Logistics shouldn’t be taken for granted

We’ve never been so keenly aware of how important logistics are to our lives than in recent months. Coronavirus has clearly shown how vulnerable the economy is if supply chains stop working.

But this finding isn’t new. In 2017, there were fears that goods wouldn’t reach the retail sector for the Christmas period after the Korean shipping company Hanjin went bankrupt and Maersk encountered financial difficulties. This led to high volumes of goods from Asia floating aimlessly around the world’s seas. No-one could reliably predict whether the ships would reach US ports and the containers could be unloaded.

But we’ve seen a similar situation even more recently. Only a few days after the outbreak of coronavirus in Switzerland, delivery services were completely overwhelmed and food retailers such as LeShop and Coop@home couldn’t meet their delivery deadlines. All available delivery slots were fully booked. Denner even closed its wine shop as the staff were needed in intralogistics and for supplying stores.

Same-day delivery, which before seemed vital, suddenly no longer mattered. Retailers and customers were happy enough if they could receive their orders any time in the near future.

We can draw the following conclusions from what happened:

• Supply chains are extremely fragile. If a single cog in the wheel stops working, this affects the entire supply chain.
• At the moment, logistics can no longer be scaled up as needed, particularly not in the short term.
• External factors can have a massive impact on logistics.
• This means planning for interruptions and delays in supply and shipping need to be part of corporate crisis planning.

Or as Gerrit Heinemann at the Future Institute of the University of Niederrhein puts it: “Everything comes down to logistics. Those who are good at it will be one step ahead.” 

The challenges of logistics

We will return to normality though. But this, too, poses challenges to the logistics sector.

• Shipping speed: on Singles’ Day 2019, the first delivery to a recipient was made just twelve minutes after receiving the order.
• Traffic issues: New York City earns 28 million US dollars annually from buses which were originally delivery vehicles.
• Sustainability: the volume of packaging material ending up in the bin is so huge that various municipalities in Switzerland charge a fee for disposal of boxes.
• Customer journey: delivery means convenience. Whoever manages it best wins.
• Value creation: logistics should not only been seen as a service but also an expanded business field.

We can define the following key factors for logistics from these findings:

1. The desire for faster and, in particular, more convenient logistics will continue to grow
2. Conserving resources will figure strongly in logistics
3. Key trends such as artificial intelligence, blockchain and the Internet of things will come to dominate the logistics sector over the long term
4. People will remain at the heart of logistics – even if robots redefine staffing structures in the sector
5. Recipient convenience and special logistics will increasingly become a challenge and a cost factor

As we look ahead, this means:

• Logistics will become an ever scarcer commodity
• What costs nothing is worth nothing
• Individual customer solutions will increase
• Customers will more frequently expect traceability in the supply chain
• Customer demands regarding sustainability will increase and there will be new regulatory requirements

Retailers and senders are therefore well advised to actively incorporate logistics into their strategic planning.