COVID-19 Impact on Logistics & Supply Chain Industry : Possibilities and Scope

The growing need for the continued supply of essential commodities is expected to significantly drive as well as pressurize the global logistics and supply chain market. The logistics and supply chain industry ensure a smooth and efficient supply of food and medical items to consumers through various modes of transports.

Post-COVID-19, the global logistics market size is projected to grow at a Y-O-Y of 17.6% to reach USD 3,215 billion by 2021 from USD 2,734 billion in 2020.

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An increase in complexity creates a costlier supply chain that is often not quantified accurately. Opportunities to reduce complexity can be found through product design, delivery methods, and supply chain segmentation. Effective utilization of data and external information also helps in reducing inefficiencies and increases productivity in the supply chain. In recent years, the deployment of supply chain analytics has increased. Inventory management is an important supply chain discipline, and most companies use simple equations to set their inventory targets. Using advanced analytics, such as multi-echelon inventory optimization, companies can reduce their inventory by approximately 20-30%. Hence, the profit-making capacity of global logistics and supply chain companies would improve. The change in the logistics business model due to an anticipated increase in the adoption of technological advancements is expected to create new revenue opportunities.

The FMCG and healthcare industries form the largest segments in the logistics market. Countries have exempted the manufacturing services regarding medical machinery and their supplies. The manufacturing of ventilators has increased as the number of COVID-19 positive cases continues to grow. For example, on April 14, 2020, Royal Philips planned to increase its hospital ventilator production to 4,000 units/week by Q3 2020 and introduced its new Philips Respironics E30 ventilator with immediate production of 15,000 units/week. Furthermore, the production and distribution of masks, gloves, medicines like HCQ has increased. The supply of essentials and the manufacturing of medical equipment is expected to drive the pharmaceutical and healthcare industry, and this will further boost the growth for the logistics and supply chain industry.

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Roadways is the largest segment for the logistics market by mode of transport. Roadways are relatively less affected by the COVID-19’s impact on the logistics sector when compared with airways and waterways. Being the preferred mode of transportation for essential goods, road transport is heavily relied upon for the continued supply of food, medicine, and other essential products.

Asia Pacific is expected to remain the largest regional market for logistics services. China has started to recover from the COVID-19 pandemic faster than any other country. The World Health Organization has also appreciated India’s control over the spread of the pandemic. The Indian logistics industry is expected to grow because of the initiatives taken by the government. This has allowed the logistics and supply chain companies to meet consumer demands during the pandemic situation. The supply of vital products in Singapore, South Korea, and Japan has also regained normalcy. The Asia Pacific region is expected to show positive signs in the near future as the supply chain industry recovers gradually.

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Company Name: DHL