2022 Supply

Chain Forecast:
Our Predictions
2022 Supply Chain Forecast:
Our Predictions

2022 Supply Chain Forecast:

Our Predictions

Supply chain issues were front-page news in

2021, with delays and higher costs impacting
almost everyone—from raw goods import to
customers awaiting their products. Moving
into 2022, shippers should brace for another
year of unpredictability.

But despite the still uncertain picture for the

supply chain, there are critical actions you can
take now to reduce delays, lower shipping
costs, and get your supply chain humming
along more smoothly.

This report covers the top 5 supply chain

issues impacting businesses shipping
operations in 2022. It also provides insight
into how you can not only survive but
profitably thrive through another year of
formidable supply chain challenges.

87% of Americans said supply

chain disruptions impacted
them in the past year.1

1
“Survey: 82% of Americans Scared That Supply Chain Issues Will Ruin Their Life Plans,” Oracle, Sept. 29, 2021.

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2022 Supply Chain Forecast:
Our Predictions

Forecast #1: Lean teams will

impact carrier efficiency
A tight labor market has affected every part of the supply chain—from ocean vessels carrying
raw goods to last mile delivery. FedEx estimates they’ve rerouted 600,000 packages across their
network due to labor shortages.2

At hubs like Portland, Oregon, FedEx is running operations on 65% of the staffing needed to
handle normal volume. This has caused FedEx to divert up to 25% of the volume that would
normally flow through that hub, significantly reducing their efficiency.3 As its efficiency declines,
FedEx must drive more miles and use more third-party transportation providers to deliver its
freight, resulting in higher operational costs to the carrier.

While UPS does not have the same labor

struggles, efficiency remains a high priority. The impact of labor
The mantra of the current UPS CEO is “better,
not bigger.” This motto translates into UPS shortages on FedEx:
focusing on being more efficient even if it
means delivering fewer packages. 600,000 estimated
packages rerouted

The Impact 65% of staffing capacity

at some hubs
UPS and FedEx are highly incentivized to
accept parcels that deliver the most profit. 25% of package volume
As a result, package volume no longer diverted due to staffing
equates to best-in-class pricing and “ugly shortages
freight,” or freight that isn’t easy to manage
and ship, is being hit hard with additional
shipping fees. In some cases, we’ve seen
9-11% increases.

To avoid these issues, you’ll need to examine your current packaging and do what you can to
standardize package size and weight. This may include no longer shipping some products
together or reengineering products to enable you to ship them in a standard box size.

2
Max Garland, “FedEx diverts packages as labor shortage bites into service levels,” Supply Chain Dive, Sept.22, 2021.
3
Brian Sozzi, “FedEx just painted a disturbing picture of the job market,” Yahoo News, Sept. 22, 2021.

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2022 Supply Chain Forecast:
Our Predictions

Forecast #2: Capacity issues

will plague carriers
Package volume continues to rise rapidly for carriers. In 2020, FedEx delivered 2.54 billion
packages. In 2021 that number was 3.13 billion. This is a 23% year-over-year (YOY) increase—
the biggest YOY increase in package volume for FedEx in more than five years.4

Combined with labor shortages, high package volume is putting unprecedented strain on
carriers, which has resulted in increased transit times and poor on-time delivery rates. On-time
performance (OTP) across all carriers declined to 82% for parcel shipments in March 2021
(compared to 85% in March 2020).5

The Impact

High package volume in a market with few competitors means it’s a carriers’ market. So, FedEx
and UPS still hold all the leverage despite performance struggles. This means they’re unlikely to
negotiate contracts or offer discounts unless there is something in it for them.

The biggest need carriers have right now is to run their operations more efficiently. If you can
improve your internal operations to make your carrier more efficient, such as using a drop trailer
if you have enough volume, they will be more open to negotiating your contract.

High package volume is also creating a

unique trend where carriers are less willing to If your shipping operations rely
work with third parties as they can impact heavily on third-party relationships,
their efficiency. For instance, UPS and FedEx be aware that carriers may no longer
are moving away from using SurePost and work with these third parties or
SmartPost due to operational issues at USPS. could start increasing prices.
If your shipping operations rely heavily on
third-party relationships, be aware that
carriers may no longer work with these third
parties or could start increasing prices.
Carefully examine your shipping operations to
see how you might avoid these impacts.

4
“Package volume of FedEx Ground between FY 2016 and FY 2021,” Statista, June 29, 2021.
5
Patrick Burnson, “Convey issues March Data for FedEx, UPS, USPS & regional carriers on-time performance,”
Logistics Management, April 15, 2021.

