Logistics End of 2020: A Look Back and a Forward Outlook

The logistics and supply chain, as well as the rest of the economy, were faced with new challenges almost from the first day of 2020. While there were initial concerns about supply chains when the outbreak of Corona in China occurred, by early March, a stark struggle for survival loomed. However, the industry recovered relatively quickly, and many were even able to benefit from the new situation. But what lies ahead in 2021?

January – February: Great Concern for Supply Chains

(Basel) When a virus named Corona (COVID-19) appeared in China in January of this year and the province of Hubei, with its capital Wuhan, was locked down as the epicenter, the disaster seemed far away. The Chinese New Year at this time somewhat mitigated the issue, as not much happens in China during that period, which was well-known. However, as the quarantine in China extended, concerns about supply chains began to mount. Productions were shut down, transport was blocked, and Europe trembled before empty production lines. The stark dependence of corporations and medium-sized businesses on suppliers from China and the rest of the Far East was brutally exposed.

March – May: Ensuring Supply

But starting in March, Europe suddenly had other worries. The virus was present, and how. In Italy, it began without a pause and then spread rapidly across the rest of Europe and the world. For logistics, the missing shipments from China initially took a back seat. The priority was to ensure supply. This is something logistics always does, but during the first lockdown from March to May, it was particularly visible. While everything froze in fear, truck drivers had to continue their duties and were treated like lepers by the recipients of essential goods. A trip to the company restroom or even washing hands was horrifically denied. Is this how one treats their “heroes”?

Contactless Delivery

E-commerce, already a booming sector, surged further. Delivery drivers performed their duties; essentially as always. Delivering packages outside or during the pandemic was, in principle, the same! However, the KEP industry reacted quickly, and “contactless delivery” was introduced. This is one of the achievements that will certainly remain after the pandemic. It greatly facilitates the delivery of shipments, but also in general.

Meanwhile, in April, China began to reopen its economy. Hundreds of thousands of stranded shipments were now loaded for Europe (sea freight, rail freight, and air freight). Every available loading meter was immediately allocated. However, the ramps were closed for recipients, and containers piled up in European ports. This was also well managed. The boom in sea and rail freight from China and the Far East continues to this day. Prices for containers on ships are reaching record highs, much to the delight of shipping companies. According to various market participants, trains from China are fully booked well into February 2021. Until the end of 2019, this mode of transport from China to Europe was only hesitantly utilized.

Contactless delivery will remain even after Corona!

Boom in Transporting Protective Equipment

Additionally, a previously insignificant branch opened up for logistics service providers; the transport and storage/distribution of protective materials of all kinds. From masks, protective suits, ventilators (mostly from China) to disinfectants, suddenly huge quantities were shipped and had to be distributed across Europe in a very short time. Due to a lack of cargo space, even grounded passenger planes were converted into freighters. Many logistics service providers were able to offset these volumes against other areas that had been disrupted, such as transportation in the automotive or machinery industries.

With the new workplace, the home office, the logistics industry also quickly adapted. At first glance, not particularly suitable, many companies equipped their employees to work from home.

June – September: A Step Back Towards Normality

From June onwards, most participants in logistics returned to normal operations. Still, parts of the economy, such as the travel industry, gastronomy, and hospitality, as well as the entire sector of trade fairs and events or culture, continue to struggle for survival. All sectors that, while niche markets for logistics, are nonetheless of existential importance unless one is solely focused on these areas (trade fair logistics, etc.).

Other sectors of the economy set out to catch up on the backlogs from January to May. Some areas of logistics, such as ports, have managed the losses better than initially feared, but compared to 2019, the lost volumes cannot be compensated. However, ports hardly need to fear being left alone by governments in tough times. The situation is somewhat more challenging for other sectors.

Overall, during this period, things have calmed down a bit. Consumer spending also declined less than feared. Those who did not shop offline ordered something online instead.

October – December

The viruses began to multiply slowly again, and it soon became clear that Europe would sink back into lockdowns. However, this time it had little impact on the economy (with the exception of the aforementioned sectors) and thus also on logistics. Business as usual (with masks on…) was and is the order of the day.

A recent stir was caused by a report from Great Britain that a mutation of the virus had been discovered, which spreads much faster. In addition to passenger traffic, goods traffic was temporarily blocked. This may also serve as a preview of Brexit, which, alongside the virus, perhaps occupied the logistics industry the most. Currently, it seems that France and Great Britain are finding a solution to maintain the supply to the island.

Is Packaging Contagious?

Are food packages really contagious?

In China, a report raised eyebrows, claiming that the packaging of a shipment of pork knuckles delivered from Germany was responsible for employees of an import company contracting the virus. The incredible urgency of this report somewhat faded. Imagine if packaging from goods, especially food, could spread the virus; the world, and thus the logistics industry, would face a massive catastrophe. Everything would have to come to a standstill for an extended period, jeopardizing the most basic supply of the population, namely food.

Logistics Real Estate is in Demand

Logistics real estate continues to be highly sought after. Already in an upward trend in 2019, it continued to grow in the crisis year. E-commerce, which during the pandemic also encompassed the food sector, demands space. Additionally, the trend for other industrial properties or even office buildings is inevitably declining. Residential properties are often overpriced, leading investors to flee to logistics. However, even there, demand is slowly but surely beginning to exceed supply. A 30,000 m2 plot (or larger) in the heart of Germany is worth its weight in gold, but it is almost utopian for such a thing to still be available for logistics. In Switzerland, the scarcity of land for logistics has been a long-standing trend. In Germany and Austria, even regions slightly outside the centers are gaining significance for logistics.

The demand for logistics real estate will remain high.

