January 27, 2023
Before we begin, let’s first define what supply chain stock is.
Supply chain stocks are companies and organizations involved in industries such as transportation (including railroad, trucking, and shipping), delivery, logistics, services, and supply chain software businesses.
The last few years were hard for such companies, to say the least. First, the pandemic broke out, and then the Russian invasion of Ukraine began, exacerbating the problems that had already begun in supply chains. Worst of all, it doesn’t look like we’re going to see the end of the turbulent times very soon.
Is this how it’s going to be in the coming years? Unfortunately, it looks like most of the issues that we faced in 2022 will continue into 2023.
At the same time, because supply-chain issues are no longer a surprise for retailers, it’s much easier to predict what’s going to happen next. Interested in learning more about how some of the largest companies are tackling supply-chain issues and related challenges, and which are the best ones to invest in 2023? If so, let’s jump in.
“Better, not bigger”. This is the motto of UPS, reflecting the company’s approach to existing challenges. Known around the world as a leader in supply chain management, UPS has made a shift towards maximizing the profitability of its assets rather than chasing volume growth, which allowed it not only to stay afloat but also achieve remarkable results.
This way, the problem they faced with building out networks to handle the growing volume of e-commerce has been tackled by simply addressing the needs of small and medium-sized businesses. In addition, they focused on healthcare markets that have come to the fore during the covid times.
As a result, UPS hasn’t lost its position in the market.
In fact, UPS is one of a few companies that, despite the supply chain problems, has confirmed its status as a Gartner® Magic Quadrant™ Leader in logistics for the fifth year in a row, meaning they know their stuff and are on the right track.
So, by penetrating new markets and focusing on quality rather than quantity, as well as resorting to the use of some of the best transportation software development services, UPS has managed to facilitate existing challenges in supply chains and remains one of the most attractive companies to invest in.
Another sector that has been hit hard by the supply chain crisis is the railroad. The railroad has long been undergoing a revolution due to the rising cost of living and low wages, but geopolitical uncertainty has exacerbated the situation.
CSX, along with a number of other companies, came up with a working solution. What the company has done is turn to methods of precise planned rail traffic management that allow more efficient use of assets to handle the same volumes.
Thanks to this, all of the key metrics, such as:
The train length;
are being closely monitored to improve the performance of railroading management.
In addition, they introduced a new change, fixed schedule trains, allowing CSX, as well as other major players, to further reduce the operating ratio.
All of that allowed the company to achieve growth in earnings per share by up to 11% per year and grew revenue by 22%.
That’s definitely a good rate of growth, making it a good investment opportunity.
Old Dominion is another big supply chain player worth mentioning. What sets this company apart from others is that it’s focused on less-than-truckload (LTL) shipping.
Thanks to this, the company can carry freight for multiple consumers while most other shippers deliver full truckload (TL) for a single customer, giving it an upper hand over the competition.
The reason why LTL is more beneficial is quite obvious.
People are often prepared to pay more to have confidence that the materials they urgently need are going to be delivered on the spot and in safety, which is exactly what Old Dominion guarantees its customers.
Thanks to this approach that the company’s been dedicated to for over 89 years now, it can boast:
Some of the highest margins in the transportation industry;
Even when the pandemic broke out, the supply chain crisis didn’t affect it, and it was on an upward trend.
In fact, the company got an opportunity to choose what deliveries to handle in the face of an urgent need, resulting in the growth of its profits. As of now, Old Dominion has already generated an impressive cash flow growth of 21.7%, and this number is only expected to grow in 2023.
So, if you’re looking to invest in a financially strong stock with sustainable growth, Old Dominion is the right destination.
Next on the list is Walmart, a retail giant that, despite the downturns that most companies have experienced in 2020-2022, maintains a strong market position. The secret of their success is a whole bunch of initiatives that the company took when the market started to slump.
For starters, Walmart was one of the first companies to focus on omnichannel, giving its customers a marketplace where they can access thousands of retail stores in one place.
In addition, it was among the few to expand available fulfillment options, providing customers with the choice of over 7,000 pickup locations and over 5,000 delivery locations, including in-store pickup, as well as on-site and digital options.
However, the best thing they did was to remove the middleman. Instead, they began working directly with manufacturers, which allowed them to lower fulfillment costs and reduce lead times.
Thanks to strong partnerships that the company built with vendors early in time, Walmart has not only managed to avoid the crisis by successfully handling the high-volume demands of its clients, but has actually seen an increase in its shares by up to 5%.
More importantly, analysts’ forecasts show no recession, which makes Walmart one of the best chain supply stocks to invest in in 2023.
Due to the many problems that occurred in the last decade, a lot of carriers and manufacturers have found themselves in a position where they cannot predict consumer demand. Because of that, many giant retailers, including Nike, ended up having much more inventory than they can actually sell.
To address these issues, Manhattan Associates has built technology solutions to enable retailers to sell their inventory across a variety of channels, including online and offline, by phone, and more, making it one of the most successful chain supply software providers to date.
Leveraging technology is definitely something that will give supply chain companies a competitive edge, resulting in substantial growth of shares and profits.
For many shippers, turning to the explicit supply chain platform, which digital transformation strategy allows, means the following:
Reducing a lot of manual supply chain activities;
Providing a user-friendly experience.
However, it’s worth noting that Manhattan Associates is a company with long-term growth. At the moment, its stock’s upside potential is somewhat limited, but as the ResearchAndMarket report suggests, its stock will rise in the coming years and is expected to hit mid-double digits between 2023-2027.
So, if you don’t anticipate quick returns and are ready to hang on for a while, investing in Manhattan Associates will be worth it.
The fact that most of the carriers have announced the increase of general rates (GRI) for 2023 is one of the biggest concerns for next year. In fact, FedEx alone has increased the GRI by up to 6.9%, which is higher than it’s ever been.
Add to that fluctuating diesel prices and weakening customer purchasing power, and you can see why shipping predictions will be even tougher.
Even if you factor in the 6.9% increase, it will still be quite difficult to predict all the other expenses that shipping orders may incur. In truth, customers only need to change their needs, which can happen under any unexpected circumstances, and all of the predictions will go awry.
To sum it up, supply chain disruptions have always been hard to avoid, even when things were going well and we didn’t have the problems we’re facing now. Today, however, it’s become even more complicated.
That being said, 2023 should be a tad bit easier since most of the supply chain trends are not new and continue from 2022. By understanding these trends and using them to your advantage, you should be able not only to mitigate risks but also take control of the situation - at least to some extent - and set yourself up for success.
And if you’re looking to invest in a company poised to facilitate supply chains in the coming year, consider the names mentioned above. All of them have a significant impact on the transport industry, and they all trade at bargain prices.