Logistics, or the flow of commodities in the economy, nearly came to a halt at the start of the coronavirus pandemic as many countries were forced to impose border restrictions to contain the spread of the disease.
While logistics was one of the first sectors to bear the impact of the community lockdown, it is expected to have a crucial role in ending the pandemic, particularly in terms of delivering COVID-19 vaccines to hundreds of millions of households around the world. It is therefore important to see the sector not only functioning well but also rising to a new level that the world has never seen before.
Logistics is more than the transportation of goods or services. It covers sourcing from the point of origin, movement or transportation, storage and warehousing, distribution and last-mile delivery. It is the operational process behind the supply chain. Simply put, it is the link among producers, traders, and customers/consumers.
Countries with efficient logistics are able to become more competitive in the global trade, enabling their citizens to have more affordable access to products and services.
The International Finance Corp. (IFC), the private sector arm of the World Bank, says logistics accounts for anywhere from 6 percent to 25 percent of the gross domestic product depending on the level of a country’s economic development.
With the globalization of brands and the rise of electronic commerce, logistics companies have occupied a more prominent status in the world economy. These companies have invested in transportation solutions that include air freight, shipping, rail, trucking and smaller vehicles that deliver the items to establishments and households.
They deliver almost everything—from raw materials and fuel, machineries and equipment, to finished products, food and medicine.
Impact of the pandemic
The world economy faltered in 2020 after most governments restricted travel—both the movement of people and goods—in their attempt to limit the transmission of the virus.
Global trade tumbled, as production and demand decelerated at double-digit levels. Countries such as the Philippines saw more than 10-percent contraction in economic output in the first three quarters of 2020.
The pandemic disrupted global trade, as factories in Wuhan, where the virus is believed to have originated, were shut down in the early part of the year. This affected the operations of factories in other countries which were relying on inputs, components or parts from China to assemble mobile phones, solar panels, automotive, medical equipment and other finished products.
Operational constraints then led to delivery delays, congestion and higher freight rates, according to the IFC.
The situation was particularly dire in March and April when the stock of essential medical goods was nearly depleted at pharmacies and drugstores because there was limited movement at the time. It was a difficult lesson that many countries had to cope with.
Even to this day, the community lockdowns and social distancing protocols continued to hamper the flow of some commodities, resulting in higher costs to the detriment of consumers.
Role of logistics in pandemic
Several pharmaceutical companies have recently announced a breakthrough in COVID-19 vaccine development. Aside from the production of the vaccines, the logistics side of it is expected to become a major challenge for countries that would like to get their hands on the vaccines. Transporting these vaccines would require a massive cold storage network which not all countries have the capability to provide.
It will be up to logistics companies to fill the gap by investing in freezer vans and other special vehicles needed for such purposes as well as warehouses suited for pharmaceutical products in enormous quantities.
The answer, therefore, is to modernize the logistics sector in the shortest possible time, given the urgency of the situation. Modernizing the logistics sector, however, would entail more than the acquisition of equipment, but more importantly systems that can achieve delivery of goods in the most cost-efficient manner.
The IFC said the uncertainty caused by the pandemic has trimmed revenues of small logistics providers such as small truckers which were severely hit because they did not have any backup or recovery plan, and they lacked the latest technology.
The IFC said the recovery and long-term impact of the pandemic on logistics may be influenced by several factors such as increased dedicated air cargo capacity; increased cargo inspections and cross border control protocols; reconfiguration of global value chains; recovery prospects in different countries; and the sustained rise of digital technology and e-commerce.
“Logistics has been in the midst of a tech-driven revolution. Companies with robust digital capabilities that allow them to provide cargo visibility/traceability and do business online are at an advantage,” the IFC said.
To survive, a logistics business needs to adapt with changes in technology, workforce demographics, customer needs, pricing models and economic developments, according to the IFC.
One powerful solution for logistics companies is the integrated cloud business software of NetSuite. It provides transportation and logistics companies with core financials that can help them be agile and forward thinking as they navigate the constantly changing global landscape.
NetSuite has completely integrated manufacturing, inventory and warehouse management solutions that are uniquely designed to work together. Using NetSuite, companies can run their businesses on a single, unified platform that reduces IT costs and gains comprehensive, real-time visibility across the organizations.