The Future of Logistics
There is absolutely no doubt that the COVID-19 pandemic has changed the landscape of our economy, especially the logistics industry. Before the pandemic began, our logistics network in the United States was strong and growing at a fast rate. Trucking, especially LTL, has been robust while truckload began to slow down.
Then, the pandemic hit. What will logistics look like after the pandemic? It is my view that we will have a shortage of truckload capacity as many owners/operators have shut down due to COVID-19. This will bring an imbalance as the demand for consumer products continues to rise. One can argue that we experienced a shortage before the pandemic. Although this is true, I believe the problem will get worse as we get through this current situation.
Less than truckload (LTL) and parcel are different. We are experiencing an uptick in demand for both modes, driven by the increase in consumer spending on e-commerce and home delivery. LTL continues to “shuttle” product to forward stocking locations, or “mini distribution centers," in the large metropolitan areas. From there, the courier (local delivery) takes over. During the next few months, we will continue to see high growth in both LTL and small parcel – more localized delivery.
Businesses are moving more to e-commerce as the brick and mortar store foot traffic continues to weaken. I believe this will continue to be the trend through 2020 and the first quarter of 2021. The need for more localized delivery coupled with greater LTL movement will continue to grow.
Let us spend a couple of minutes on the truckload movement. The need to “reposition” medical supplies and other inventory from city to city will require a higher demand for truckload. The problem that we are experiencing is the lack of truckload carrier supply. Naturally, this shortage is going to drive the price for truckload upwards; notwithstanding this, I do not see a lot of new entries into the truckload supply anytime soon. Most of our truckload movements have been handled by owner-operators. With the exit of many of them, we are going to continue to see a shortage of supply.
So, what does all this mean?
- We will see pricing increase and delivery times become longer from the shortage of truckload carriers.
- We will see longer delivery times causing some frustration for the consumer due to the increased demand for LTL.
- The courier (small parcel) local delivery will grow exponentially. Again, without a surge in new carriers in this mode, the delivery times to the consumer’s home will increase.
- There will be continued growth in forward stocking locations for “key” items. Using advanced technologies, such as artificial intelligence and predictive analytics, companies will be able to determine which items need to be moved to a forward stocking location (mini, localized distribution center).
The future of logistics is strong, but we have challenges to overcome as explained above. Nonetheless, I believe that the industry is up to the challenge. Most importantly, never give up!
About TCU Supply Chain Leader, Dave Malenfant
Dave Malenfant is a Director of Outreach & Partnerships, Center for Supply Chain Innovation, at Texas Christian University Neeley School of Business. He has more than 35 years of experience in driving change and performance improvement across the supply chain. He also serves as the Executive Vice President of Industry Liaison and Talent Development for the Biotech Supply Management Alliance.