Twelve Post-Pandemic Supply-Chain Trends for 2021

Photo: Bloomberg

Article: Supply Chain Brain

As vaccines roll out more broadly, and countries begin to get the coronavirus under control, attention will turn to the recovery and a return to normal operations. The supply chain will play an integral role in this effort, and will itself emerge in a different shape, with COVID-19 leaving a lasting legacy on many areas of transportation and warehousing.

Following are the 12 most significant trends expected to shape the industry in 2021, and how those trends will influence companies’ strategic plans in the coming year.

Three trends accelerated by COVID-19. The global pandemic applied pressure to the supply chain in ways not previously seen, forcing many companies to look toward third-party experts, advanced digital capabilities, and accelerated e-commerce operations.

• Outsourcing. In 2020, many companies recognized that outsourcing their supply-chain activities to specialists — particularly those with an integrated, end-to-end offering — allowed them to reduce risk, increase flexibility, focus on their core business, and respond more quickly to changes in the market. This trend is expected to continue into the new year.

• Digitization. The drive toward greater automation was already underway, but the importance of digitization was reinforced amid the pandemic. Companies that made investments in digital technologies were able to quickly respond to fluctuations in demand, while also enabling productivity increases to absorb additional volumes, even with strict social-distancing protocols in place.

• E-commerce. The huge increase in online shopping will remain at a higher level than originally anticipated post-pandemic, speeding up e-commerce adoption by nearly a decade in just a few months. Coupled with unpredictable consumer behavior, this trend has made it more difficult to forecast, and has underscored the value of being able to react quickly o customers’ needs and demands, through a well-thought-out strategy and physical infrastructure roadmap.

Three trends expected to resurge after COVID-19. With so many lives on hold during this difficult time, COVID-19 has slowed the progress of some existing trends that are expected reemerge in 2021.

• The labor shortage. While many industries closed down and unemployment rose in 2020, logistics providers needed workers. As the economy begins its recovery, talent-gap pressure will return with a vengeance, and attracting and retaining people with creative H.R. solutions and a positive working environment will once again become the primary competitive battleground in the supply chain.

• Intelligent forecasting. Consumer behavior was erratic during the pandemic, making it difficult to use historical trends to forecast and manage inventory. As we return to a more stable environment, artificial intelligence and machine learning will reclaim their place at the forefront of advanced analytics and forecasting.

• Sustainability. There was a lot of momentum behind the topic of sustainability before the pandemic, but it was replaced by a need for business continuity while the world struggled to manage the global crisis. In 2021, sustainability will return to the top of the priority list, and will likely be further supported by the incoming U.S. administration.

Three long-term trends coming out of COVID-19. Given the magnitude of the pandemic, it’s reasonable to expect many lasting effects on the supply chain, most notably a greater emphasis on redundancy, proximity and resilience.

• Redundancy. Supply-chain managers now have a greater appreciation for the need to reduce the risk of out-of-stock events and disruptions. Redundancy has become a key topic, and will continue to be a priority even as operations normalize. Third-party logistics providers are well-positioned to supply redundancy through their resources, infrastructure, and engineering capabilities.

• Near-shoring. Many, but not all companies, are moving toward near-shoring to avoid the inventory disruptions we saw in 2020. This will push companies and their supply-chain providers to seek higher efficiencies through technology, leaner inventory and network design, offsetting increased costs in warehousing and labor.

• Resilience. Visibility and real-time monitoring of risk have always been important, but the appetite to invest explicitly in these tools was limited. As we enter 2021, the business case for resilience is at the forefront.

Three short-term trends defining supply chains in 2021. These final three short-term trends shine a light on what we can expect in the immediate future as we begin 2021, and further illustrate the ripple effects that COVID-19 and vaccine distribution will have across the supply chain.

• Transportation capacity. We’ll see ongoing capacity challenges — and a seller’s market for those that control the capacity — throughout 2021. Most passenger flights remain grounded, and sustained peaks around e-commerce, the Chinese New Year and vaccines mean demand will remain high for domestic ground carriers and international capacity across multiple modes. The capacity situation will likely normalize over the mid-term, reverting to its “normal” cycles of supply and demand swings as the vaccine becomes widely available. But securing capacity, managing price volatility and strengthening relationships with carriers will remain a priority throughout 2021.

• The “bullwhip” of non-COVID-19 healthcare. In addition to the vaccine, another major challenge in life sciences and healthcare — as more and more people return to elective surgery — is a release of pent-up demand for other types of medical treatment. We expect to see pressure on pharmaceutical and healthcare companies to manage surges in inventory across North America. The possibility of a “bullwhip” effect will require close monitoring, inventory planning and efficient warehousing processes, and will place additional strains on last-mile capacity.

• Vaccine logistics. The defining issue for the supply chain in 2021 will be the vaccine distribution effort. The complexities that the vaccine supply chain will bring, in terms of the cold-chain requirements, urgency, variation of distribution models and sheer scale, are unlike anything we have seen. There will be challenges we’re still not aware of, as the requirements around the different vaccines evolve throughout the year.

Scott Sureddin is CEO of DHL Supply Chain North America and SCB Contributor