COVID 19 and Logistics; The Reflection of the past years- and what now?
Now with the threat of new COVID-19 variants surfacing, companies in the logistics industry are rising to the challenges they faced in the wake of the pandemic weathering the storm. Facing the reality that even as most parts of the country open, we are still haunted by global supply chain disruptions, which will take some time to be sorted. Not to mention the industrial disputes at some ports that are putting additional, and unnecessary, pressure on an already stretched network and an economy in recovery mode.
All these factors have been placing a strain on the crucial role of the logistics industry as the driving force behind all business sectors. However, like most business sectors nowadays, the supply-chain operations industry is facing great challenges and changes such as digital transformation, strict regulations, and a vast increase in the volume of work and activities.
We have all felt and witnessed how the pressure and expectation on freight and logistics dramatically increased during the pandemic. The sector responded magnificently, despite health impacts on the workforce, disruption to operations and different state and territory border restrictions and testing requirements.
But with hopes that life will return to normal sooner rather than later, some changes are here to stay which drove home a reminder for businesses in the logistics industry to remain flexible and adaptable where meeting the growing customer expectations is an absolute top priority.
In reality, the full effect of the pandemic on global supply chains is not yet known. But Third-party logistics companies have adopted a range of responses to these uncertainties according to International Finance Corporation, including:
a. New safety protocols: To protect their staff’s health, some companies have introduced new protocols on social distancing at warehouses, disinfecting work areas, or providing protective gear, while giving staff unlimited unpaid time off. However, these efforts, which come at a higher financial cost, cannot guarantee protection against outbreaks in confined warehouses.
b. Alternative modes of transport: Many companies are using creative alternatives to their go-to transport modes. Since the reduction of passenger flights has reduced airplane belly cargo capacity, companies such as DHL have used charter flights to transport shipments to and from China. Airlines are also repurposing passenger aircraft for cargo. Some observers are even forecasting a boom for the China-Europe rail as 60 percent of the air freight capacity between China-Europe has vanished.
c. Adapting service offerings to current demand and safety protocols: Some larger players have been playing an important role in delivering medical supplies. For example, UPS provided free air transport for two million masks and protective gear to Wuhan in February. Companies are also adapting to demand. Warehouses and retailers are focusing on grocery deliveries since demand is high for essential products, while companies in the last-mile segment are offering no-contact delivery options (some of which include robots).
The recovery and long-term impact of the pandemic on logistics may be affected by adaptions and factors, as described below:
● Increased dedicated air cargo capacity: The airline industry is already reallocating its fleet to exclusively serve air cargo demand.
● Increased cargo inspections and cross-border control protocols: Governments have responded to the crisis with temporary trade embargoes and export restrictions for sensitive cargo (such as medical supplies, and pharmaceuticals). In the longer term, logistics costs may increase due to tighter cross-border processes and controls fuelled by concerns regarding the transmission of diseases.
● Technology and e-commerce rise: Logistics has been in the midst of a tech-driven revolution. Companies with robust digital capabilities that allow them to provide cargo visibility/traceability and do business online are at an advantage. This would entail investments in technology, such as the Internet of Things (IoT), cloud computing, automation, and data analytics. In the long term, robotics, drones, and autonomous vehicles might reduce logistics services providers’ exposure to labour shortages.
● Reconfiguration of global value chains: The pandemic has exposed the vulnerability of extended and complex value chains to production disruptions, particularly in the East Asia Pacific region. As a reaction, many of these supply chains may shorten or diversify through reliance on alternative partners (for example, nearshoring) or intensified efforts to bring home (such as reshoring) strategic value chains. The shortening of supply chains may benefit countries with capable manufacturing sectors and beneficial exports policy (for example, Colombia, India, and Mexico) to partially substitute China over the medium term. There may also be a trend towards placing additional warehousing capacity or dry ports near demand centres to shorten the time to get goods to market.
● Recovery prospects will vary by country and subsector: As logistics is a diverse sector, recovery prospects will vary depending on the length of lockdowns and the duration of the subsequent economic crisis. Large companies with diversified business (such as multiple clients, serving different sectors in various countries/states) will be better placed to weather the storm.
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