Adjusting to the New Normal in Logistics & Supply Chain After COVID-19
By Hugo Britt | August 17, 2021
The future of logistics
Confronting these challenges served to rapidly accelerate the pace of change within the industry, and the transformations are expected to continue in a post-pandemic world.
Below, we outline the seven key factors that will likely inform the future of the logistics industry.
1. Just-in-Case supply chains
At the start of the COVID-19 pandemic, supply chain disruption saw the B2B logistics market almost grind to a halt.
Between January 24 and February 26, 2020, the volume of long-haul trucking in China fell below 15% of 2019 levels. Meanwhile, the massive reduction in commercial air travel resulted in air freight volumes falling by 19% in March 2020.
An August 2020 survey by McKinsey found that 93% of organizations were planning to increase their supply chain resistance in the near future. For many survey respondents, protecting themselves against future disruptions will mean a pivot from just-in-time (JIT) to just-in-case (JIC) supply chains.
Organizations adopting a JIC supply chain model ultimately prioritize risk management by storing larger inventories of stock to ensure that orders are fulfilled on time. To accommodate this shift, logistics companies will need to invest additional resources in warehousing and inventory management.
The pandemic exposed the intense vulnerabilities of complex global supply chains and, even as the world recovers, new transportation regulations (such as increased border inspections), and restrictions may continue to drive airport congestion, shipping delays, and higher freight costs.
Concerns over these issues and the very real potential for future disruptive events will see an increase in organizations near-shoring or re-shoring their manufacturing processes. A Foley survey found that 43% of companies currently operating in China either already have or are planning to move operations to another country, such as the U.S., Mexico, Canada, or Vietnam.
Logistics companies with the resources to increase their warehouse capacity or dry ports will be best placed to thrive under these new circumstances.
3. Alternative modes of transport
Various transportation disruptions, including the significant reduction in commercial flights, meant that logistics companies were compelled to find creative alternatives. DHL, for example, leveraged charter flights to move its shipments to and from China, and some airlines are looking to meet increased air cargo demand by repurposing their fleets to exclusively serve the logistics industry.
Logistics companies must continue to optimize their shipping routes, whether it’s adopting new transportation methods, anticipating supply chain delays and disruptions, or improving their track and trace methods.
4. Rise of e-commerce
If the B2B logistics market imploded at the beginning of the pandemic, the B2C market exploded.
The combination of more sophisticated technology, which enables more efficient manufacturing, coupled with the pandemic-related e-commerce boom has resulted in more businesses opting to sell directly to their customers.
Logistics companies have worked hard to rapidly expand their service offerings to meet these changing demands. However, there are major challenges associated with catering to a B2C market and maintaining profits, including the need to increase delivery density and drive cost efficiency.
To achieve this, the logistics industry will need to implement new technologies and improve its data management strategies to streamline operations and improve visibility across supply chains.
5. Safety regulations
Ensuring the safety of employees and customers has become a top priority for logistics companies since the outbreak of COVID-19.
One way that logistics companies are protecting their customers is through the implementation of last-mile contactless delivery. Methods such as drone deliveries or smart locker solutions negate the need for any human contact and can help limit the spread of COVID-19. Meanwhile, in warehouses, logistics companies have implemented social distancing measures, new cleanliness requirements, and provided workers with personal protective equipment (PPE).
Logistics companies will need to carefully consider how health and safety measures will impact their operations. Not only do they come at an additional cost, but they can drive inefficiencies and production bottlenecks.
Environmental activists and scientists across the globe have warned about the importance of driving a green economic recovery post-COVID-19. As logistics companies look to streamline their processes and adapt to the ongoing changes within the industry, they must also consider sustainability.
Sustainable logistics companies are committed to reducing their ecological footprint, including CO2 emissions, noise pollution, and road accidents. Some companies, for example, have set deadlines to be carbon neutral while others are investing in electric vehicles or renewable energy.
To keep their businesses afloat during a time of unprecedented change, many logistics companies had no choice but to fast-track their digital transformation journeys. Many organizations had to manage with a depleted workforce, but robots were on hand to package products, IoT technology-enabled remote warehouse monitoring, and AI helped with data analysis and forecasting.
To achieve a competitive advantage in the coming months and years, logistics companies will need to invest in technologies like automation, data analytics, AI, IoT, and cloud computing, which can drive sustainability, visibility, and efficiency.
To learn how a group purchasing organization like Una can help with logistics and supply chain challenges, contact us today.