During a year when e-commerce sales skyrocketed, the global pandemic impacted supply chains around the globe, and transportation capacity contracted across most modes, while companies worked to get their logistics strategies realigned with this “new normal” operating environment.
As part of that realignment, more companies required more warehouse space to accommodate the rush of e-commerce and other orders. According to WSJ, demand for large warehouses soared 51% during the first half of the year, with Amazon and other e-commerce providers requiring more and more space for processing, packaging, and shipping orders.
Already operating in a tight labor market pre-COVID, these organizations also faced steep human resources challenges in 2020, when demand for warehouse labor was at an all-time-high. In September, for example, warehouse employment reached the highest level ever recorded, with 1.25 million workers in the warehouse and storage sector, according to Supply Chain Dive.
“With more people working remotely during the pandemic, it created a tremendous shortage of labor for the warehousing and logistics sectors,” says Monica Franco, DB Schenker’s VP Contract Logistics Business Development & Customer Management Head, Americas.
Social distancing, health concerns, and other pandemic-related impacts made the situation that much more challenging for employers, who suddenly found themselves trying to control those impacts while also keeping their operations running. “From a general labor perspective,” says Franco, “there’s been a dramatic and dynamic shift in how labor pools are managed.”
Playing the Waiting Game
Reflecting on the events of 2020, Franco says the automotive sector was among the first to take a hit on the supply chain front, with many other industries following it down that path during the early part of the year. “Manufacturing pretty much came to a halt in most high manufacturing countries such as the U.S., Germany, and China,” she says, “so there was no option but to adapt, be agile and re-engineer strategies to accommodate to these changes to maintain sustainable.”
Those impacts are a direct impact to the contract logistics space, which felt them both on the production and spare parts sides of the business. Although people were driving their cars less, they still service and parts to do maintenance and repair on those vehicles. Similarly, service and products still need to be sourced in other sectors requiring the need to an efficient supply chain and its infrastructure.
Two Big Players: E-com and Health Care
From the contract logistics perspective, Franco says the massive uptick in e-commerce sales forced providers like DB Schenker to develop extremely scalable operations that can flex according to the changing demand.
What may be a “hot item” online one week, for example, could be replaced by another option the following week. “As contract logistics providers, we have to be able to adapt and cater to those shifts,” says Franco. “These and other factors contributed to some definite pivots in the contract logistics space in 2020.”
Within the health care sector, the rush to source personal protective equipment (PPE), cleaning supplies, and other essential products became an all-out race by Q2 2020. And while the supply chain movement improved near the end of the year, the worldwide vaccine distribution effort could strain the health care supply chain even more in 2021.
“Here at DB Schenker, we’re watching these trends closely and coming up with ways to facilitate that supply chain,” says Franco, “and stay ahead of the game in positioning solutions that will help the health care givers and patients.”
What’s in Store for 2021?
In surveying DB Schenker’s warehouse and contract logistics customer base right now, Franco says most have come to realize that their supply chain providers are most valuable when they are true partners, versus just being “transactional” provider. This reality came to light during the global pandemic, with shippers across the board experiencing everything from labor shortages, health crises, to supply chain interruptions.
The latter were particular strong catalysts for change on the shipper front, and especially when basic essentials like toilet paper and paper towels became scarce during the early stages of the pandemic.
“The supply chain impacts everyone, but if you can find ways to partner and collaborate with your logistics partners, you can stay ahead of the game,” says Franco, who expects to see more shared use and multi-client warehousing approaches in the near future as companies work to realign their supply chains in light of the pandemic and the pending vaccination distribution effort. “That’s going to take a lot of collaboration and communication, and strong alliances with reliable logistics partners you can trust. The supply chain continues to prove to be much more critical today and for the future.”