The global logistics industry, 2021 in review

The global logistics industry, 2021 in review

Global logistics is a continuously changing, fast-paced and highly profitable, yet very challenging industry. This is made so because of the myriad of external or near uncontrollable factors that could disrupt the industry in a twinkle of an eye.

For example, Natural disasters (Pandemics) and man-made disasters (piracy, accidents, etc.) these and more are major causes of disruptions in the sector. Going forward in this article, we would review the disruptions the industry experienced in 2021, the effects, lessons learnt and the future opportunities of the industry.

The pandemic and the logistics industry

One of the most negatively impacted industries by the pandemic is the global logistics industry.

At the very early stages of the pandemic, the world entered a lockdown, borders were shut, flights grounded quickly, and the movement that was given priority was for emergency and safety equipment — understandably so. There was also increased demand for PPE (Personal Protective Equipment).

While this was ongoing, the world experienced an astronomical increase in e-commerce purchases, more people across the world relied on online shopping. This further put more pressure on the global supply chains.

Whilst combating these pressures, logistics operators had to place priority on the health and safety of their employees by way of reviewing and reworking their supply chains, bringing about changes in their workforce, considering logistics automation and new warehouse management structures.

It was expedient for most logistics firms to swiftly adapt to these numerous changes within the past one plus year to stay in business, those who could not, couldn’t stay afloat.

Global logistics and rising costs of shipping

The shipping sector is undoubtedly a critical part of the supply chain, assisting with the movement of containers in millions daily across the world. The cost of global shipping is hitting all-time highs, and this mounts pressure on logistics companies and consumers.

The following are factors necessitating the rise in shipping costs:

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Increase in demand for Chinese exports and container shipments

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Shortages of containers (mostly at Asian ports) have also increased shipping costs

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The increased cost of fuel

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Inadequacy of port workers

All these can be attributed to the pandemic experienced globally.

The sustained shift to E-commerce/Drop-shipping

Despite the disruptions and challenges the global logistics sector experienced in 2021, there are still some positive impacts the pandemic had on the industry. One of such is the shift in the shopping behaviour or culture of consumers across the globe in the acceptance of e-commerce and drop-shipping.

As countries enforced shutdowns, most businesses transited to digital operations, thereby providing and purchasing increasing quantities of goods online.

This development surprisingly has proven as a trend that has come to stay, because the increase in e-commerce generated by the pandemic has become a permanent consumer behavioural shift.

This shift has created an opportunity for the shipping/logistics firms to research, test, and equally invest in different ways to provide pick up, transport, sort and delivery of goods internationally.

The future of shipping costs

The astronomical rise in shipping costs was primarily driven by transport disruptions related to the pandemic, and this has resulted in tightening the availability of containers. It is unfortunate that even as the world gradually gets back to normalcy, for the below reasons, these costs will most likely not come down.

The gap between production and demand

The gap in-between production and demand for goods has remained one of the significant effects of the pandemic. Due to the inconsistencies in demand with different countries entering full and partial lockdowns, also opening at different intervals, this led to shipping firms reducing capacity on major routes and equally the shortages of empty containers.
As the global economy is on its recovery path, the global demand also recorded a strong bounce back, this is more evident in the sectors linked to international trade in goods. There is an increase in competition for ocean freight as many economies have further opened up and there are rebuilding of inventories across several supply chain links.

There are limited alternatives options to ocean freight, and this results in the inability to avoid growing transport costs now.

An imbalance in recovery among countries

Currently, some countries have been recorded increase in the transportation of goods than they did before the covid-19 pandemic started, while some countries are still battling to match what they did before the start of the pandemic.

Congestion and closures of port

This formed a major part of the problem, shipping performance in 2021 picked up from where 2020 left off, in relation to lower rates of vessels that kept to schedule, and average delays for late vessels on the rise. Although there has been a resumption of operations in major ports globally, congestions and the steady need for covid-19 protocols mean the continuation of delay.

Implications for the Shipping/Logistics Industry?

The pandemic has in no small way negatively impacted the logistics industry at large, this has necessitated companies to change and adapt in ways they never would have probably imagined in years.

As the world returns to normalcy, the increased demand that the pandemic brought does not seem to stop, this has affected shipping internationally. We can safely posit that global costs of shipping might not return to their former levels soon, prior to covid-19. This might as well be considered the new normal.

As a result, industry players must decide on how best to deal with the current realities, and this could mean accepting price increases and distributing same across the value chain, adopting technology to help efficiently manage costs, or reviewing and reworking the supply chain to avoid long-distance shipping as possibly as they can.

In order to stay afloat in this new normal, shipping and logistics firms must lead more flexible, efficient and effective ways of doing business.

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