Insight

Re-orientation in logistics

Insight
Law

Demand for space in the logistics sector is rising, as a result of increased online buying – both domestic and commercial – and a trend to more domestic storage and production.

The COVID-19 pandemic will result in long term disruption and major change. The sector will be affected by reduced international trade, increased regionalization and an accelerated move to on-line buying. Supply chains will alter, requiring a new approach to warehousing and logistics parks.

For organisations with risky, opaque or vulnerable supply chains, de-risking and even re-shoring capacity to home markets will likely form an immediate priority. We may see a broad acceptance that supply chains reorient from aiming to be just-in-time to just-in-case, implying the end of ‘lean,’ and a reduction, but not elimination, of complex global supply chains.

Trends

  • Geographical shifts: 59% of organisations expect that they will have significantly modified how they produce and distribute and nearly half expect to have modified their geographical base of operations(1). Ports could, as a result, increasingly cater to smaller ships and shorter routes due to the rise in local and regional production processes(2),’ for example.
  • Capacity and capability: Significant increases in on-line buying will place emphasis on both the capacity and capabilities of logistics and warehousing, compelling the use of new technologies and systems. Warehouses need to accommodate space not just for fulfilment, but also for returns.
  • Broader networks: We are likely to see a decentralization of the sector into a broader network. The future urban distribution centre will also likely need to include a network of mobile or perhaps pop-up style pick-up points for facilitating demands for ever shortened delivery times(3). The result may be fewer large operations but many more smaller, connected ones.
  • Technology: Covid-19 has accelerated the emergence of online freight platforms, third-party collaboration and a rise in contactless deliveries(4).Urban distribution centres will need to incorporate a wider range of technologies, perhaps including advanced analytics able to predict consumers’ demands and consequently minimise inventory.
  • Wellbeing: The pandemic and its aftermath is likely to change what is required of warehousing, particularly in the larger units. Sophisticated ventilation, more amenities for the workforce are just some of the likely evolutions.
  • Flexibility: Industry giants are also looking at the whole management of the chain. The goal is not to replace the existing logistics delivery chain but diversify it and add agility to it. New transport and infrastructure systems may in time facilitate even more change, with both provider and user flexing to adapt to different locations and processes.

References

(1) Source: Forbes, 2019 https://www.forbes.com/sites/sesilpir/2019/09/09/the-future-of-work-is-here-what-is-your-hr-organization-working-on/#3cef63457b2e
(2) Source: Deloitte, 2020 https://www2.deloitte.com/content/dam/Deloitte/nl/Documents/consumer-business/deloitte-nl-cb-global-port-trends-2030.pdf
(3) Source: Logistics Middle East, 2020 https://www.logisticsmiddleeast.com/warehouse/35181-the-next-generation-of-smart-warehouses
(4) Source: Accenture, 2020 https://www.accenture.com/us-en/insights/consulting/coronavirus-supply-chain-logistics-resilience

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