How to improve logistics and transportation in the post-COVID world
The logistics and transportation industry hasn’t seen such an all-out and unprecedented challenge as the COVID-19 pandemic before. It has created a multitude of challenges for all industry players, large and small alike, and all of those challenges had to be addressed as fast as possible. Logistics digital transformation, along with other crucial changes to the industry, is not a pleasant possibility now, but a necessary and urgent step.
Supply chains were disrupted, on-site workers were forced to switch to remote positions en masse, and executive priorities were flipped upside down. Those who managed to transform along with the requirements of time have survived, but still, have to weather the storm of the ongoing pandemic.
In this article, we’re going to take a look at the measures logistic and transportation companies have to take in order to keep growing during the third year of the pandemic, and after its inevitable end. But first, let’s review the details of the post-outbreak logistics market and the impact of COVID-19.
Logistics market overview during the pandemic
The global transportation and logistics industry is an extremely complex thing. It involves thousands of logistic businesses which play a vital role in connecting other businesses (raw resource production, manufacturing, etc.) to their markets. Warehouse storage, inventory managing, freight forwarding, actual transportation, and other activities make the cogs of global manufacturing processes spin. Production of some goods can be complex enough to involve hundreds of suppliers from dozens of countries.
Therefore, international transportation of goods now demands much higher efficiency and flexibility than historically. This demand is mostly achieved by outsourcing to 3PL (or third-party logistics) companies.
The logistics and transportation industry contributes to a significant fraction of gross domestic product (or GDP), especially in actively growing economies: there it can amount to as much as a quarter of GDP. We can, therefore, see an obvious correlation between the efficiency of the transportation sector and economic growth rates in a state.
When the COVID-19 pandemic hit the world, it changed a lot in the logistics sector. Let’s take a deeper look at the nuances of this hit.
The impact of COVID-19 on logistics and transportation
Let’s first focus on China, as it is both one of the most active transportation areas in the world and the starting point for the pandemic. Wuhan, the Chinese city that became the epicenter in the winter of 2019-2020, is a major logistics and economic hub: it has branch offices of more than 200 companies present on the Fortune Global 500 list. China also consumes a lot, importing a multitude of agricultural goods and other commodities.
Then manufacturing in China was disrupted, it affected the global supply network heavily. The biggest ports have substantially slowed their traffic down, amassing cargo in warehouses and unable to proceed because of travel restrictions. The same restrictions heavily shortened the number of available trucks and ships, resulting in delivery shortages worldwide.
The world economy is heavily intertwined with China, and the aforementioned shortages have in turn influenced every industry that was dependent on the delivery of the components from there. Medical equipment, consumer goods, electronics, pharmaceuticals, and automotive industries suffered hard.
The process was eventually resumed, with most large industry players restarting their operations by the end of winter 2020, but getting back to full capacity is still not possible for many of them, due to the subsequent world spread of the pandemic and irrevocable changes of transportation rules.
The drop in long-distance trucking serves as a good illustration of the global decline in logistics and transportation in China. The overall volume of long-distance truck shipments has dropped below 15 percent of the previous year’s levels during the Jan 24 – Feb 26 2020 period. The recovery was rapid as well due to effective containment measures taken by Chinese authorities, but the virus has already spread to the rest of the world, causing similar problems.
All over the world, borders were closed and warehouses were put on lockdown, halting the movement of the shipments. Staff safety was enforced in transportation hubs, establishing such new protocols as social distancing, which helped in slowing the spread of the virus but seriously damaged freight rates. This created such cases as the several dozen miles long A4 highway traffic jam in March 2020, following the closure of borders between Poland and Germany, or the massive piling of containers for ocean carriers in several Indian ports (more than 50,000 units).
As of now, the pandemic is not an emergency factor anymore, but a constant presence in the logistics and transportation industry, that is being calculated and included in any economic growth and recovery plans. Still, the virus keeps changing and the possibility of new challenges for the industry stays high.
So, what are the measures the industry players can take to improve transportation and logistics in light of humanity’s ongoing struggle against COVID-19? Let’s consider some of the strategies that can help with that.
Four key logistics strategies for a post-pandemic period
1. Make changes to the traditional way of working
The pandemic has incurred new requirements for warehouse operations:
- Minimization of physical contacts
This can be achieved by implementing robots for in-warehouse pickup and transportation of goods, as well as adhering to the goods-to-person principle. The fewer touches the warehouse workflow includes, the less the risk of contamination.
- Improved efficiency to compensate for declines
The pandemic has caused a significant rise in online shopping, which in turn requires the introduction of changes to warehouse processes in order to fulfill an increased number of online orders more efficiently. Modern warehouse management systems (or WMSes) can be a great asset in handling such requests.
- Ways to deal with labor shortages
The solution to this issue combines two previously mentioned practices: the introduction of robotics in warehouses, which will compensate for diminishing numbers of available staff, and the improvement of safety procedures along with reducing the number of touches each shipment requires.
2. Provide health safety for workers and clients
We’ve already covered some safety measures to be taken above, but the process of making the industry safer for all participants is much wider.
The whole workflow of the industry is subjected to substantial changes in the near future, including the implementation of such measures as temperature screening and digital precautionary examinations in distribution centers and large hubs. The long-distance transportation procedures need to be upgraded with additional safety measures for drivers when entering and leaving route points. Not to mention the implementation of safety procedures when transporting hazardous materials. Certain dangerous liquids require specialized containers such as COPV tanks (Composite Overwrapped Pressure Vessels).
3. Use cognitive supply chains to manage supply and demand
One of the key factors in the modern supply and demand estimations in transportation is the active use of artificial intelligence and machine learning. These technologies allow transportation industry players to gather historical data in large quantities, automatically analyze them, and make high-precision predictions depending on them.
Another important factor here is visibility across the global supply chain transportation network. Logistics digital transformation allows for levels of visibility unobtainable in the past and increases the industry efficiency manyfold.
4. Handle new demands by creating new offerings
The COVID-19 pandemic has influenced consumer behavior significantly. This shit will inevitably reflect in major industry participants changing their offerings and services. These novelties are going to be focused on the following:
- Reduction of costs by achieving better utilization of assets
- Enhanced efficiency by optimization of logistic transportation routes
- Capacity handling by maximizing the efficiency of resource utilization
Since the new logistics strategy paradigm shifts toward the elimination of direct contact between human participants in the supply chain, the number of online orders is expected to grow even further. We should also expect further development in the sphere of delivery by drones or other automated vehicles.
It is important to remember that the pandemic is still not over. New challenges might arise any day, in correlation with the changes in COVID dynamics, possible mutations, or biotechnological advancements.
In such a turbulent and unstable environment, the main objective for a logistics and transportation industry player should be flexibility. Expect the unexpected, keep your options open, stay in tune with the latest developments, and you will drastically improve your chance of success.