The coronavirus pandemic has triggered a period of huge and unprecedented change within the logistics sector. With consumers staying home and many businesses now working remotely, shippers and third-party logistics (3PL) firms are having to pivot to become increasingly e-commerce friendly.1 Many traditional businesses are also accelerating their digitisation programmes, with governments around the world offering grants, and working with e-commerce providers to speed up the process and keep firms functioning.2
The impact of COVID-19 is also being felt by manufacturer supply chains. As demand outstrips supply and stocks run dry, the subsequent overcorrection by businesses places massive strain on the overall procurement process.3
Let's start by looking at how the crisis and subsequent fluctuations in demand are reshaping the industry as a whole:
- Larger basket sizes - As people become more comfortable with shopping online, especially in SE Asia.
- Consumers' discovering new brands and products - With product availability and reliability of shipping now the top priority. Shoppers were exploring new products and services when their usual retailers' stocks ran dry.
- Customer needs changing - Beyond buying 'everyday essentials', people are also spending more on sports and fitness equipment, self-care and home furnishings, i.e., things that are helping them adjust.
How did businesses respond?
- There's a shift towards D2C (direct to consumer) and omnichannel - Many bricks-and-mortar stores started to sell online for the first time and some businesses switched to a D2C model in order to meet new demand. After seeing the benefits of online sales, businesses are unlikely to go back to the old way - meaning sales and marketing teams will need to work closely to ensure demand can be met operationally long-term.
- Bricks-and-mortar stores found new ways to differentiate - To compete with the pure online sellers, many large domestic retailers are adapting their logistics to provide shoppers with options like drive-through, in-store or even curbside pick-ups.
- Adapting - In China, 25,000 flights to, from and within the country were cancelled in the first two months of 2020. As such, air transport capacity was down 30% compared to the previous year, so air freighters adapted by switching to more indirect routes and purchasing additional cargo aircraft.
How can you rebuild your logistics?
Many consumers have now experienced the benefits of online shopping for the first time, and are unlikely to switch back. Likewise, businesses that have had to quickly adapt and find new online audiences will be keen to maintain their customer base. Going forward, businesses should be looking at their supply chains to see where a transition to digital can make them more efficient.
Much uncertainty still exists though, and in the current climate, recovery and growth are highly unpredictable. Inevitably, businesses will need to remain adaptable and flexible to survive.
Steps you can take to help your business reimagine
Adapt to strengthen client relationships
While the pandemic has caused widespread disruption to supply chains, it has undoubtedly served to remind businesses how integral logistics is to their overall operations.
Over the coming months, businesses must continue alleviating customers' fears by offering services like contactless 'doorstep drop' deliveries and supply chain decontamination. Alongside this, it's equally important for them to actively inform customers of the steps they're taking to keep people safe, which is every bit as important as actually doing it. Moving forward, retailers should constantly assess their logistics to determine any risks or problems that may potentially arise.
Embrace e-commerce by investing in technology
With increasing emphasis on e-commerce retail, companies should invest in their online sales and either develop more advanced in-house logistical capabilities, or partner with advanced external parties who can help. Adopting logistics software such as inventory management platforms can help you optimise your logistics.
In the future, we may see more widespread use of AI chatbots, or stores that are entirely unmanned. The rapid growth of smart factories will also mark the arrival of unmanned logistics systems — including warehouses, cargo trucks and delivery drones.
Reduce risk through diversification
To try and ensure future business continuity, companies should consider switching their manufacturing and shipping from a single company or country to a more regionalised network, with less reliance on single suppliers. To prepare for this transition, businesses should open up conversations with other players in the ecosystem, or consider working with network-based businesses who provide access to multiple service providers via one touchpoint.
That said, many smaller businesses often lack the resources and expertise to detach from the big online retail players. Even larger retailers aren't agile enough — or are too risk-averse — to disrupt their primary selling channels.
The pandemic has proven how brands without a multi-channel 'direct to consumer' strategy can be left stranded by closed retailers or cautious shoppers. While those who have already embraced a more flexible approach are being rewarded by volumes that are 'above peak' in some categories.
Build resilience through stress testing
Businesses should periodically run stress tests to pinpoint and prioritise risks within the supply chain. This should include all areas — from key suppliers and factories, to logistics centres and inventories of finished products. A business continuity plan should also be developed, which businesses can refer to in the event of continued disruption or a new kind of crisis.
For more support and guidance for businesses, take a look at our operations best practices guide plus other useful resources on the Market Finder's Logistics section.