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Supply Chain Management

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Resilient supply chains - opportunities for logistics

The logistics ecosystem is changing - driven by global economic change, louder demands for sustainability, and, not least, the Corona pandemic. Customers are demanding the usual efficient logistics with more security, flexibility, and predictability in supply chains. To remain successful in the future, logistics companies must respond to these new demands by offering tailored end-to-end solutions and be able to counter supply chain disruptions through robust, customer-focused services.

For decades, global trade has been driven by international supply chains. Globally integrated supply and product flows have provided unprecedented levels of efficiency, specialization, and international division of labor, changing the face of the global economy. What has emerged is a successful and powerful global logistics industry that supports this model and forms the backbone of the global economy.

However, while all of this continues, new focus areas are emerging. Issues such as growing protectionism, societal pressure to produce more sustainably and the Corona pandemic are forcing development in a direction away from globalization and toward more local or regional supply chains. As a result, companies are now demanding more adaptable, resilient, and flexible logistics services - in short, resilient logistics. But what does this new concept mean for logistics providers, and how can they benefit from it?

The trend toward resilient logistics

The recent past has shown that global supply chains are prone to disruptions and therefore pose an increased risk for internationally highly networked companies that rely on secure and continuous logistics. There are four main reasons for this:

Growing protectionism:

Globally, there has been an increase in trade conflicts and in new trade barriers suddenly appearing. The recent trade dispute between the U.S. and China has had a particularly strong impact - with the result that both countries have turned to new partners in the European Union and Southeast Asia, respectively. Other political changes, such as the U.K. leaving the E.U., have contributed to the near-sourcing trend.

More frequent occurrence of natural disasters:

Weather and natural disasters can disrupt production processes and transportation routes, negatively impacting downstream industries that depend on supplies. For example, a 2018 Resilinc survey on supply chain disruptions found that weather extremes had the most substantial absolute impact.

Sustainability commitments:

Sustainability issues from the so-called ESG (Environment, Social, Governance) areas now play an essential role in corporate actions. Short-term production stoppages due to labor rights violations or environmental concerns can lead to companies facing supply disruptions without any warning, jeopardizing their business processes. Civil society and legal scrutiny of globally active companies is constantly increasing; for example, supply chain laws are under discussion at the E.U. level and in individual countries, such as Germany. These are intended to hold companies legally accountable for human rights concerns in their upstream supply chains, for example.

Covid-19:

The Corona pandemic has hugely impacted international trade, highlighting how crisis-prone global supply chains are. The World Trade Organization estimates that global trade volumes declined 9.2% in 2020 compared to the previous year. As a result, it has become much more difficult for companies to find the right balance of supply and demand and proactively manage procurement and inventory. In this context, it can be assumed that corona lockdowns and also similar "interruptions" caused by other global crises will be a recurring feature of economic life in the future.

As a result of the first three of these disruptive developments, a global economy is emerging that is growing faster than international trade and is undergoing a shift toward localization, or rather so-called glocalization. Covid-19 has further accelerated this process - with substantial consequences for the logistics industry.

Awareness of the inherent vulnerability of global, integrated supply chains has been heightened, and companies are actively working to recalibrate their logistics strategies to manage risk better. Put, creating resilient; reliable supply chains has become a central aspect of corporate action.