2020-2021 Logistic trends: what changed due to COVID-19
2020 is marked with coronavirus infection, which affected all the aspects of human activity, including cargo transportation, delivery of raw materials and food. The situation is so serious that in early April, associates of the International Road Transport Union (IRU) and the I International Transport Workers Federation addressed an open letter to their governments. They asked for a support in a closed borders reality.
Coronavirus changed the demands of end consumers; many factories stopped. To eliminate the bias, governments are to preserve and keep supply chains on the level (e.g., cold chains).
Logistic companies were forced to rapidly admit new environment. Even now that would help them to stay on top. There is good reason to believe that below said trends will be actual even in post-pandemic period.
Trend 1. Carriers’ Dumping
Striving for keeping clients, carriers would scale down below acceptable level to make a shipment. However, many would be broken.
Trend 2. Weak Players Would Not Stand The COVID-19 Perfect Storm
Most of small companies will be forced to close; also, some of the middle ones. Only the strongest will survive, particularly those having rainy day funds and clear debts. These carriers will be able to renew their fleet and offer new services to Customers. Bankruptcy cases, mergers and acquisitions of the weak companies by the strong ones may be predicted.
Trend 3. Cooperation Intensification and Joint Services
Carriers will mutually share information and enter the joint services agreements. Complex services will become available for Customers; carriers will strive to take their joint foothold.
Trend 4. Fleet Repairing Rather Than Buying New
Logistic companies will be forced to revise their procurement plans. Instead, increased demand for spare parts and repair services will be evidenced.
Trend 5. Priority to Assembly Shipments
Suppliers will ship smaller volumes. To avoid empty trucks, carriers will stick to assembly shipments. Also, decrease of flight frequency also contributes to the situation. Transport workers will "exchange" cargos or group them if shipped to the same destination. Currently, there is a noticeable bias for assembly cargoes received from Europe already.
Trend 6. Shift to Information Technologies
The need to implement IT technologies has been evidenced long before, however still no actions. The coronavirus forced many to stick to digital process. In particular, IT-platforms allow exchanging information on tariffs, rates for transportation, etc., already.
Trend 7. Option to apply from mobile phone. Mobile carriers occurrence
The cargo owner is provided an option to order a truck or apply for complex delivery remotely; correspondent application to be installed on your phone. For example, Russian Post has already tested and launched a service of shipment where phone number is required only. Data can be selected from the phone book
Trend 8. In-country cargo shipments and new supply chain development
Last year, carriers mainly focused on the international delivery. Latest recession lead to the borders closed. Domestic market became a priority and carriers switched to working with local companies. Previously, significant part of the products was purchased in China and other Asian countries (regardless of their purpose); as of now, manufacturers start their own manufacture.
For instance, last year demonstrated popularity of communication means or agricultural products or gyms’ equipment; these were imported from China. Now reason is seen that many goods can be produced domestically. There is some reason to believe that Russia will start operating its own seда-contained logistics chains, and that the quality of the goods produced and the services rendered will increase.
Trend 9. Outsourcing of business processes
Outsourcing becomes more popular among companies and enterprises and comprises more and more works performed. Trend occurred in the beginning of XXI century, but currently it reached maximum of its popularity. This is the way to save money for entrepreneurs.
Trend 10. Regions demonstrate increased demand for goods’ delivery
Even in relatively small villages and urban settlements, there appeared a demand for the basic goods delivery along with big cities’ trends. Carriers will have to find solutions to each separate problem, which are to be carefully considered.
Trend 11. No contact of courier and receiver
Being worried of their health, many do not contact with others, even when receiving the shipment. Carriers are now busy with settling the issue.
Many customers refuse visiting stores or markets to avoid infection and are ready to pay 5-10% more for 1-3-day delivery and zero contact with other people.
Trend 12. Switching to air drones
Asian countries moved to even greater extreme in the field of no-contact deliveries: air drones are utilized. The most intensive use of these was evidenced within pandemic period.
