How will the logistics industry look after the Coronavirus fallout?

Business owners, employees and investors in the manufacturing and logistics sectors will be anxiously keen to know how long it will take the industries to recover from the coronavirus pandemic.

Based on the experience of the 2003 SARS epidemic, it could typically take several months for the sector to bounce back.

But how will the logistics industry look after the pandemic? 

It must radically improve to protect against the shocks of future governmental lockdowns.

Surely it will change. It has to.

Logistics must acknowledge the impact of COVID-19.

The impact from the Coronavirus has demonstrated that manufacturers need more resilient supply chains.

Businesses will need to grasp the situation they face themselves in and allocate resources to determine new priorities.

Will the existing market be in a position to operate on pre-crisis levels? 

Probably not.

The purchasing power of global goods will inevitably drop, and likely to remain lower for several years to follow.

Apple, with its vast network of components, saw production cease in February in China. By March, its manufacturing suppliers of chips and circuit boards in Malaysia had stopped. Even suppliers in South Korea and Europe saw a halt. 

As of mid-June, Apple is struggling to return to normal pre-crisis operations. 

A halt in operations of a global monolith like Apple will have a ripple effect on the world's economies due to decreased consumer confidence.

Companies must evaluate whether their existing logistics service providers can still operate in their desired routes.

If they cannot, then new routes need to be mapped out and transportation costs renegotiated. 

Supply-chains must be spread across a more extensive network.

What if Apple had more assembly factories in the USA? Would they witness such a disruption in supply?

It poses an intriguing question.

Typically companies outsource manufacturing to save on labour and component costs. Will we now see a refocus on production in current markets?

Probably.

The coronavirus fallout will not be the end of globalisation. It is easy to observe that we are so connected that to roll back these forces would be more of a struggle than combating the current pandemic.

More likely is that more companies will boost their distribution infrastructure. When a supply centre is impacted, the focus is shifted to another to take up the strain of consumer demand.

If manufacturers are shifting or adding to their supply bases, payment terms will need to be revised. Unit economics will be impacted as both interest rates and loan terms will be different after the crisis subsides.

Also, supplier and buyer renegotiations will be dependent on financial reserves and obtaining outside financing by institutional lenders. Simply put, those who raise capital will be in a stronger position to negotiate better prices to conduct their trading operations. 

For example, Tartu-based Greenlife was ready to import COVID-19 masks to Estonia, yet the Estonian government didn't have the necessary funds to pay in advance. Greenlife, rather than risk a loss in profit, decided to sell the masks to advance cash buyers in both Latvia and Lithuania. 

This is a daily occurrence in any industry sector where buyers don't have cash to pay in advance.

Evaluating partners and their financial capabilities.

Since the financial meltdown started right after the end of the fiscal year, the results of the reports of 2019 will not show the real situation of companies after the crisis. 

For many companies, a 3 to 6 month crisis period will devour their financial reserves.

A company's financial ratings will remain based on last year's report.

Yet in reality, the present scenario is likely to be far from what has been reported. A business's financial credibility may drop from AAA to CCC.

A drop in a business's financial index comes at considerable risk to a supplier. 

Suppliers will not be able to determine the risk of that partner as data will be absent from any financial reporting until the end of 2020. 

Accordingly, finding the correct data sets and forecasting tools will be crucial to companies as they navigate the current market environment to make strategic decisions.

Re-engineer internal procedures to maximise cost-efficiency

During the crisis, many companies are furloughing or making employees redundant, creating breaks in company workflows and structures.

When little work is required to be done, what's left of that role can be completed by another employee, absorbing their responsibilities into one job role.

Whilst this sounds financially viable during the crisis, once over, it will become challenging to find suitable personnel to rebuild and grow and meet expected demand.

It's critical that once business returns to some degree of normalcy, that every opportunity to grow and replace lost revenue is taken.

Simultaneously if your time is devoted to hiring and onboarding new employees, then you'll not be in a position to scale the company to pre-crisis levels. 

One opportunity to reduce this time-consuming and expensive procedure is to adopt newer technologies.

