5 Supply Chain Trends for 2021: What to Watch

Happy New Year! Somehow, this time last year we skipped an article on 2020 trends. We can't claim any kind of clairvoyance, but it's fair to say that no-one saw what was coming from March onwards.

Fast-forward a year and things look very different, but with some relief and stability hopefully on the horizon, let's take a look at some supply chain trends for 2021.

5 Supply Chain Trends for 2021

Here are five important factors that we expect to impact our industry and eCommerce over the next 12 months.

eCommerce Over Everything

Getting the most obvious one out of the way, online selling has clearly become the primary focus for retailers of all shapes and sizes. According to industry analysts, 2020 accelerated the progress of eCommerce by anything from five to ten years. Even if a brand was dragging its heels in the run-up to this new decade, the past twelve months forced every retailer reliant on in-store sales to adapt their online strategy as quickly as possible.

Although we expect to see a return to physical stores later in 2021, it's unlikely to happen all at once.  Some shoppers will simply never go back, at least not for a majority of their purchases. The convenience and increasingly enjoyable experience that customers receive from buying online, especially from DTC brands that take the time to engage them individually, will be too strong to stifle.

What this means for brands playing catch up is ever more investment in content, UI/UX, and the final order experience that turns an online purchase into a real-world delivery. In-house digital experts and external fulfillment partners proved to be a strong combination for brands that pivoted effectively in 2020, so expect to see greater demand for eCommerce talent and closer ties to key vendors as emerging supply chain trends for 2021.

Cabin Fever Stokes Summer

If everything goes to plan with mass vaccinations and easing restrictions, summer travel and socialization should be unleashed by this summer. With a long winter in the rearview and pent-up demand for a return to real-world activity, it will pay to be ready for the online shopping spike that could precede it.

Brands serving some of the housebound activities and product categories that benefit from them should look to strengthen bonds with their buyers before this occurs. Content strategies that continue to inform and entertain customers during these difficult early months of the year will help set the stage for a return to normality.

On the other hand, brands with products that thrive on outdoor activity or travel need to be ready to push the accelerator at just the right time to excite customers and get them what they need. Planning promotions and pre-summer sales during Q2 - and ensuring key supply chain partners are looped into those plans - will go a long way to develop long-term bonds with your customers and helping them ride out the final months of an exhausting year.

Accenture's 2020 guide to creating customer-centric supply chains provides an excellent deep read on preparing for the post-pandemic growth that analysts expect to see in the second half of the year.

Sustainability Is Now Essential

While the importance of environmentally-friendly practices is nothing new, the emphasis placed on sustainability as a purchase prerequisite has shifted. Ethical consumerism has moved from a rising trend to core consideration.

Where in recent years sustainable credentials were a distinguishing factor for niche brands only, transparent sustainability is quickly becoming one of the defining aspects of the purchase decision.

As with most parts of life in 2020, pandemic conditions accelerated this shift to more ethical shopping. In a survey by New Food Magazine, for example, 45% of respondents confirmed they are making more sustainable choices when they buy and will continue to do so as the situation improves. Similarly, IBM found that nearly six in ten consumers they surveyed intended to change the brands they buy to reduce their personal environmental impact.

This shouldn't be a surprise to many in our industry. The brands we serve are increasingly placing sustainability at the core of who they are and what they produce. For many of our clients, everything from the fine details of eco-friendly packaging and minimizing waste, all the way up to brand values and strategic sourcing are defined by their impact on our environment. Brands that fail to embrace this consumer shift in a holistic way will find themselves losing the interest of new buyers in the years ahead.

Continuity is Key

Nobody, whether consumer or company, wants to again go through the mad dash to reorganize systems and rethink standard ways of working that characterized March 2020. As we examined in our look at retail during a pandemic, adaptability proved to be a crucial quality in that moment, allowing some supply chain partners to pivot and meet the unexpected spike in eCommerce activity, while others faltered and were forced back to square one.

The takeaway in terms of supply chain trends for 2021 is that business continuity planning is an investment in stable, trustworthy operations that can adjust on a dime to changes in demand.

It's impossible to cover every eventuality, but ensuring that data is stored safely and available 24/7, that order fulfillment can be reorganized or moved to alternative processing centers, and that clients maintain visibility of their product movements, all provide a firm base on which to build a robust continuity plan.

Warehouses Are Essential (and More Expensive)

Closing the loop on our opening point, the widespread uptake of eCommerce in 2020 has ramifications for the cost of commercial real estate, especially the warehousing sector. Storage and supply chain facilities were quickly classified as essential operations as the pandemic arrived last year. Many retailers turned to 3PL companies for help.

To meet the surge in demand and accelerated shift away from many bricks-and-mortar stores,  retailers and 3PL companies needed to find additional square footage. Furthermore, the need to avoid product shortages and meet unexpected order spikes saw brands accept the need to carry extra inventory "just in case". All of this takes extra space, squeezes available storage resources, and puts upward pressure on warehousing costs.

With expansion plans already well underway, Capacity was well placed to accommodate new and existing clients in an exciting new HQ here in NJ and additional facilities serving the central US and western Europe. The squeeze on commercial real estate is likely to continue throughout 2021, with prices going up even in areas considered outside the major coastal transit hubs. Increasingly popular exurban areas like Pennsylvania's Lehigh Valley and the Texas Triangle are likely to feel the burden of these increases, as demand outpaces the construction of new facilities.

Interestingly, the high vacancy rate of traditional shopping spaces such as malls and retail plazas could provide some relief for established brands. The reimagination of retail locations as storage and distribution hubs has been in the works for some time now, as companies seek to make the most of resources they already have at their disposal. If a drive to better serve major urban centers with large populations is on the cards, traditional retail locations could be exactly what some brands need to get closer to customers.

Even with a return to normality on the horizon and planning for these anticipated supply chain trends for 2021, it's likely we will all see setbacks and unexpected challenges in the year ahead. We wish everyone the very best in our collective efforts to turn the page on 2020 and set the stage for a growth-focused, prosperous 2021.

If you could use any help with your planning to achieve these goals this year, don't hesitate to contact our team of fulfillment specialists.