The New Normal for Logistics: Assessing the impact of COVID-19 in 2020 vision
The renowned military strategist, Sun Tzu once wrote “The line between order and disorder lies in logistics” and it is no different now than it was then. It is often used as a barometer for any global economy.
However the harsh realities of COVID-19 have had a major impact on the global flow of goods. With a hyper-focus on the MENA region, these restrictions are significantly impacting businesses and consumers alike. At the risk of sounding too dramatic, if we as an industry are not able to adapt to these challenges we risk not only a pandemic, but pandemonium.
There is, however, a silver lining, if we take corrective action now we can address these challenges, support our society, and lead the industry on a path better than where it came from.
Finding demand when you shouldn’t
COVID-19 is creating havoc for logistics. Port closures and increased border processing times are driving real disruptions for cross border and port traffic. In turn leading to pricing spikes, that are no longer palatable for shippers, forcing reduced demand and/or substitute modes of transport. Market estimates suggest a 12% drop in container volume in March-May year-on-year on the Asia-Middle East-India route - reminiscent of the global financial crisis of 2009.
Despite the market slow-down, a number of localised industries are firing up; pharmaceuticals, FMCGs, non-perishable foodstuffs and e-commerce are clearly in demand, while pet-chem, construction, manufacturing and entertainment industries have taken big hits. The companies that navigate these disruptions better often succeed in the long-term, they invest in their core customer segments and anticipate their behaviours.
What you can do?
- Adopt a dynamic strategy to focus on the core customer needs in the market
- Develop a balanced client portfolio to reduce concentration risk during force majeure
- Cut through red tape to initialise opportunities quickly and support demand peaks
Trying to fulfill demand with less
Supply is becoming scarce, and it will worsen. Hard government regulation coupled with a burgeoning social response is restricting the availability of supply in the market. While the government will continue to push to allow for such essential industries to continue; a breakdown in communication between decision makers and enforcers has created a game of chinese whispers, sending a ripple across the driver base.
A recent local example in Saudi Arabia, saw a truck driver hit with a fine for operating after curfew. He was not located within the city limits and had a right to be operating. This news travels like wildfire. Operators are now not commiting to certain trips, and drivers don’t want to move at specific times. All compounding the acute challenges facing transporters at this time.
It is now more important than ever to ensure supply, and create confidence in the market to meet its needs.
What you can do?
- Build on your relationships with your suppliers, you need them now more than ever
- Adopt various incentive models and structures to guarantee supply from your suppliers
- Communicate with your suppliers regularly and with confidence, all the way down to the individual
Adapting to a new working model
Social distancing, while an important endeavour is driving major changes in how we achieve work on a day to day basis. This disruption is most acute within our industry, and in this region, where access to real time data is limited and slow paper based processes that rely on human interactions will make this transition challenging.
However, leaders in the industry have rapidly implemented contingency plans; working remotely where possible, segregating team structures (just in case), implementing digital tools, and relaxing restrictions and red tape. As an example, at Trella we are now working with our shippers to accept electronic proof-of-delivery as a means for invoicing, reducing any potential exposure to our employees and our customers employees
The silver lining I spoke of earlier, if this becomes the new norm, which I believe it will - such measures will drive a more efficient and digitalised environment for the logistics industry, something that we at Trella are striving for.
What you can do?
- If you haven’t already, rapidly enable your teams to work from home - leverage the large variety of tools that are available for use such as slack, google suite, zoom etc.
- Digitize documentation processes where possible, and/or customise delivery processes to reduce/limit exposure to COVID-19
- Put in place weekly cadences, highlighting reporting structures, recurring meetings, and progress trackers to provide clear visibility and ownership
Dealing with the human impacts on our industry
Isolation, confinement and displacement affect us deeply as humans, it is of course natural to feel stress, anxiety, fear and loneliness at this time. However, it is not only the restrictions that we are enduring, but also the uncertainty that shrouds them which is troubling to our mental health. The human mind is incredibly averse to ambiguity; driving us to quickly find certainty, which in a less-than-certain world can be dangerous.
These impacts are affecting people to differing degrees, but it will be most visible on the front-line. Truck drivers, many of whom cannot afford to stop working, are facing extremely challenging environments at this time. As an example, spikes in demand and reductions in border throughput are driving extremely long wait times - the UAE border processing times ballooned from an average of 2-3 hours to 2-3 days, with a back-log of 5000 vehicles. Not only do these areas lack the required amenities for such a mass of people, these forced congregations also greatly increase the chances of infection.
Acknowledging the human impact of this virus on the people in our industry is an imperative, and we must support one another to come out stronger on the other side.
What you can do?
- Demonstrate purpose and support the effort to combat COVID-19, ensuring that your team feels like they are contributing to the cause
- Think creatively how you can engage with your team during this time, leverage social, introduce humour and appreciate them; but be always be credible, well informed and level headed
- Ensure your team, and suppliers have access to not only the necessary physical protection to minimise exposure, but also psychological support to get through this period
Amidst this uncertainty, if anything is clear, this pandemic has shown that businesses must adapt, or die - we as an industry need to evolve to drive efficiency, and convenience for our consumers. The situation at hand dictates this sentiment, it is no longer a desire, but a need, for everyone - as the age old quip goes, necessity is the mother of all invention. Ultimately, those that are able to innovate rapidly, through both immediate tactical responses and longer term preparation can not only provide a common good, but provide great surety for their business.
The constancy of the logistics industry must ensue. It must. However, as an industry we need to adapt to a new normal that allows for the efficient and effective movement of goods, now more than ever.
E-commerce deals in MENA-based startups have tripled from 2016 to 2019. Find out more details behind this trend and many more in our 2019 MENA E-commerce Venture Investment Report HERE