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2022 Supply Chain Forecast:
Our Predictions

Forecast #3: More price increases

Price increases are a symptom of other
supply chain issues. Labor shortages have
made carriers less efficient, which has eaten
into their profits. At the same time, carriers are
flooded with freight—leaving them with plenty
of business. General Rate Increase higher
in 2022 than 2021
2021 saw general rate increases (GRI) higher
than we’ve seen in years, increasing by 5.9%
versus the standard 4.9%. Moreover, carriers 5.9%
also increased fuel costs by 2%. 4.9%
Even worse, it’s unlikely to stay there. 2021
saw two fuel rate increases, and we anticipate
we’ll see more fuel hikes in 2022 as well.
2021 2022
Other surcharges, such as Remote Area
Service (RAS) and oversized package fees, 5.9% GRI for 2022 vs
are also going up, and they’re impacting more 4.9% GRI for 2021
areas and more packages. RAS fees used to
be only for Alaska or Hawaii, but for 2022,
carriers have added in several rural areas in

2%
the contiguous 48 states.

The Impact

Continued price increases will threaten profit

margins. You will need to use your distribution 2% fuel surcharge for 2022
network more intelligently and look at regional
carriers to help offset some of the cost.

For a full analysis of the 2022 GRI, download

our eBook.

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2022 Supply Chain Forecast:
Our Predictions

Forecast #4: New carriers will

enter the market
Parcel carrier LaserShip acquired OnTrac Logistics late in 2021. The approximately $1.3 billion
deal extended LaserShip’s last mile delivery network significantly, allowing the carrier to provide
two-day shipping to 74% of the U.S. population.6

This is good news for shippers. The long-standing FedEx and UPS duopoly has limited shippers’
options during a time of surging ecommerce demand, shipping prices, and carrier capacity
limits. LaserShip’s new national network will bring some much-needed competition into
the marketplace.

Looking ahead, it’s expected we’ll see even

more deals like this one as regional carriers
continue to consolidate and new entrants
enter the last mile delivery network. Amazon
is also investing heavily in adding more
warehouses and growing its fleet. We
anticipate Amazon could compete directly
with UPS and FedEx in late 2022 or
early 2023.

The Impact

If more than 80% of your shipping volume is with one carrier, you should consider shifting your
percentages around in 2022 to other carriers. By redistributing freight to give the right freight
to the right carrier, you can lower shipping costs and lessen the risk of a carrier dropping the
volume of packages they’ll accept. Spreading volume to multiple carriers also helps ensure best-
in-class pricing and lessens the risk of relying on a single carrier.

Forecast #5: Continued

unpredictability and change
After an incredibly challenging two years in the global logistics industry, we believe there will be
no ‘new normal,’ only the ‘next normal.’

6
Jennifer Smith “LaserShip is Buying Package Carrier OnTrac in $1.3 Billion Deal,” Wall Street Journal, Oct. 13, 2021.

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2022 Supply Chain Forecast:
Our Predictions

More has changed in supply chain

transportation in the last two years than the
previous 20 years, and disruptions continue to
impact shippers, including:

• Shortages in raw materials

• Labor shortfalls
• Unpredictable and severe weather
• Rising fuel costs

Additional forces, such as rising costs in other

areas of your business due to current inflation
woes, will also continue to add pressure on
global supply chains in 2022 and beyond.

The Impact

Your shipping operations will need to become more sophisticated and data-driven. This will
require being open to change and new perspectives on how to resolve issues that arise. Most
importantly, you and your team will need to learn to speak the language of data. Because with
the right data, you can proactively and reactively make intelligent decisions that can help your
business weather the changes and maintain a profitable and resilient business.

Take control of your supply chain

While there is a lot in the supply chain that you can’t control, there is a lot you can, especially if
you have a detailed understanding of your shipping operations data. With a solution like Sifted,
which gives you clarity, control, and unmatched visibility into your supply chain, you can:

Improve your operational efficiency

Use your own data, combined with powerful artificial intelligence, to model operational
scenarios like whether you should invest in new distribution centers, change packaging
characteristics, or offer free shipping. You’ll gain certainty as to which decisions are worth the
investment and be able to fully optimize your operations.

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2022 Supply Chain Forecast:
Our Predictions

Gain visibility into carrier performance

Analyze your historical shipping data to see how your carrier has performed in the past, and
then use these insights to predict how they’ll perform in the future. By knowing how likely your
carrier is to deliver on time, including its delivery performance with premium-priced services or
specific geographic locations, you can more accurately determine if you need to expand your
carrier network to include more regional carriers and where it makes sense to do so.

Predict your shipping volume

Use historical shipping data to determine what your volume will look like for this year. You can
then confirm with your carrier that they can meet this capacity or expand your carrier footprint to
cover your shipping needs.

Rerate your packages

Use your historical shipping data combined with carrier rate data to help you make sure you
have the right mix of regional and national carriers and that you’re getting best-in-class pricing.

Know your landed cost

It’s essential to understand what the total cost
of a product is–from raw materials–all the
way to delivery at the customer’s door. When
you have this data, you can make shipping
decisions that ensure your business’s overall
profitability and health.

When you have this type of

360-degree view of your
shipping profile in a single,
actionable location, you can
make smart, informed decisions.

See how Sifted can help you weather

Get a Sifted Demo
supply chain challenges in 2022 and beyond.

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