November 19, 2021

How Has COVID-19 Changed Logistics?

How Has COVID-19 Changed Logistics?

COVID-19 exposed a wide range of previously unidentified weak points in the global supply chain. As a result, logistics and supply chain practitioners have spent nearly two years developing creative strategies that allow them to respond to unprecedented levels of pandemic-related challenges. These changes to the supply chain environment will leave a lasting impact on future logistics operations.

The SARS-CoV-2 virus will continue to cause problems and disruptions in the supply chain for some time to come, and long-time logistics operators will need to get used to all of the changes that make up what is now commonly called the new normal. Here are some of the lasting changes that logistics practitioners and stakeholders can expect to contend with in the future due to COVID-19.

Restructuring of the Global Supply Chain

An inability to get critical materials, components, and inventory from overseas suppliers has resulted in significant supply chain restructuring for many U.S. companies. Many of the old ways of getting goods from Point A to Point B and ensuring inventory availability have proven ineffective under extreme stress. Some of these changes include:

  • Reshoring/nearshoring. By moving at least some logistics, procurement, and production activities closer to home, business leaders hope to avoid the problems that stem from tangled international shipping lanes and complex international politics. While these initiatives take time to implement, reshoring and nearshoring efforts will increasingly produce results in the next few years.
  • Supply chain leaders will seek to improve resiliency by using redundant suppliers in different regions. That way, if one region gets impacted by an event, suppliers in other regions can step up production to fill the shortage. These practices will become much more common for both manufacturing and inventory management.

Rapid E-commerce Growth

Consumers made a massive shift toward online shopping because of COVID-19 stay-at-home orders and the general fear of exposure to the virus. Even as the pandemic subsides to more manageable levels, consumers have demonstrated an unwillingness to give up the convenience of e-commerce delivery. As a result, e-commerce will not just retain the market share it gained during the pandemic – it will continue to grow in every industry.

Industrial Real Estate Shortage

The e-commerce boom, reshoring activities, a spike in cold storage demand, and numerous other factors have contributed to a substantial shortage in availability for industrial real estate. Meanwhile, the pandemic has halted and slowed attempts to create additional industrial inventory. Because of this, it will take several years at a minimum for industrial real estate stakeholders to create enough supply to meet the skyrocketing demand. In the meantime, the logistics sector will continue striving to offset this ongoing shortage of space with creative fulfillment and storage solutions.

Labor Shortages Across Industries

Though it used to be a problem that mostly plagued trucking firms and certain manufacturers, the labor shortage has expanded into virtually every industrial vertical. During the pandemic, the American workforce reevaluated its priorities and overwhelmingly pursued positions with lower exposure risk. Now, warehouses, ports, truckers, and other industrial businesses all find themselves competing for the same limited labor pool. These shortages won’t resolve soon and will likely inspire innovative technology solutions that allow logistics operations to do more with fewer people.

Service Over Cost

The supply chain spent decades building toward Just-in-Time as a best practice. However, this hyperfocus on cost-efficiency and lean processes left the supply chain extremely vulnerable to disruption from COVID-19, natural disasters, and other threats. Business leaders have demonstrated a willingness to spend more if it means maintaining reliable service levels. As a result, logistics operators may have to get used to spending more to meet service expectations.

About Phoenix Logistics

Strategic Real Estate. Applied Technology. Tailored Service. Creativity. Flexibility. These fundamentals reflect everything we do at Phoenix Logistics. We provide specialized support in locating and attaining the correct logistics solutions for every client we serve. Most logistic competitors work to win 3PL contracts, and then attempt to secure the real estate to support it. As an affiliate of giant industrial real estate firm Phoenix Investors, we can quickly secure real estate solutions across its portfolio or leverage its market and financial strength to quickly source and acquire real estate to meet our client’s need.

Kurt Jensen is the Senior Vice President, Acquisitions & Leasing of Phoenix Investors, a national real estate firm specializing in industrial real estate based in Milwaukee, Wisconsin. He is a seasoned executive with over 25 years of entrepreneurial, management, and deal-making experience.

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