Logistics post COVID-19: Why we need to love logistics

In less than 90 days, COVID-19 has changed the global logistics economy forever.

For decades outdated misconceptions by Councils resulted in the logistics sector being viewed as the Cinderella of the employment uses. Much of this was due to a misguided perception that low grade jobs were provided in poor quality buildings. As a result, all too often allocations for logistics and/or the support for additional growth in the sector was not viewed as being sought after or important. Well, Cinderella is now considered a key worker and receives public applause at least once a week.

Notwithstanding the rise to fame of the sector it is inevitable that during the crisis, companies with globally stretched supply chains and low inventory levels have suffered greatly. As a result, some will go bankrupt. The survivors who were, or can now be, fleet of foot or had a well-considered business continuity plan may choose to maintain higher inventory levels as safety buffers, especially for critical goods like PPE, pharmaceuticals and some food items – at least in the short term. The national shortage of available space has been highlighted and key locations will increase in value as the sector seeks to satisfy demand. Equally, users are likely to tend to favour organisations with shorter, more robust supply chains and better liquidity ratios as companies become more valued for their sustainability and resilience, even if in the short term this means a slight sacrifice of profit margins for longer term gains. There will be winners and losers in this transition which ultimately is likely to result in a greater concentration of power among fewer logistic providers.

In the short to medium term there will be very few companies single sourcing, particularly if they are dependent on the Far East, China, North America, Brazil, South Africa and some parts of Europe. Instead, expect to see companies near sourcing a lot more, especially in critical industries like medical supplies and food. It is also possible that global health and food providers will impose quotas including products and ingredients from national or regional suppliers.

Undoubtedly, e-commerce will emerge as the big winner of the crisis probably at the cost of our all too often monotonous shopping centres and some high streets where they lack the variety and the offer of a high-quality consumer experience provided by independent stores. Even people who previously never ordered something online will have now become accustomed to internet shopping, which will accelerate the shrinkage in the number of physical stores. Aided by the continued growth for data centres, e-commerce will remain a driver for air cargo growth all be it potentially in focused locations which offer economies of scale, opportunities for future investment and are well connected by strategic roads to the locations of greatest demand in the UK.

There will not just be a demand on space arising from the growth needs of the logistics industry; let us not forget the additional opportunities that will arise from an e-commerce scenario. Those opportunities, which will include diverse job creation arising from state-of-the-art logistics warehouses, the efficiencies in processes that will be born out of this pandemic and the construction/development prospects that will be secondary to these new opportunities. Furthermore, there will be a fundamental change of perception on the demand and need of logistics nationwide.

People are optimistic by nature. Whenever there is a crisis, we quickly talk about the form the recovery will take – even though in the earlier years of prosperity and economic growth, we rarely spoke about the risk of a crisis dramatically changing our lives. So just as we have lived through pandemics, natural disasters and economic calamities before, things will improve, be it in a ‘V’, ‘U’, ‘W’ or a ‘L’ shaped recovery. However, whilst some sectors of our society may forget the days of ‘lockdown’, the shape and importance of the logistics sector in our economy and the robustness of supply lines will be a long-lasting legacy, long after the passing of the COVID-19 pandemic into history e-books in a data centre for us to download.