The Importance of Logistics in the modern world

Mathieu Friedberg

The fundamental role that logistics plays in our everyday lives has never been more evident than during the COVID-19 pandemic. One of the inevitable questions now being posed is: what will the “new normal” look like? And, therefore, how does this industry adapt itself and change to these new circumstances? Not every country will respond in the same way and there will be no way of determining how long any period of restrictions might last or what form they might take. Flexibility will be the watch word moving forward, and the ability to deliver solutions to match the customer’s new needs will be key.

The original use of the word ‘logistics’ is of course military: a term which personnel used to refer to how they obtained, stored and moved equipment and supplies. Today, the use of the word is much wider and covers all aspects of the flow of goods between point of origin and point of consumption; and along the supply chain.

The management of logistics is about having the right resources in place at the right time to get the goods delivered to the right location in the correct condition. It sounds simple but with ever more complex, longer supply chains around the world it only takes one part of the world to sneeze and your entire supply chain can catch a cold.

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Whatever the new normal is, logistics will still play a key role in how the world recovers from a time of planetary economic collapse

The sophisticated just-in-time supply chain format has been shown to have many failings when you add in a global pandemic, where no nation remains untouched. This may well result in a reformatting and readjusting of the entire logistics industry as we enter the new normal. But, whatever the new normal is, logistics will still play a key role in how the world recovers from a time of planetary economic collapse.

In the past, economic downturns have tended to hit the logistics industry hard; but at the same time we need to recognize that the industry has broadly benefitted from the key trends of the last half century – globalization, the growth of just-in-time supply chains and the exponential growth of internet shopping.

eCommerce is likely to continue to boom on a global basis. As McKinsey points out in its 2020 report on how consumer goods companies are preparing for the new normal: “In the medium term, we expect shoppers to prefer the “safe” experience of shopping online to the prospect of shopping in crowded stores”.

Shopping from the safety of our own homes - be they in Auckland, Abu Dhabi, Aix-en-Provence or Albuquerque - appeals as long as we can rely on the logistics provider to deliver what we ordered on time and in tiptop condition. The ability of the logistics provider to do that relies on knowledge, planning and experience - because business cycles and economic upturns and downturns are notoriously unpredictable.

The Importance of Logistics in the modern world

Embracing the best digital technology has also increased customer expectation of what can be delivered - with the result that the average consumer expects a level of transaction transparency and delivery capability which were rare just a decade ago. So, the onus is on the logistics provider to deliver a service to an e-tailer which matches up to these customer demandsDigital workforce tools, the use of robots in warehouses, advanced analytics and warehouse management all combine to make meeting those demands a reality, while at the same time maintaining firm control over operational costs and efficiencies.

Investment in order to deliver on this service requirement does of course create both risk and opportunity - and that’s without accounting for disruptors which could be encountered at any point along the way. Personalized manufacturing is a growing customer requirement: great for the consumer, but more challenging for the logistics industry without the use of technology. This can all be additionally hampered by many things for which there is no single solution – such as variations in shipment sizes, and differing regulations in different countries regarding the same commodities.

And it’s not all about eCommerce. There’s a role both now and in the future for what can best be termed mainstream logistics. In its simplest form, logistics is important because it is needed to supply raw materials, goods and equipment to both the maker and the consumer. The manufacturer isn’t a logistician and neither is the consumer; and both need the logistics middle man to deliver what they need.

New technologies enabling greater efficiency, more collaborative working models and better management of trade flows between countries and regions are shaking up the sector and delivering results for both shipper customers and end-users.

But off the back of the lessons they learn from eCommerce, manufacturers too are expecting more from logistics service providers - from faster time to market for their goods, to better traceability and predictability from their LSP – be they a 3PL or 4PL.

Large scale logistics players also have the ability to disrupt the sector from within by acquiring smaller niche players which enable them to achieve scale and innovate in fields that were previously not important or potentially profitable for them. Innovation brought in with such smaller acquisitions can then be used to improve the operational expertise of the whole company.

In simple terms businesses need logistics providers to help provide them with a competitive edge over other companies across inbound, outbound and reverse logistics.

For a little historical context, think about the number of changes and significant developments the industry has undergone in the last 50 years. We didn’t have the internet five decades ago, yet today it’s an integral part of everything we do. AI was something we imagined only in futuristic films, eCommerce didn’t exist and a supply chain would have involved moving goods between two local towns. Then of course there are the different transport methods which have also evolved: cargo aircraft accommodating containerized and palletized freight, roll-on roll-off ferries, containerization on commercial ships with reusable containers of uniform size and shape, and specialized road vehicles which can cater to every type of commodity from pharmaceuticals to high fashion, and all points in between.

Today’s supply chain really is the method of linking major business processes both within and across companies to create a high-performance business model that drives competitive advantage. Increasingly, logistics is becoming an integral part of the finished product, with an impact on price point and on repeat business.

In the USA, the Council of Supply Chain Management Professionals defines logistics as “part of the supply chain process that plans, implements and controls the efficient, effective forward and reverse flow and storage of goods, services and related information between the point of origin and the point of consumption in order to meet customers’ requirements.” That’s a broad and descriptive statement and it sums up the complex nature of logistics today.

The COVID-19 pandemic has shone a light on the important role logistics plays in how the modern world functions. We have all become even more aware of just how important our skills and capabilities are. And this global crisis has brought into sharp focus exactly what can be achieved by logistics providers in times of need.

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Resilience should really be the watch word for the logistics industry, as we move to the new normal - and our people, technology, processes and culture are the four elements which will ultimately deliver the goods.


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