Post-pandemic Growth Opportunity Analysis in the Logistics Industry

The global logistics industry had a turbulent 2019, registering 1.2% in merchandise trade volume growth due to the stagnant global economy, trade disputes, geopolitical uncertainties, and environmental regulations. In Q1 2020, the COVID-19 outbreak flipped the growth switch in every area of the economy, and the global supply chain is no exception. As the global economy grapples with the pandemic, its impact on global trade and the supply chain is mounting with rapid deterioration in global trade and investment flows. Stringent containment measures resulted in a sharp decline in economic and trade activities. Concurrent demand and supply shocks impacted the global logistics ecosystem, resulting in significant disruptions that forced governments to announce stimulus measures. The dramatic contraction in Chinese output has hampered the global manufacturing supply chain, reducing the cargo volume in the major ports of China and increasing bottlenecks in the domestic road freight transport. Industries that rely on the Chinese supply base for intermediate and finished products, with lean and just-in-time inventory models, are expected to shift their production logistics using near-shoring by increasing inventories to warehouses in their domestic markets. Shutdowns have led to supply shortages, and the pandemic is taking a toll on the global maritime segments, from oil tankers to container lines. Container movement in the transatlantic and transpacific trade lanes has contracted, with China’s manufacturing shutdown and sudden recession conditions in North America and Europe. The backlog of delayed orders, port calls, and blank sailings have escalated volume pressures on the containerized supply chain. The air freight industry has been a vital partner in keeping the global supply chain functioning for critical and time-bound shipments. While COVID-19 spreads around the world, air carriers have grounded their fleets in response to plummeting demand and travel restrictions. The fall in global air cargo demand has been partly offset by increased demand for air shipments of critical relief supplies and other intermediate goods. With severe capacity constraints, air carriers are spot rating all shipments, and the rates are expected to rise with demand. Further, the US ban on passenger flights on the transatlantic route is expected to impact the belly cargo capacity. The outbreak has shown the industry how delicate the supply chain has become. During this difficult time, it is essential for logistics companies to have an immediate focus on enabling end-to-end visibility, agility, improve operational excellence, process flexibility, and collaboration to support their customers in anticipating disruptions and mitigating the respective impacts. In the long term, robotics systems for warehouse operations, SaaS platforms for transportation management and control tower operations, and artificial intelligence-powered technology platforms for customer management will allow logistics companies to anticipate supply chain risk and promote sustainability goals with enhanced operational efficiency. Author: Senthil Kumar Subbiah