The effects of COVID-19 on global supply chains: short term pain but potential long term benefits

By Blake Larson, Managing Director, International, Lalamove

Lalamove is a leading tech company that connects people and businesses to on-demand delivery services. We use technology to make delivery fast and simple; matching over 15 million registered customers, SMEs, micro-sized businesses and larger corporates with a pool of 2 million trained and professional drivers.

It’s not a stretch to say that supply chain management and effective logistics make the world go round. The average consumer probably doesn’t take into account the journey of their goods until they are waiting for them to reach the front door. But those goods and all their composites have likely crossed borders, travelled over and through oceans and passed through myriad checkpoints along the supply chain route, before finally arriving in the hands of the end consumer. This all comes at no small cost.

With much of the world under lockdown and economies grinding to a halt during the COVID-19 crisis, the effects on global supply chains and logistical operations have already been severe. Shutdowns in key manufacturing hubs like China have caused inventory backlogs and delays in shipments and demand has all but ceased in major markets like Europe. While there is a slow trickle of good news related to the gradual opening up of some economies, the disruptions are going to be felt for months, perhaps even years to come.

What does this mean for businesses and the logistics companies that need to cater to them? In an already competitive market, logistics providers that have an edge are effective in the use of real-time information, digitised processes and data-driven AI technology to optimise performance. In today’s climate, just how can businesses in deep trouble keep the cogs turning?

A chance to pivot

In the midst of global uncertainties around supply chains, now could be an ideal time for businesses to take stock. Research by the Business Continuity Institute has found that over two thirds (69%) of companies do not have complete visibility of their supply chains. This could lead to difficulties in planning for and reacting to unique situations like the disruption caused by a global epidemic as is the case now or during localised economic crises.

Small- and medium-sized businesses (SMEs) are in a position to pivot quickly by leveraging existing technology and adapting to changes in supply chains.

Over the past couple of months there have been numerous success stories of traditional brick and mortar stores and SMEs fighting against their own collapse by turning towards digital technologies. Through experimenting with e-commerce and partnering with companies that offer on-demand delivery, these SMEs have been able to reach new and existing customers.

With the COVID-19 epidemic affecting global supply and logistics operations, SMEs should also look to local suppliers to fill in any gaps. Shorter transportation distances can help offset increases in supplier costs, while fewer middlemen may also speed up procedures. In terms of logistics and delivery, this could empower businesses to take control and create an agile, scalable foundation for short- and long-term growth.

Consumers are increasingly conscious of where their products are made and the ethical and environmental factors involved in their production. Going local may also help SMEs to leverage these concerns and introduce a more transparent supply chain that can be used to differentiate themselves from competitors.

While existing supply chains don’t have to be completely overhauled, streamlining and optimising could lead to vital savings and reveal untapped areas for growth.

Adaptation in the last-mile delivery sector

While we may think of supply chains on a global scale, a critical part of the entire supply chain is what is known as the ‘last mile’. This commonly means the final section of the supply chain where goods, usually from regional warehouses or distribution centres, are dispatched to the end consumer through a delivery driver. This last section can be one of the most expensive and logistically complicated sections of the entire supply chain - up to 53% in some cases of the total cost - despite the relatively short distances goods need to travel.

In this current climate many consumers are turning to the internet to order all manner of goods, thereby reducing the need to visit shops, malls and crowded public places. Recent research in the UK reveals that six out of 10 UK shoppers will maintain their new online shopping habits even when the COVID-19 pandemic is over. And this type of sentiment is being echoed by consumers around the world.

Those businesses that have access to a reliable and flexible last mile delivery fleet stand to be the winners in the race to satisfy anxious consumers. But as so many businesses will be asking themselves, is it possible to cost-effectively scale up and manage in-house delivery operations during this time?

While some large businesses with experience in such operations may be able to afford an in-house delivery fleet, many SMEs will struggle to optimise, schedule and maintain deliveries when reacting to fluctuating consumer demand. The proliferation of third-party logistics providers, specifically on-demand last mile delivery companies, can offer businesses a fast and efficient way to make more deliveries without committing to long term overheads.

Couriers, vans or even lorries can be hired from these on-demand service providers within a matter of minutes. Having the power to instantly scale delivery capacity from a mobile or web app provides businesses big or small an agile and powerful digital platform. An equally attractive feature is simply having the ability to not use it the next day, and given the current economic climate, this lack of financial commitment could prove to be extremely valuable.

From the perspective of the consumer, they are more likely to care about when they receive their delivery rather than who sent it. On top of that, consumers expect to be able to check the progress of their delivery at every stage of its journey, meaning that transparency in deliveries should be made a priority. In highly developed markets in Asia such as Singapore and Hong Kong, where mobile penetration rates are extremely high, the ‘on-demand’ mentality is such that a delivery period of more than two days risks being rejected in favour of a competitor that offers same day or next day delivery.

Few businesses or industries are sheltered from upheaval and disruption to supply chains, such is the globalised nature of business today. A black swan event such as COVID-19 will undoubtedly lead to many business hardships and the market will likely look very different once this is over. But those companies that are actively assessing their supply chains, implementing digitisation and adapting to working under new conditions or with new business partners may just come out the other side in a stronger position for the future.