Analysis

What will the long-term industry effects of COVID-19 be?

31st December 2020
Alex Lynn

The UK logistics industry claims British businesses will have to rethink their reliance on China and its importance to international supply chains (32%) as a result of the COVID-19 crisis. Logistics industry leaders, polled by IMHX, has also forecast a move toward increased warehouse automation and robotics (29%), which could help to address challenges presented by social distancing as well as labour shortages fuelled by Brexit.

The biggest challenge facing their businesses during the COVID-19 crisis was the Government’s confused handling of the pandemic, according to half (48%) of businesses operating in the sector, who criticise Parliament for lack of guidance.

Reduced reliance on China

The survey of industry leaders found a third of respondents (32%) believed the supply chain industry would need to seriously rethink its reliance on China and its importance to international supply chains.

This comes as shipping container rates in December jumped to $7500 to the UK from China meaning its very costly to obtain stock now from the region.  

The research also revealed an additional 43% cited increased demand on already overstretched facilities as a considerable challenge during the pandemic, with nearly two thirds (63%) agreeing their business has been negatively impacted by COVID-19.

Supply chains in lockdown

Against a backdrop of uncertainty at Government level, 77% of those polled confirmed they have made changes to their business as a direct result of COVID-19. While the majority of these changes were employee related, including enforced homeworking and furloughing staff, 90% have introduced social distancing measures in their locations, causing some industry experts to warn of the implications for future warehouse design and logistics real estate, and what this might mean for consumers.

Peter Ward, CEO of the UK Warehousing Association said: “It’s easy to join the blame culture, pointing the finger at government and to possibly overlook the many positive opportunities facing our sector at this pivotal time. The pandemic has driven opportunity for our sector, as online shopping and demand for home delivery soars. With grocery retailers in particular re-evaluating their warehouse and logistics strategy, take up of warehousing space for the first half of this year is already 20% higher than in 2019 and set to grow.  Now is the time to stiffen resolve, look for the positives that flow from the tough times we face and seize the undoubted opportunities ahead.”

Logistics - the new normal

In the face of job losses and a drop in consumer spending, two thirds think it will take up to two years for the logistics and supply chain sectors to get back to normal, while one quarter don’t believe it will ever be the same again.

“Looking to the post-pandemic era, two thirds of logistics businesses (69%) also share concerns about the impact COVID-19 will continue to have on the supply chain. However, according to our research, it is clear that this impact could instigate change which in turn will lead to increased efficiencies  for logistics operations,” said Rob Fisher, IMHX Group Director.

Shane Brennan, Chief Executive, Cold Chain Federation, said: “Despite the huge pressure on businesses, the main story of COVID-19 is how resilient and responsive they have proved to be. I fear the biggest challenges are yet to come. As the government withdraws economic support and the ‘new normal’ establishes, the businesses that make decisive action will survive.

“This means taking a sober look at all short term costs, especially, regrettably, labour costs in existing operations, but also bringing forward investment plans to modernise buildings and establish new locations wherever possible; and above all responding to the fast-changing consumer demands and opportunities of automation and digital solutions.”

Silver linings

Uncertainty about the future in the face of COVID-19 is shared by many sectors, including logistics. However, there were also a number of encouraging signals to come from the research: 31% of businesses operating across UK supply chains confirmed the pandemic has had a positive impact, with 38% of all respondents citing the boost in in e-commerce and internet fulfilment as a lasting driver for consumer demand. An additional 88% claim they would be prepared if ‘faced with a similar situation again’, indicating a confidence in future supply chain resilience  

Rob Fisher continued: “With the UK Government’s lockdown exit strategy now taking shape and a decrease in global supply chain disruption, there is a tangible feeling of pride among respondents at how the pandemic was handled, as 59% said they believe the UK logistics industry’s response was a reflection of its agility, flexibility and innovation. A further 32% applauded the way logistics and supply chain  businesses had pivoted to help NHS and key workers.”

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