Conclusion 2020

The logistics industry has come through with a “black eye.” Certainly, some have suffered more than others. Well-established companies with multiple pillars have fared better than niche players who simply had bad luck with their niche, as well as the aforementioned trade fair and event logistics providers.

Logistics service providers have less influence over the choice of supply chains; that is the task of production and trade. Much has been said and written about the “resilience” (a newly emerging term) of supply chains. It is now essential to review suppliers and strengthen procurement.

Reviewing suppliers is generally good advice, not just in times of crisis. However, even the best-certified supplier can do nothing if it is mandated that their plant be closed. And one cannot prepare for all events, especially those that occur rarely. Sometimes improvisation and flexibility, historically the greatest strengths of logistics service providers, are the better approach.

Outlook 2021 and Beyond

Has so much fundamentally changed for the logistics industry in 2020? Keywords like digitalization or automation had already begun to initiate corresponding measures before. This allowed for an increase in pace during the crisis. Anyone who would have had to start from scratch in March would have been lost.

Conferences via Zoom, MS Teams, Skype, etc., have certainly surged and seemingly replaced travel forever…!

However, none of this is really new. For over 10 years, mobile phones have had tools like “FaceTime,” allowing for video calls. Most of these tools also work on PCs, laptops, and tablets. And even before, one did not travel to a customer twenty times a year. One simply called and asked, “Hello, how are you?” Of course, connected with the question of whether there was anything else one could do, such as offering a new transport or implementing a price increase for the next year, etc.! The quote or confirmation was sent by fax and later by email. So what has fundamentally changed?

New Online Tools

The new tools offer the possibility to connect almost unlimited participants simultaneously. However, it also holds true that with too many participants, an orderly discussion is not possible, and the technical stability is still not what it should be. Home office in the logistics industry is certainly acceptable for bridging emergency situations, but as of today, it is not a permanent solution. Team spirit remains a key to success, especially among medium and smaller market participants in logistics.

Are Supply Chains Really Changing?

Can supply chains be managed in such a way that one is independent of suppliers from China and the Far East? Is this a wishful dream? Conversely, these are also the large sales markets, which means that one should also produce nearby and build a supplier network. Only large companies can diversify in production and thus also among suppliers.

One thing is clear: China is the big winner of the Corona pandemic. This is not an accusation but simply a fact, and it is due to the passage of time. When the pandemic began in Europe, normal operations and especially readiness to deliver were almost back in China. China was able to supply all of Europe with protective equipment, and certainly not disguised as aid goods. The economy has practically weathered Corona unscathed, and for the rest of the world, it is a beacon of hope. China will be able to raise the conditions and benefit from them. With one-sixth of humanity, which is inexorably approaching a top economic level, China holds the cards.

Are supply chains effectively changing after Corona?

How Long Will the Boom in Online Retail Last?

The boom in online retail will continue, but it is not infinite. It will eventually stabilize at a certain level. When one can shop carefree again, without masks and waiting in line outside, the longing for a city stroll will also return. The question is how many of the familiar storefronts will still exist then. However, retail has held up better than feared. Retail and online shopping will merge. Blessed is he who masters both. “Click & Collect” is the buzzword. Contactless delivery will also remain. This not only has advantages during pandemic times. In many cases, it saves the tedious task of locating the recipient. Many residential communities have organized themselves, and couriers leave packages at the entrance or, in the case of single-family homes, there are alternative solutions.

The trend in demand for logistics real estate will persist.

Green Logistics

Regardless of the pandemic, environmental awareness in logistics is massively developing. Many initiatives for alternative drives in trucks (hydrogen, LNG, electric, etc.) are making significant progress, and more and more freight forwarders are acquiring such vehicles. Efficiency improvements and enhanced route planning (both in and outside) also contribute to making logistics and the supply chain greener. Whether trading in emission certificates is the ultimate solution remains to be seen, but more and more transport companies are also moving towards compensating their CO2 consumption with certificates.

Distribution of Vaccines

For some logistics service providers, a new, lucrative source of income is opening up towards the end of this year, but especially in the new year: the distribution of vaccines. Especially the doses that require a temperature of -70 degrees promise substantial revenues, as the selection of service providers who master this field is not vast. However, even for vaccines that can be transported and stored at 2 – 8 degrees, the appropriate vehicles and infrastructure, including adequately trained personnel, are necessary. The determining municipalities will rely on experienced, i.e., large service providers. Experiments cannot and, above all, will not be undertaken here. Many small and medium-sized freight forwarders and KEP service providers have invested significantly in this area in recent years.

Will the Industry’s Leading Trade Fair Take Place in 2021?

Will trade fairs and events increase again after the pandemic? It is to be suspected. Next year, from May 4 to May 7, 2021, the leading trade fair of the logistics industry, “transport logistic,” is scheduled in Munich. Such an event cannot be compensated or replaced by any web conferences. It can at best serve as a “consolation prize.” However, the many personal encounters, the numerous personal conversations, and the many newly forged contacts of such an event cannot be replaced by any laptop in the world. Given the developments, it appears that we will be dealing with Corona and especially the measures until spring. This also means uncertainty for the planning of “transport logistic.” It is to be hoped that the logistics world can meet unencumbered again in May. Many deals are finalized, deepened, or initiated at this event. Without such an industry highlight, a gap emerges. While these events can be postponed, they still fall through.

Image of Logistics

Even before Corona, there were several initiatives to improve the image of logistics. However, the pandemic has certainly contributed to the public becoming more aware of why logistics is necessary. Whether this awareness will persist once the crisis is over remains to be seen, but during Corona, a significant step towards improving the reputation of this industry has certainly been made.

All the Best

In this sense, dear readers, we thank you for the loyalty you have shown us since early June 2020. We wish you and your loved ones happy holidays and all the best and much health in the new year.

The Editorial Team
Loginfo24

Photos: © Adobe Stock

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