India is facing several challenges amid country-wide lockdown. Many industries have been severely affected. One of them is logistics and supply chain management. Shortage of labour, cargo capacity challenges, the slowdown in manufacturing, order delays, stuck shipments as well as demand and supply shocks have affected the logistics segment to the core.
The manufacturing halt has reduced demand for logistics services, which has brought down the pressure on prices across warehousing, freight and logistics. Due to lockdown in surrounding countries, minimal export-import movements during this time have amplified the crisis in the logistics space. Restrictions on air travel and international flights globally have contributed to the slowdown in the movement of goods and brought first and last-mile transportation and intermodal movement of goods to a standstill. Reduction in the capacity of vessels and shortages in the equipment to deliver the goods, related to disruptions has had a major impact on the intra-Asia trade lanes. A rapid and sudden drop in freight volumes has prompted major carriers to report service cancellations and delays and ultimately empty sailings to and from India, the Middle East and the Mediterranean took place.
But in a post-COVID-19 world, the scenario of logistics and supply chain segment will be totally different and supply chain stress tests will become a new norm. India’s supply chains will go through huge transformations to challenge the demand and supply frameworks in the coming few years. Also, people are responding in a variety of ways and having different attitudes, behaviours and purchasing habits.
According to a recent industry report of India’s leading logistics intelligence platform LogisticsNow, a timeline of at least 1-2 months will be required for the logistics industry to recover post lifting of the lockdown. The key recommendations are to unlock inventories for retail consumers; increase transport and distribution capacity for the vaccine; build citizen information systems (CIS) powered by artificial intelligence (AI); build digital supply chains and logistics, mandate and further drive digital payments, etc. alongside supporting the economy through the usage of advanced technology.
The most important change will be the rise of domestic sourcing to make supply chains more local. Post lockdown, the role of government policies to promote domestic manufacturing companies should increase and this will push the establishment of global value chains in India to not only serve domestic markets but also export markets. Companies should start building more safety stock in their distribution pipelines to gain risk management and mitigation in supply chains. This will increase in more warehousing space across networks. The practice of developing, implementing multiple and robust contingency plans will be taken more seriously.
As there will be more variables in volumes, supply chains will start becoming more adaptive, especially large suppliers and logistics operators in the supply chain industry must prepare for major catastrophic events such as weather-related calamities, upcoming lethal pandemic outbreaks, strikes, social unrest and associated disruptions. Digital transformation of the industry will be hastened. Every element of the logistics process whether it is planning or execution would be reconsidered, repurposed and digitized. In most of the industries, comprehensive dashboards have been produced that states the full status of production and shipment, down to the last detail. Such technology will inevitably emerge as a norm in the coming days.
To prevent the spread of the virus, the number of touch-points any product goes through during the entire supply chain—from production to handling till the doorstep of businesses and homes—will be reduced drastically. Rapid automation in handling systems and management including palletization of cargo, conveyor systems, robotics, drones and drop boxes amongst others would go through an accelerated trend. A rapid shift towards omnichannel procurement would be a new trend once the lockdown is completely lifted.
Every segment, somehow attached in running supply chains, would need to go through severe compliances as a worker, product, transport and facility sanitization protocols would be the new priorities. This will not only increase the management cost but also the insurance cost. Labour will be managed as a key asset of adaptation that plays a fundamental part of a crisis response program. To deal with one of the largest global exogenous shocks to economies, almost all aspects of managing supply chains will go through substantial changes.
In the Indian logistics sector, several long horizon transformations will get accelerated and perhaps skip a generation of gradual improvements. In the post-COVID-19 situation, the main goals in the medium term should be making them more regional, modifying the supply chain as a key business driver and putting back the human asset and manpower as the most important factor for an agile business to succeed in the post-Covid-19 scenario.