Using technology saves businesses by removing human error when done manually by employees.

According to research from McKinsey, supply chain management is one industry sector where its operational workflows can be automated up to 55%.

Digital logistics provides definite possibilities to boost turnover and net revenue without growing your team again.  

When working with limited resources and an unclear market situation, the precision of your operations will be a crucial factor. 

Automation and digital tools are vital cogs in a company's machine for avoiding miscommunication, feedback, planning and supply chains. 

Digitise, outsource, and lower fixed costs

At the core of any supply chain lies costs.

Digitisation, done successfully will analyse and highlight areas that are ripe for operational efficiency. 

Provided it does not impact the core intelligence of your business, and where automation is not possible, consider whether outsourcing an operational workflow could be more cost-effective? 

An example would be outsourcing your logistics operations and supply chain management to a third-party digital logistics company. 

According to our own company internal data, such a decision could save your business at least 20% in supply chain expenses, and provide a more competitive edge to the competition. 

By using integrations with ERP and MRP systems, logistics companies can reach new levels of operational precision. 

By increasing the pricing transparency of your supply-chain logistics and providing full traceability, will become a significant growth factor for your company post-crisis.

Modern digital solutions that are intuitive to use, simple to implement, efficient and convenient will give a company better business insights and analytics. 

Digitise vs hiring employees. Lower your future business risk

According to OECD research, employee roles are becoming more digitised - so much so that 4 out of every ten jobs is now 'digitally intensive.' 

The fallout from the Coronavirus has not only spurred on this digitisation, but it will also ensure that we will not fully return to how jobs were previously. Not only will employees need more digital training - companies must re-prioritise their businesses digital competitiveness to future-proof these types of crises.

One way is to embrace digital automation rather than hire more employees.

On average, there are typically three or more departments within a manufacturing organisation dealing with logistics - purchasing, sales, and housing.

Usually, these departments are silos that do not exchange data between themselves. Sadly this method does not consolidate the majority of the shipments going out or coming in. 

The truth is, consolidation is one significant method to improve profitability and save money within the logistics sector. 

It's why Speys was born - to furnish the manufacturing and logistics sectors with greater savings than had been anticipated - all by consolidating in one space - our pioneering platform.

But using our platform, manufacturers consolidate and monitor all daily shipments and activities in a single window, with only one employee required to supervise and manage the shipments. 

When you use our platform to reschedule inbound and outbound daily shipments; companies can influence the time spent by warehouse employees for loading and unloading goods. 

You can witness what savings can be made.

We can determine savings that are made by basing our calculations on the average salary in Western Europe for a logistics position, ranging between €40,000 and €70,000. 

For instance, we have a customer in Finland; a manufacturer with an annual revenue €40 million. 

Speys helped them monitor and optimise their supply chains. They implemented our digital logistics solution, and as a result, this company saved €140,000 in their first year of using Speys.

Using Speys

Imagine having access to a logistics solution where one employee can order, manage and monitor all your shipments with several logistic service providers through one screen?

To become a Speys customer, it’s simple.

1. Contact us via your work email and our operators will create a business account for your company. 
2. Unless you need additional consulting from our industry specialists, you begin using this digital logistics solution immediately without any additional cost. 
3. Next, our operators arrange a call with you to identify a company's logistics workflow. 

Our operators locate the most suitable shipping partners that meet your business requirements that will keep your company functioning at all times. 

If you already work with trusted partners, we collaborate with you to bring them online through our platform. 

While your business does this, Speys operators take care of early warnings and inform you about unexpected changes in delivery times. 

The operators are proactively reacting to warnings by either rerouting the goods or finding another service provider who is fast enough so that a delay would not affect your workflow.

During times of crisis as they are now, this fast reaction is a necessity to avoid loss of custom.

The coronavirus pandemic has taught us that a robust digital logistics monitoring system that highlights subpar dependencies is an essential requirement for today's supply chain and logistics professionals.

Aleksander Gansen is the Deputy General Manager of Speys. A digital logistics solution provider that empowers companies to decide faster, standardise their processes and reduce costs.