Pandemic impact on the logistics industry

The COVID-19 crisis has affected almost all business operations in every sector and region of India since it began. India's logistics industry is expected to grow at a compound annual growth rate of more than 10%, according to the McKinsey Global Institute (MGI), from $200 billion in early 2020 to at least $320 billion by 2025. COVID, however, proved a setback for verticals worldwide, including the logistics sector. To stay relevant amidst the pandemic, logistics players in every function can embrace digital technologies.

We are aware that the pandemic has had an impact so far on two key functions of the logistics sector: warehouses and transportation. Estimating demand, allocating capacity, and distributing products across sectors and regions remain difficult tasks in the near future.

Warehouse Management 

Inventory management in warehouses is a very difficult and sophisticated endeavor, even during good times. Keeping up with orders of raw materials in a world that has radically changed is harder than ever because forecasting techniques have become unreliable. Experienced buyers make decisions to buy raw materials, but that experience may not be as valuable in a country that has radically changed.

Due to these challenging conditions, most companies could reduce the variety of products in their portfolio to focus on warehousing the most critical items in their portfolio. Producing nonessentials, in particular, could continue to minimize their inventories, which increase their holding costs and occupy valuable warehouse space. In the case of essential items, however, it might make more sense for producers to keep inventory levels high rather than risk stockouts. In any case, just-in-time approaches to scheduling may not be effective in the near future.

As a result of the pandemic, many companies are questioning if large regional warehouses are really the best way to keep supply chains agile; smaller warehouses in more locations might be a better answer. Lockout restrictions have also forced companies to think about whether distribution centres maintain service levels more effectively than warehouse systems. This may certainly make it more practical to deploy the latest technology in these centres.

As producers shift their focus away from China and toward other Asian countries, including India, India's warehousing industry may enjoy greater demand in the future. But one thing is certain: there must be less human contact in warehouses. Due to this, the demand for innovative packaging and materials-handling processes is increasing throughout the supply chain. Those who lease space in warehouses for their operations demand more streamlined and automated processes. Those that have their own facilities must implement such processes as well.

Logistics Movement 

As a result of COVID-19, India was forced to restrict the movement of goods across government-defined zones as well as across states, increasing the use of suboptimal routes. There was also a shortage of drivers, which raised truck-rental costs, so logistics functions had to act quickly during the pandemic.

It is becoming increasingly common for companies to use FTLs (Full Truck Loads), LTL (Less than Truckloads), and milk runs in different ways. Among fast-moving consumer goods and other products, milk runs are more efficient because they can aggregate demand across multiple SKUs and companies. The use of LTL is also increasing as companies respond to changing demand. To meet demand, it is essential to choose when to use LTLs, FTLs, and milk runs strategically, and the principles that guided them before the pandemic has been overtaken.

As a result of COVID-19, a related trend has intensified. Last-mile deliveries have become increasingly important for e-commerce, addition to last-mile delivery. There has been an increase in online grocery shopping, particularly in India, since the pandemic began. Last year, demand for India's online grocery-shopping portals surged, while their operational capacity dropped by half. However, that is only a short-term issue. A shift to digital will be necessary for all logistics partners to stay relevant in the new normal post-pandemic.

There is no doubt that trucks dominate the logistics sector in India. Railways, however, remain the only mode of transportation that was unrestricted, allowing goods and commodities to be transported across the country at nearly pre-pandemic levels during the lockdown's most stringent phases.

Conclusion

Due to the growth in the D2C sector and incremental innovations every day, the logistics sector will continue to grow and be the backbone of all industries. Logistics players in such unprecedented times should strive to minimize disruptions, maintain long-term relationships and be the ultimate partner of choice for their consumers. It is possible to achieve this strategic intent by offering differentiated offerings, building digital skills combined with industry experience and forming niche partnerships.

The article has been written by Aashirwad Deshmukkh, Founder and CEO, Howdyy