In brief

In brief

  • COVID-19 is disrupting global distribution on a scale unseen in recent times, creating extreme challenges for the supply chain.
  • The pandemic also emphasizes the key role of logistics and the importance of supporting and protecting people in this critical function.
  • Companies have an opportunity to reshape their logistics operating model to increase effectiveness, efficiency and resilience.
  • Several pragmatic steps can help companies respond to the immediate challenges of distributing products and adapt to the new normal.

How is COVID-19 affecting logistics?

COVID-19 is disrupting global distribution on a scale unseen in recent times. Increased border controls and customs regulations resulting in longer wait times, and lack of capacity for long-haul and last-mile fulfillment are creating extreme challenges for logistics organizations.

As a result, organizations are having to quickly adapt by accelerating their digital transformation agendas. This process has been happening for several years, albeit slowly. Driven by heightened consumer expectations from interactions with online retailers like Alibaba and Amazon, logistics businesses have started to introduce capabilities like real-time order monitoring, end-to-end inventory visibility, and super reverse logistics experiences.

Incumbent businesses are being forced to innovate and adopt new digital tools faster than ever to minimize disruptions. Leaders must take urgent action to RESPOND to new conditions, support the workforce and sustain business operations.

But they should also use this opportunity to RESET their operations with digital capabilities and RENEW their logistics operating models. This reset will help increase operational efficiency and effectiveness. By doing so, companies will emerge from the present crisis with more resilient supply chains to future disruptions.

RESPOND: Five key actions to address the COVID-19 impact on logistics

1. Improve visibility

Use an integrated logistics control tower to get real-time visibility into operations.

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To help leaders use insights to respond with confidence, companies should use a logistics control tower to get a real-time view of operations. This will require integrating logistics market information (e.g. truck border crossing times), inventory levels, demand forecasts, and capacity constraints, both internally (e.g. warehouses) and externally, (e.g. carriers and suppliers) to support better and faster decision making. At this point, companies are going for scale rather than scope. It is better to focus on a core set of end-to-end global priorities than get distracted by trying to implement sophisticated functionality in each locality.

Find out how to develop a rapid response plan for the supply chain.

2. Increase flexibility

Repurpose assets, inventory and capabilities to balance supply and demand.

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Companies should look for ways to repurpose assets, inventory and capabilities to meet increased demand and act responsibly to help local communities address the COVID-19 impact:

  • Balance supply and demand on a micro and macro scale (such as redeploying fleets and inventory to high-demand locations and customer segments).
  • Increase spot-buying of freight to get additional capacity, leveraging online freight platforms (such as LoadSmart, ClearMetal, or Timocom).
  • Collaborate with other companies, individuals, and communities to bridge gaps in service. The UPS Neighbor Captain initiative lets people offer their garages to hold packages and inventory for neighbors, enabling after-hours pickups to avoid multiple delivery trips for the carrier.
  • Leverage “Uber-like” service models by thinking creatively about the use of non-traditional assets.
  • Increase contactless deliveries. Implement no contact services for pickup, delivery and payment options (such as scanning a QR code or signing a digital image).

3. Communicate effectively

Ensure proactive communication with onsite and remote workers, suppliers, carriers and customers.

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In this time of intense disruption, regular, clear and effective communication across the whole logistics ecosystem is essential. Fulfillment and logistics teams should look to engage proactively with:

  • Other supply chain functions: Collaborate with and integrate the different supply chain functions, such as procurement for new carrier agreements, planning for supply and demand alignment, and sales and customer service for customer prioritization.
  • Suppliers/carriers: Look to manage expectations and proactively monitor their effectiveness against a revised set of service level expectations.
  • Customers: Provide as much visibility as possible to wholesalers, distributors, channels and consumers about the impact of COVID-19 disruption on service level agreements.
  • Remote workers: Quickly adopt new ways of working to manage remote workers. Look to keep them engaged and productive by, for example, monitoring daily activities with transport planners. Inspire them with a sense of purpose and commitment to pull through the crisis and retain trust.

4. Support the workforce

Address the physical health and mental well-being of the core workforce as well as the extended logistics workforce.

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Both the core and extended logistics workforce is enduring an unfamiliar and often highly stressful work environment. Companies should look to address their mental and emotional health and well-being as well as their physical safety. Ensure strict compliance with all health regulations (such as social distancing in canteens and workspaces). Set up interim workforce protection measures like non-combined shifts and/or temperature checks during daily clock-ins. To support human resilience, people need to trust that their leaders have a plan to support their health and productivity.

5. Be a responsible steward of supply chains

Think creatively and with purpose about how to support customers, suppliers and logistics networks affected by COVID-19.

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COVID-19 is demonstrating the vital role that logistics plays in modern societies. Thus, the response is a question of corporate responsibility as well as business continuity. With the pandemic severely impacting the finances of many companies, logistics leaders are thinking creatively about how to best support customers and suppliers. That includes paying the most financially vulnerable logistics partners immediately (even if contracted) as well as waiving fees and penalties to keep the supply chain moving. Leading companies are also making their fleets and teams available for the emergency transportation of healthcare supplies needed by hospitals and medical care centers.

RESET: Learn, evolve and grow stronger after COVID-19

There is no question that the crisis has tested the resilience and flexibility of distribution networks and logistics operations worldwide. Leaders should use this time of disruption to reset, rethink and renew logistics and supply chain management for the long-term benefit of their businesses and the communities they serve.

We recommend the following actions to RESET operations:

Conduct a detailed analysis of the response phase. Identify points of weakness as well as the effective capabilities displayed and acquired during the crisis. Decide where to strengthen, protect and enhance.

Revisit master contracts with core suppliers, vendors, carriers and third-party logistics providers. Adjust terms and conditions to the new normal. Consider whether there are needs for new fleet configurations, new routes, and/or revised service level agreements.

Revisit customer channel segmentation and logistics agreements by segment, given the new demand patterns and service expectations created by the crisis.

Realign the existing workforce as needed. Rebalance teams in distribution center operations, fulfillment, traceability, customer service, etc.

Decide which digital technologies used during the crisis could be adopted permanently for enhancing capabilities for the long haul.

Support local communities impacted by COVID-19 to build a trust-based ecosystem and network.

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RENEW: Look to the future of logistics

The COVID-19 emergency will pass. Leaders know that the speed of the economic recovery depends on the ability of companies and industries to bounce back from the crisis. That means making decisions and taking actions now that will generate revenue, protect jobs and support the return to growth.

This is also an opportunity to look at the future of logistics. Companies should be considering how to RENEW their logistics operating models to increase resilience, responsibility, effectiveness and efficiency.

We recommend the following actions to RENEW logistics and fulfillment for the future:

Adopt a smart zero-based mindset. Rethink operations from scratch and devise the best possible cost structure for the future of the business.

Increase the maturity of the ecosystem. Develop the digital capabilities needed to enhance service levels and control costs (such as visibility and execution control towers and “Uberization” platforms for distribution centers and vehicles).

Invest in omni-channel fulfillment platforms with dynamic order allocation capabilities.

Identify investments in automation and robotics for logistics. Look to improve resilience and augment outcomes through advanced human+machine operations.

Drive greater logistics collaboration by developing cross-industry forums and committees to embrace co-creating models for process and service innovation.

Build responsibility and trust through a green logistics network, integrating environmental considerations in strategic decisions about the distribution and storage of goods.

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