for updated supply chain skills training for individuals and we anticipate that supply chain professional organizations will continue to leverage this medium . We like the approach that APICS has taken in offering corporations a bundling of programs for formal certification in supply chain management, as well as and supply chain organizational process discipline related to the Supply Chain Operations Framework Model. (SCOR) Similarly programs that nationally recognize top up and coming stars in supply chain management such as the 30 Under 30 Rising Supply Chain Stars jointly sponsored by ThomasNet and ISM are noteworthy for generating added interest for millennials planning a career in supply chain management.
Supply chain technology and services providers can make a continued contribution to the skills challenge by increasing efforts to provide more user-friendly interfaces and tutorials for advanced technology and by partnering with industry supply chain teams to consistently define skill characteristics and needs.
Throughout 2016, to foster broader industry education, Supply Chain Matters will feature and amplify laudable training and skill development efforts in addressing supply chain talent and skill development needs. We encourage leading organizations to let us know about your successes as well as organizational learnings in this area.
Keep your browser pointed to Supply Chain Matters as we continue dive into each of the above 2016 predictions in more detail. In our Part Two posting we will explore Prediction Three- continued turbulence in global transportation and logistics, and Prediction Four- the widening of supply chain talent and skills gaps.
In the meantime, share your own predictions over and above those that we have outlined. Utilize the Comments section associated with this posting or email us directly with your predictions at: feedback <at> supply-chain-matters <dot> com. We will share all contributed predictions in a final predictions of this 2016 series.
Bob Ferrari, Founder and Executive Editor
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