COVID-19: Issues, Impact and Challenges on Logistics

Introduction

We are aware that most of the countries are in lockdown due to worldwide spread pandemic coronavirus or COVID-19.  This phase is very critical for all economies. This further has blocked the logistics up to a certain extent. From the perspective of India, only essential commodities’ supply is permissible since cities are lockdown and people are home quarantine due to the COVID-19 outbreak. It has badly impacted the logistics industry. There is equal importance of logistics as finance in business. Logistics is a circulatory system of any industry or business. As Human Body can’t survive without a circulatory system in the same way any industry can’t without logistics. This might have cleared how much logistics are important.

About Logistics

In layman, language logistics means any transportation facilities provided to any business or activity. In a general business sense logistics is the management of the flow of things between the point of origin and the point of consumption to meet the requirement of customers. The goal of the logistics is to meet the customer's requirement timely and cost-effective manner. There are many companies specialized in logistics, providing the services to manufacturers, retailers, and other industries with a large need to transport goods. Some logistics companies provide both transportations as well as warehousing facilities. FedEx, UPS (United Parcel Service) and DHL (Dalsey Hillblom Lynn) is a well-known logistics provider. Let us clear it with example suppose Mr. A resides in Delhi ordered a bundle of books from a manufacturer/retailer in Hyderabad and books is delivered via currier here, currier company is also a logistics company. Resources managed in logistics may include tangible goods such as materials, equipment, and supplies, as well as food and other consumable items. There are various components of logistics like inbound logistic, outbound logistics, fleet management, warehouse, material handling, order fulfillment, inventory management, and demand planning

  

Importance of logistics

1.     It starts with the efficient purchase of raw material and hold the goods until it reaches to the consumers.

2.     It coordinates the resources to allow timely delivery of goods which bring down the cost of material and increase profitability.

3.     In today's era consumer satisfaction is at topmost (ie consumer is king), faster and timely delivery satisfy the consumer demand and which further increases  the future order.

4.     Innovation like Just-in-Time (JIT) in logistics helped to grow  this industry worldwide.

Modes of transport in India

1.     In India, the railway plays an important role in logistics, it is mainly used for movement of the core sector. Cement, Coal, Petroleum products, food grains, iron ore, etc are the core product which is mainly supplied via train. it covers 27% of total freight movement.

2.     Freight movement by road via truck and other means of transport through NHAI( National Highway Authority of India) covers 65% of the total freight movement.

3.     Movement of goods via air covers 7.5% of the total freight movement.

4.     Only 0.5% movement of goods done by cargo ships ie waterways.

5.     The pipeline is also used as a means of freight movement, liquid and gas are transported via pipeline.

Impact and challenges

The logistics business is already going with the tougher phase due to worldwide pandemic COVID-19 which further brings down the earning amid the global economic slowdown. Currently, different sections of the business like warehousing, trucking, and last-mile delivery among consumers are facing challenges with labor shortage because of lockdown. But if we particularly talk about the crude oil exporting ships, they are flourishing since countries are making sufficient storage of crude oil because of the tension among oil-exporting countries and of course coronavirus pandemic. Here are the few impact and challenges which the logistics industry are facing as per study conducted by KPMG:

• Transport and logistics is an essential sector where supply is predominantly lower than the demand
• Crude price reduction is likely to impact the transportation cost positively in the short term
• Reduced demand for logistics due to reduced production across sectors will put downward pressure on prices across various transportation and logistics sub-sectors like warehousing, freight transportation, among others
• Freight traffic volume spike typically witnessed in the months of February and March is expected to be delayed and the slowdown is anticipated to persist until monsoon. Post-monsoon, the demand is anticipated to spike on account of accrued consumer savings as well as the onset of the festive season
• Asset utilization across the transport and logistics sector anticipated to reduce in the short term.
• Low impact on regularised labor force expected, Transport and Logistics being an essential sector. However, daily wage earners to be adversely impacted in the short to medium-term and expected to stabilize only once the demand picks up
• Transport and Logistics services sector is highly working capital intensive. Reduced demand for these services is expected to impede the services in the short to medium term due to cashflow constraints. This might further result in reduced discretionary spending by the sector
• Trucking sector is expected to witness immediate adverse impact in the short-term on account of  reduced demand due to decrease in production as well as domestic and EXIM trade
• Ports are also expected to experience reduced traffic volumes decreasing the overall utilisation level and revenues in short to medium term
• Reduced freight volume is expected to result into low utilisation of road and rail infrastructure
• Storage facilities such as warehouses, ICDs, MMLPs etc. which are majorly dependent on EXIM and domestic trade are expected to experience reduced cargo volume impacting revenues.

In sum, this crisis is a story with an uncertain ending. However, what is clear is COVID-19 has introduced new challenges to the business environment which call for a measured, practical and informed approach from political and business leaders. We also need to realise that COVID-19 is likely to lead to a new normal - being aware of and preparing for these shifts wll help businesses and economies navigate in the post COVID-19 world.