Logistics Update: Version 2020
The coronavirus pandemic has been raging since January this year. One of the first industries which has suffered from the unfolding events was logistics. Today, this industry is gradually changing. In just a few days, logisticians had to accept the current situation and find an alternative for organizing work from home offices. Air freight is increasingly being replaced by road or rail, but what should we expect next? ACEX employees told what changes in logistics are taking place now, and what to face after the pandemic.
Stephan Haltmayer, CEO of Quick Cargo Service, ACEX Alliance partner in Germany: "Today we found out that online cargo platforms can't process requests on time, so we have to look for transportation methods and calculate fares ourselves. Flexibility in finding available seats cannot be handled using these sources."
IT platforms cannot replace the experience of real freight forwarders. What about e-commerce? Have marketplaces been able to replace real stores that have suspended their operations today? Customers who are forced to buy everything they need online in isolation get the experience of using the Internet channel on a daily basis. By the end of the pandemic, they will have formed a persistent habit of buying online.
We can see the growing interest of sellers in e-commerce: those businesses that have not opened online services yet are hastily looking for an opportunity to join this market. It is not about only small and medium-sized stores in the regions, but also about manufacturers.
"After the situation normalizes, online sales will be used almost everywhere. All this will seriously affect the sales volumes of online stores and trading platforms, and, as a result, increase the flow of freights. The e-commerce market will accelerate growth and lead logistics. Therefore, Boxberry plans not only to develop the service and improve its quality, but also to increase its capacity. We will continue to optimize processes, reduce deadlines, and develop the network. All this will be necessary in a world that will learn to buy online and also trust this channel more," comments Alexey Sapon, Logistics Director at Boxberry, ACEX Alliance member in Moscow and Yekaterinburg.
Online shopping today will certainly give an additional boost to the development of the e-commerce business. But, according to Stephan Haltmayer, even such business should be transported from country to country, which means that it also needs experienced freight forwarding companies. Thus, logistics services will be in demand even with the full transition to digitalization. Only one thing raises question: what forms logistics will take in this case.
"Logistics is not an independent industry, it is the first derivative of the world economy and international trade. Accordingly, logistics will take precisely the forms and volumes that will be required by the changed economy. At the same time, international logistics is very adaptive and is able to recover in a very short time," said Eugene Apasov, General Director of the SLS Agency, ACEX in Saint Petersburg.
Logistics directly depends on international trade. This can be observed even now: due to the closure of many enterprises for quarantine, the number of orders for transportation has significantly decreased. At the same time, due to the growth of e-commerce and restrictions on the movement of people, the demand for courier delivery has increased.
"In April, the demand for this service increased at least twice. We were able to introduce contactless delivery service very quickly and organize walking delivery from pick-up points. This allowed the company to ensure the continuity of the logistics chain," comments Alexey Sapon.
The delivery service will continue to develop after the crisis, but some customers will quickly return to pick-up when they can leave their homes and move freely. When everyone is allowed to go back to the office, the freight business will gradually begin to return to normal.
Stephen Lee, General Manager of ASE Air Sea Express, ACEX Alliance member in Taiwan: "Business and shipment will increase within 6 months after the quarantine is lifted, as the production of raw materials and spare parts, as well as other goods, requires a certain amount of time. In another 6 months, airlines, road, rail and sea carriers will face problems of space shortage, as suppliers will start shipping goods to the buyer with a regular volume. The lack of space problem will be solved only when airlines start operating passenger flights as normal, and other carriers start making more weekly flights."
Of course, it is naive to think about the growth of the economy and, as a result, the volume of logistics compared to 2018 or 2019. This will have a significant impact on the business. "There will be no new investments, companies will live in "stagnation", some of the weaker ones will probably go bankrupt. With the slowdown in business, volumes of transportations are also reduced. This year, the supply on the freight transport market should be reduced by at least 20% compared to 2019. It is difficult to predict when we will be able to talk again about the growth of the logistics sector and the economy as a whole, because we cannot control the spread and resumption of the pandemic," comments Edvinas Neverovskis, Head of the ACEX Representative Office in Lithuania.
It will take time to restore all areas of logistics after such a pandemic crisis. It will also take a long time to fully restore flights that directly depend on passenger traffic. Stephan Haltmayer believes that the number of passengers will return to normal when the vaccine is found and people feel completely safe. "It will take at least two years to fully return the number of passenger flights that were observed before the epidemic. The pandemic will end only when all people are vaccinated, " says Stephan Haltmayer.
However, only 1.5-2 percent of cargo by weight is transported by air, while 65-70% is transported by sea, which is not affected by passenger traffic. Yevgeny Apasov believes: "Nothing will change institutionally in logistics – it is one of the most "ancient" industries. Changes in logistics will have (and already have) in terms of the scope, enhance the customers 'requirements to the professionalism and versatility of logistics providers".
The client is still becoming more demanding. After the crisis, he will understand what it wants clearer and more specific. Beautiful product packaging will not be necessary, the role of quality service will grow.
"The role of the service will grow after the price wars are over. That is, when the customer closes all their current "holes" at the lowest price and exceeds the budget due to downtime in warehouses, price increases in a number of directions. I think there will be fewer people willing to participate in large tenders when the deferred payment starts from 60 days. But, as after any crisis, sooner or later there will be growth, imports will return, stores will open," says Alexander Galkin, Commercial Director of NAWINIA, ACEX Alliance member in Moscow and the Far East.
The pandemic has shown that only modern technology can save us from complete closure. As long as we are all connected to the Internet through our home office, we can overcome these situations. Cargo agents who are well connected with other agents around the world will find alternatives for moving cargo. Airlines that have completely canceled flights can be replaced with charter companies. In any case, carriers will be able to find any solutions for customer service. They may differ from the usual ones, but there are always opportunities.