Will 2021 be an excellent year for the Logistics industry?
It’s trendy to make predictions these days; it seems that Everyone is doing this. I’m not an exception. But its a Hard work; even the best analytics are most of the time wrong. When the first pandemics wave hit us, most thought that We would Have an economic disaster, that the 2021 recession will be harsh as newer before. It stalled the investments; most operations were made Leaner. Some earlier signs related to the supply chain disruptions like changed import and export balances changed consumers’ behavior pointed out that the logistics industry will suffer. Keeping in mind that the recession hit’s the logistics industry first, those signs were quite terrifying.
But well, this is one of the hottest industries at the moment where record profits are being made. Of course, companies that weren’t able to transform their operations or companies working with affected sectors by the pandemics are suffering. Broadly speaking, the logistics industry is taking back margins taken from them during a decade (there was even increasing pressure from the customers to lower the prices). And I believe that 2021 will be even better.
Why do I think so?
Stay with me and find out the signs which are pointing to this.
1. Pandemics are changing consumer behaviors.
During the pandemics, most suffering industries are related to the entertainment sector: pubs, hotels, spas, outdoor movies, theatre, music, Traveling, etc. Those are the industries where before the pandemics, significant portions of total spending were relocated. Humans are emotional creatures dependent on the dopamine rush. And partying, traveling, buying things are the best ways to increase dopamine levels. Those are the soft industries where the logistics budget line is either small or absent.
When partying and traveling were eliminated, humans started to look for other dopamine bombs, relocating their budget for buying things, decorating houses, buying home entertainment, and all different types of items and services available during the pandemics.
In other words, those changed behaviors are favoring Hard industries. And there are many more logistics volumes in the Hard industries than soft sectors.
This fact favors the logistics industry; furthermore, some changed consumer behaviors will stay after the pandemics creating even more possibilities.
2. The UK leaving the European Union
One month is left before the UK is leaving the EU. Those countries Have deep economic relationships, which will be affected by the increased Lead times. Companies inside the UK will need to move from “just in time” and increase the safety stock. Longer Waiting times on the borders and increased procedure count will increase complexity and decrease truck turnaround.
The tendencies above suggest that more warehouse space, brokerage services, and more trucking services will be needed. Furthermore, new types of logistics services and forwarding means will arise, creating new business opportunities.
3. Changing global supply chains
Companies are rethinking global supply chains. Keeping in mind the increased freight prices and unpredictability of the low-cost manufacturing locations doesn’t look so attractive anymore. Of course, companies will not move all manufacturing home overnight, and this applies not to all merchandise, but the trend is emerging already.
Again more business opportunities for logistics businesses serving nearshored supply chains.
4. Some companies will lose the game and leave customers for the competition to take over.
There Will be winners and losers. Every shift in the economy creates headaches for companies that cannot change accordingly are suffering. Again, nothing to do here; it’s related to evolution; lost opportunities for one company will transfer to increased revenues for other companies.
5. The logistics industry is gaining back lost significance.
I believe no one before covid thought of the logistics industry and how it can change our lives. Most of us consumed without thinking about how merchandise appeared on the shelves. We are now all starting to understand that a small disruption in the supply chain can leave us without food and water on the table. Nothing new here; if you looked back to history, you would find out that all major wars were lost or won due to how well logistics activities were planned and executed.
And this Will change procurement of logistics services. Earlier shippers had the higher hand, looking for any possibilities to save few bucks (not all companies did this). Nevertheless, the importance of strategic partnership trends between 3pl/4pls was emerging; there were still many companies thinking about logistics procurement as a cost center, not a value creation center. But it will gain even more immense significance after the pandemics. Having partners who deliver keeps their word, and works shoulder by shoulder dealing with problems will be valued as never before. It doesn’t matter if they are more expensive. Strategic partnerships will evolve as it was with the retail and other industries.
The digitization trend shapes all industries, but the logistics industry is still behind compared to other industries like pharma and retail. We will see significant shifts in this arena, which will create many possibilities for SaaS Service providers and other applications.
Earlier biding platforms and virtual brokerages that were gaining significance will need to rethink its business model. It’s not enough to offer a platform for the price (dealing only with the procurement side) checking when strategic partnerships are evolving. The “Ask, ask, ask – buy” method is no longer feasible; companies evaluate total cost ownership. SaaS service providers need to take a few steps ahead, creating solutions that make operations more efficient and deal with complexity.
And there are many more possibilities for tech-savvy service providers in this Industry: automation, cloud, AI, IoT, Big data, blockchain, etc.
It seems that with a considerable delay but governments will be forced to provide help to companies and employees who were hit by the pandemics. I believe everyone understands that otherwise, we will have a disastrous situation. Of course, not everyone will be saved, but stability will be reached (I hope so).
It implies that we will not see the collapse of major economies, which is suitable for many businesses, and logistics isn’t an exception.
The E-commerce sector is booming as never before, the pandemics are favoring this sales channel. More and more companies start to understand that this is the future of commerce. Even skeptics are starting to believe in the Omni sales channels approach. Furthermore, we have seen many traditional brick-and-mortar retail bankruptcies, so the tendency to move towards the Omni channels approach is clear.
Again there will be more possibilities for logistics businesses handling all kinds of merchandise and for all kinds of SaaS and equipment providers which will sell solutions for making warehouse operations more efficient.
It’s hard to model all possibilities and conjunctures, but I see the Industry’s very bright future if no disasters happen.
Although I am often asked, what do you think about freight prices? Will they decrease shortly (talking about air, container, and USA road transportation)
We will most likely see increased and fluctuating Road, air, and container freight prices having in mind earlier logistics capabilities shortage (drivers, warehousing space, vehicles, etc.). This trend will most likely continue in 2021 and 2022, until equilibrium will be reached. And I’m saying with caution that those prices that we see today will not go drastically down in the following years; they are logical, I believe. The next price shift down can be achieved when technologies will eliminate shortages and make operations more efficient.
So the Industry will Have grat Years to come, although I would recommend Logistics companies leaders not to sleep on lours and look for ways to create long-lasting competitive advantage. It can be achieved by increasing efficiency, digitizing processes, marketing sustainability, improved quality of services, and aligning companies’ customer relationships, marketing, sales strategies with the general plan. One thing is sure, with the climate temperature going up, we will have more and more disruptions caused by the environment, viruses, etc. It’s better to prepare for disruptions before they actually arise.