Trend 13. Shift to remote work
On Spring 2020, many shifted to remote working mode. The approach makes to optimize current business processes. Special platforms for remote transactions and communication are sought for.
Trend 14. Transport and equipment disinfection. This to be included into contracts and agreements
Carriers wishing to survive will have to comply with the sanitary requirements.
Trend 15. Rail transport is more preferred
Shipping rates by sea and air are highly volatile, therefore many shipments are made by rail. Particularly in Asia-Europe destination. Tendency is also forced by constant quarantine of the trucks and special drivers’ requirements. Meanwhile, many passenger trains are canceled and all the railways are at the disposal of trains from tanks, platforms, freight cars, etc…
Trend 16. Logistics shift to Internet
Negotiations, exhibitions, conferences, and the signing of contracts are currently online; this trend will continue since proved to be effective. 2020 offline events will be half-unattended. Many exhibitions or presentations will merely have to be canceled
Trend 17. Carriers developing their bail-outs
2020 spring and summer downtime will force many companies’ management to develop action items to be utilized in case recession reopens, and also for preserving rainy day funds.
Trend 18. Last mile being a priority
Companies engaged in truck supplies or auto delivery will emerge from the recession with minimal casualties. The same also applicable last mile carriers, and forwarders not having own vehicles.
Trying circumstances will try carriers who purchase transport and pay lease payments. The chance to increase shipping volumes and profits will be preserved in those who serve retail, or pharmaceutical companies, or ships FMCGs.
Development of medicine and clinical trials’ logistics
Even during pandemic period, the demand for medicines or bio-samples delivery and clinical trial conduction is preserved. Logistic operators and pharmaceutical companies are seeking for new ways of cooperation. As a result, cooperation of major market players exposed to the light of the day. Globe Medical considers safety and offers no-contact deliveries; also, direct-to-patient deliveries occurred which is applicable for Named Patient Program (NPP).
How to emerge from the recession with minimal casualties
Several months of COVID-19 pandemia lead to global economic recession, and logistics need help to emerge. Airports and sea terminals prolong delivery period due to quarantine. Depots have many unshipped goods. As a result, agreed timelines are violated.
Logistic companies are forced to cover their losses. Some experts believe that air carriers will stand for no more than 2 months. Similar situation is for ship owners, though has been lasting for more than 10 years - survival experience is formed.
No rainy day funds are gained by the truck carriers; many depend on lessors, lenders, and car manufacturers. They will hardly stand for 6 months. Numerous bankruptcies and company dissolutions will come next.
Railway carriers are likely to get new opportunities. Operators accepting orders for transportation do not raise rates for every demand change. In current circumstances, there is reason to believe the railways to be most preferable for the goods delivery between Russia, Asia and Europe. Also, railways are often state-owned, and will definitely not lose their support. These will be utilized to deliver medicines and medical equipment.
States are now supporting carriers already. Aviation and railway state-owned companies are the first in the list. Private companies can expect to receive credit holidays, lower tolls or even their cancellation. If the company can prove the pandemic to be the cause of the losses, they will be allocated some budget assistance. For truck carriers, the abolition or reduction of customs duties on spare parts will be a significant help. Alternatively, VAT rates decrease or road tools or fines cancellation can be considered (this does not apply to penalties for traffic violations). For individual entrepreneurs who have one or two trucks, temporary tax exemption or credit holidays for lease payments is a best option.
Managers of logistic companies will have to make significant efforts to emerge from the recession with minimal casualties. It is important to track what support measures are provided by the government and utilize them wisely. Teams of lawyers, economists, and finance specialists should pay much effort. At the same time, contracts with the counterparties and the structure of working capital are to be revised; liquidity of assets should be considered.
The pandemic will change every company, including logistic ones. But those following the world and industry changes will be able to adapt and manage the situation. In this case, strengthening the competitive market position can be afforded.
It is very important that logisticians work together to overcome the recession consequences. It is the creation of collaborations that can be viewed as an engine that will lead the industry to new positions