Supply-chain and logistics challenges fueled by the COVID-19 pandemic have demonstrated how transportation partners with integrated, flexible offerings can keep the supply chain flowing.
COVID-19 not only disrupted supply chains but reshaped them. The pandemic forced shutdowns of some markets and accelerated others. For example, at the height of the pandemic, supply chains were impacted by a 69% decrease in U.S. restaurant dine-in business. At the same time, the grocery sector experienced double-digit growth. Similar trends played out in the construction industry, which saw more than a 10% decline in revenue in 2020. In contrast, the corrugated packaging industry enjoyed double-digit growth resulting from the increase in e-commerce.
Changes in consumer behavior also caused a dramatic shift in freight patterns. COVID-19 accelerated e-commerce, with sales growing from $598 billion in 2019 to $861 billion in 2020 — a 44% increase. Data from consulting firm McKinsey puts the surge in e-commerce volume into context, noting that the rate of e-commerce penetration in the U.S. grew by 10 years in 90 days in 2020.
Dramatic swings in capacity needs elevated the demand for carriers with the flexibility to help customers navigate COVID-19 supply-chain challenges. McKinsey noted that “now more than ever, maintaining the flexibility of logistics is essential for limiting disruption to essential services.”
Flexible logistics solutions during the pandemic included redeploying drivers and assets from customers experiencing a decline in business to other fleets where more capacity was needed scenarios. Shifting resources back and forth between less-than-truckload (LTL) and dedicated fleets balances capacity for customers who either need more or less capacity based on their business volumes during COVID-19. Flexible logistics solutions during the pandemic also saw some carriers providing additional capacity through non-asset or asset-light brokerage divisions. The diverse logistical capabilities of carriers continue to play a critical role in helping shippers adjust quickly to supply and demand changes in the market.
Quick and severe capacity swings in different distribution modes occurred not only at the height of COVID-19 but continue today, creating a need for integrated supply-chain solutions.
A prime example of this is the surge in online ordering, which created widespread capacity challenges for supply chains worldwide. Small-parcel volume caps experienced by many large supply chains in the fourth quarter of last year caused shipments that would typically go by parcel to be handled by LTL providers. This situation strained LTL networks, which led shippers to turn to the truckload spot market to move traditional volume LTL shipments, driving those rates higher and causing acceptance rates to decline. Customized integrated solutions became critical to addressing these capacity swings.
Integrated distribution centers provide shippers with the ability to warehouse their products, operate their dedicated fleets, utilize truckload and brokerage services, and access a next-day LTL network all under the same roof. These solutions provide customers with the unique advantage of immediate overflow options that efficiently address dynamic daily order volumes. Consider a situation where a customer’s dedicated fleet is at or near full capacity. In this case, transportation providers with integrated distribution centers can simply take the overflow shipments a few doors down and inject them into an LTL network via a connected cross-dock facility. This means loads that would normally have to be delayed would be delivered that day if they’re within a service center’s coverage area.
Integrated supply-chain solutions offer shippers a complete range of transportation, warehousing and distribution services that provide same- and next-day distribution, assembly and value-added project capabilities, final-mile delivery options, improved shipping integrity, extended cut times, consolidation and de-consolidation. These solutions speed up customer supply chains and create operating efficiencies that help control distribution and delivery costs for customers.
According to a report by Capgemini, more than 80% of organizations reported being negatively impacted by the COVID-19 crisis, and a vast majority have struggled with significant challenges across all aspects of their operations, including supply-chain management. The report noted that “the COVID crisis has been a crucial test of supply-chain agility, requiring organizations to respond to a wide spectrum of unexpected challenges. Going forward, organizations are taking actions to improve supply-chain agility to be better prepared for future disruptions.” One of the steps recommended in the report to help organizations react rapidly to disruptions is to establish strong collaborative relationships with supply-chain partners.
Carriers that provide flexible, integrated solutions are the answer to creating a seamless, scalable, and cost-effective supply chain to meet the challenges created by the pandemic today and the uncertainties of tomorrow.
Chris Valante is director of supply chain solutions with A. Duie Pyle.
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