We live in an era of global value chains: Everything we produce is interconnected globally to different suppliers from different tiers. With China effectively acting as the factory of the world, when the COVID-19 crisis broke out in Wuhan Province, supplies quickly became short. China was not shipping usual quantities of goods, ports were closed due to safety protocols and shipping companies were making trips with reduced cargo. The chain reaction intensified: shippers cut down their number of sailing journeys and prices surged; rail services began to pick up what shipping services could not provide. As China recovered, additional COVID-19 hot spots emerged elsewhere in the world. Consumer behaviors changed, more ports closed and goods began stacking up in yards.
One of the key learnings from the COVID-19 pandemic is that digitalization is fundamental to providing visibility, integration across the supply chain and automation. Lessons learned from the widespread effects of COVID-19 must apply to future operations in the logistics industry.
Benefits of digitalization in logistics planning
In disruptive scenarios, firms need to react with a sound plan. Today, some companies still operate with pen and paper or decades-old, dated computerized systems. When disruptions occur, these companies scramble to catch up. If you can consider certain scenarios in advance, you’ve got an edge – but your range of options is very small if you only have limited data. So historically, companies keep records of shipments, customers, cargo, country restrictions – and will come up with a fairly limited demand scenario based on volume and hope that business proceeds as usual.
At moments like these, digitalization strengthens visibility and allows you to react more nimbly. The option of having information at hand, to collaborate with customers and your network, to understand the situation as it develops, and have a common platform, enables swift and smart decision-making when major disruptions hit. You need to be able to see what’s going on and quickly assess the impact. For example, where are the delays with closed borders or airports? How many ships should you leave at sea and what sort of rates should you offer customers? When labor regulations vary by country, how can you rebalance staff working schedules to comply with health regulations? The ability to quickly process complex intelligence, which digitalization can provide, is vital to help logistics firms weather the storm.
Workforce planning is an ongoing challenge in good times and bad. Digital tools provide visibility essential to making sure you have staff deployed correctly to provide the service you’ve committed to offering. Tools help control the number of working hours you have; keep on top of employees with different compensation plans; who has overtime or different types of contracts. It becomes easier to rebalance working schedules and even take employee preferences into account. When you can meet these various demands, the working environment is much better and you’ll reap benefits with your customers.
Even in normal times, it can be daunting for large companies to make a new strategic plan, because logistics has become increasingly complex due to reduced workforces, stronger labor regulations, increased competition and tighter health and safety protocols. But, for many, COVID-19 has forced them to take a different approach as the need for investments in technology became evident during the onset of the pandemic. At the same time, firms are also focused on cutting costs. We’re not in a bonanza situation right now. So there is a real need to manage costs in logistics companies. Adopting digital technologies is a must, but these companies need to be smarter and more creative as to how to implement those purchases.
Preparing for what comes next
The spectrum of logistics solutions and scenarios continues to shift as we envision a post-COVID world. Open questions remain around the re-emergence of rail service and how e-ecommerce deliveries, which helped keep the economy afloat during the pandemic, will fare in a post-COVID economy. And we can expect health regulations to remain a top priority.
We don’t know what the next disaster will be. Nor how it will disrupt the logistics industry. But we can expect that those companies that invest in digital technologies, will be best positioned to optimize their plans to make their supply chain robust, flexible and resilient.
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