Whether you’ve been working from home with Zoom, doing pilates classes in your lounge via Facebook Live or home-schooling your kids, life has been pretty strange recently. The spectre of COVID-19 has made terms such as ‘social distancing’, ‘furloughing’ and ‘viral load’ common parlance in what seems like a parallel universe.
It is clear that the effects of the pandemic will be both far-reaching and long-lasting. Besides widespread personal tragedies and likely societal changes, early analysis by management-consulting firm, McKinsey, suggests that the economic shock could be the biggest in almost a century. Little wonder that eminent historian, Lord Peter Hennessy, has predicted that the terms ‘BC’ and ‘AC’ – before Coronavirus and after Coronavirus – will come to demarcate this era.
When it comes to the supply chain sector, what will be the ‘new normal’? In the absence of immunity and a vaccine, global governments chose to mitigate the medical outcome via restrictions on personal freedom. Under lockdown, home delivery became critical to vast numbers of UK citizens and the supply chains of the food and pharmaceutical sectors were subjected to unprecedented surges. In grocery retail, this progressed from early stocking up to panic buying and then, as restaurants closed, a sustained increase due to out-of-home consumption switching to in-home. In all sectors, consumers switched to buying online when retail outlets for non-essential items closed.
The switch from multiple channels to just one proved challenging for many retailers and potentially catastrophic for those without an e-com platform to fall back on. Flexibility – simplifying product ranges and enabling resources and inventory to be moved quickly to the e-com channel – along with some degree of automation to mitigate the effects of sick or self-isolating employees have been key factors in success. And the innate flexibility of 3PLs proved invaluable in shifting the focus of staff and systems from sectors with falling demand (such as automotive) to those with rising demand (such as food).
What will the long-term effects of all this change be? Clearly, online’s share of the UK retail market is set to rise dramatically from the figure of almost 20% at the start of the year. As consumers new to online shopping are converted by its convenience, we are likely to see an acceleration in the decline of bricks-and-mortar retail. Pandemic planning will become the norm and companies will be motivated to invest in more technology and automation – including in their distribution centres – to help them cope with similar scenarios in the future. Digitising the supply chain improves the speed, accuracy and flexibility of logistics management. However, having the motivation to automate is one thing and having the resources to invest is quite another. There will inevitably be a period of recovery before firms can move on to build resilience for the future. But if the trend is for sales across all sectors to move towards e-commerce – with its requirement for single-piece picking and its higher return rate – then warehouse automation will undoubtedly be more in demand than ever before. The challenge for retailers will be that, in the post-COVID-19 recession, consumers will not want to shoulder the cost for delivery and returns.
Taking a wider perspective than the logistics sector, what might be the key takeaways from the COVID-19 pandemic for business leaders? One has to be that there are limits to globalisation. Nations may now pursue supply chain resilience rather than supply chain efficiency – or at least a better balance to ensure that they have a robust network of strategic suppliers. This could lead to the reshoring of manufacturing capacity. Another effect will be that significantly more organisations will embrace an omni-channel strategy. In addition, more companies will seek to establish consumption-based or subscription-based business models in order to reduce reliance on their clients’ CapEx budgets. Expect to see a rise in robotics-as-a-service, for example. Finally, business leaders will have learned the lesson that, in times of emergency, having a moral compass is an important differentiator; the board members who put people before profit made an investment in their brand that will pay dividends long into the ‘AC’ period.