2021

2021 in the shadow of 2020 for the Logistics Sector

Post By : Guest Contributor
Post Date : January 4, 2021
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The theory of “Survival of the fittest” popularised by Charles Darwin in 1869 suggested that organisms best adjusted to their environment are the most successful in surviving. This means that- any organism that does not adapt or learn with the changing environment, will not survive.

The fact is true not only in the zoological ecosystem but also in the corporate world. Learning and unlearning are critical parts of a journey, in order to maintain one’s existence and grow.

Every passing year gives immense learning to mankind. But 2020 was quite different from its preceding years in many ways i.e.: our generation faced a pandemic for the first time, instantaneous economic recession due to the pandemic, changes in norms for the way of life, headwinds for globalisation and many more. Most of these changes continue to have a significant impact on the supply Chain, which will lead to certain changes in next year and years to come.

Focus on Resilience: A flexible supply chain and logistics network is essential for a sustainable supply chain. COVID-19 has proved that strategies like robustness, flexibility, redundant capacity, surplus inventory are necessary but not sufficient to cope with major crises like that of a global pandemic. The New Normal in the supply chain will be resilience and efficiency.

Basically, resilience translates to better forecasting, readiness to responding and recovering from unexpected situations. Focus on building supply chain resilience has always figured on risk management strategies. But in 2020, the threat of disruption was much higher than past years, which is driving the thrust on building resilience and implementing a risk management strategy. Supply chains will be more flexible and agile to react and adapt quickly to potential disruption.

Role of Data: Since the last decade, role of information availability, data analytics and digitisation have increased continuously. At the time of disruptions, the need for strong communication with all critical stakeholders and information sharing became unavoidable, which led to fresh thinking on disruption-control models along with greater need for visibility and synchronisation.

In the year 2021, most of the firms will have a fresh strategy on data management and real time usage of data.

Many organisations have supply chain command centres to monitor and analyse supply chain data, but they miss a crisis management philosophy. In future, these command centers will imbibe crisis control framework within the supply chain to have seamless communication and decision making.  

Degree of automation: Accelerated adoption of automation is expected in 2021 compared to previous years.

In the pre-COVID world, rate of technology adoption in newer startups was higher than relatively established conventional players. But the pandemic has drawn a new set of rules like social distancing, contactless transactions, remote working, working with fewer human employees etc. These rules are now driving automation to the next level. In the last quarter, we have already seen higher inclination and investments in automating supply chain.

The trend of automation is same across segments like transportation, First mile, Last mile Distribution center and procurement. Automation will be in material handling systems, palletisation of cargo, conveyor systems, Auto storage and retrieval system, robotics, drones.

As per LogisticsIQ’s latest post-pandemic market research study, Global Warehouse Automation Market will reach the milestone of $30B by 2026, at a CAGR of ~14% between 2020 and 2026.

Work place culture: In Logistics & supply chain industry, operations always run 24X7, while all other functions were not like operation. But the pandemic has changed the definition of working hours for other functions in logistics.

In a remote working environment, back end functions are now expected to respond on a as-and-when-required basis. This trend is not going to be reversed soon, which implies that even backend functions of logistics are also moving towards 24X7 scenario.

Smaller office space: Even as more employees return to their offices in 2021, some remote work will likely continue. With the IT industry converting to remote working in a major cost-saving initiative, other industry sectors will also adopt similar practices for cost optimisation on a smaller scale, including logistics and supply chain.

The process will never eliminate the office set-up completely, as physically bringing employees together also offers benefits like team building. This will effectively reduce the requirement for office space and other infrastructure in the years to come.

Distribution Model: During the pandemic, B2B segment suffered a lot and declined significantly for few months, while B2C emerged as winners.In this duration, e-commerce registered strong presence in the segments, where its penetration was insignificant in the past, like groceries.

This shift has triggered major change in logistics and warehousing network. In order to provide same-day or next-day delivery to customers, decentralising of warehouse locations are emerging as the need of hour.

Being closer to the customer not only decreases transportation costs but also reduces the risk of supply chain disruption. The increased demand of e-commerce is also pushing for omni-channel strategies. In 2021, we will see more action in the omnichannel distribution model.

Transportation Volumes: 2020 was the first year in the twenty-first century when domestic transportation volumes dropped year-over-year. Major impact was in the first half of the year, while second half witnessed good recovery and by December 2020, domestic transportation volumes were higher than last year.

Last two months of the last calendar year registered growth in the core sector, which indicates that the present year will register a strong bounce back in transportation volumes. As per our estimates, domestic transportation volumes will register double digit growth this year.

We expect that 2021 will be a happening year for logistics and supply chain industry. But the industry needs to get ready for handling the surge in volumes and increasing expectations of the customer. The COVID pandemic has pushed the industry to a level, where service provider needs to take recourse to transformation to survive.

This article has been authored by Vikash Khatri, Founder, Aviral Consulting Pvt Ltd.

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