Emerging Trend 2021 and Beyond - Warehousing & Logistics

The year 2019 and 2020 have been watershed years in the history of modern world. Nobody has seen or anticipated the crisis brought in by Covid pandemic lea ding to the responses in the initial phase which were clumsy and unorganized. Health care systems around the World were completely exhausted and extended to their limits. Many countries including developed ones realized that health care systems are not created to meet the emergency of this magnitude.

We believe that effects of COVID pandemic may not disappear anytime soon but worst is clearly behind us. Year 2021 is going to be year of recovery and consolidation. Many industries and businesses are reporting the Pre pandemic level of activities whereas others are reporting accelerated level of activities due to benefit brought on to them because of changing behavior pattern of the consumers.

It is a fair assumption that risks have not been completely disappeared but distress and damages to Financial and Real Estate market have been avoided to a great extent. Unlike in the past, there are no major pre existing structural problems to be fixed which would have required long years of re adjustment. However, each crisis will have its own winners and losers and depending upon the nature of crisis certain permanent patters will be established. This crisis has certainly accelerated certain trends and amplified their importance – one such sector has been Online Retail which in turn has boosted Logistics and Warehouse Sector.

The Crisis will cause certain fundamental changes in global strategies of large multinational corporations and will also lead to emergence of various new & innovative business models relying on technology.

We are expecting that following will become permanent trends in the global economy:

Rethinking on supply chain
management

More than 90% of Fortune 1000 Companies sources some or the other product from China. The disruptions caused in the supply chain has been profound and deep for the businesses during the Pandemic. Many businesses had no visibility beyond their principal suppliers leading to complete chaos in sourcing. The damage was not limited to manufacturing but extended to services, mining and agriculture also.
We believe that businesses will relook at their Supply Chain Strategy more closely and many of them will make it more flexible and resilient. Some of the businesses will focus on greater sourcing globally but from divergent sources so that they are no longer at the mercy of single supplier and single country while others may bring some critical product manufacturing near shore.

A generic square placeholder image with rounded corners in a figure.
Source: Pexels
A generic square placeholder image with rounded corners in a figure.
Source: Pexels

Rapid Digitization of Commerce

More than 90% of Fortune 1000 Companies sources some or the other product from China. The disruptions caused in the supply chain has been profound and deep for the businesses during the Pandemic. Many businesses had no visibility beyond their principal suppliers leading to complete chaos in sourcing. The damage was not limited to manufacturing but extended to services, mining and agriculture also.
We believe that businesses will relook at their Supply Chain Strategy more closely and many of them will make it more flexible and resilient. Some of the businesses will focus on greater sourcing globally but from divergent sources so that they are no longer at the mercy of single supplier and single country while others may bring some critical product manufacturing near shore.

Digitization of Supply Chain

The boundary between offline and online businesses are getting blurred. More and more Off line player have put greater emphasis on creating online capabilities so as to take benefit of changing consumer taste and behavior and at the same time many Online only players are creating offline presence to create greater visibility.
Businesses are also realizing that more robust and digitized supply chain management is key to withstand any future shock as experienced recently.

A generic square placeholder image with rounded corners in a figure.
Source: Pexels
A generic square placeholder image with rounded corners in a figure.
Source: Pexels

Inventory Management is pivoting to “Just In Case” Strategy

Inventory cost has been one of the major component where working capital of the businesses have been getting locked up. Over the period of time, business complexity has been addressed through famed Japanese model of Lean Manufacturing and Just in Time delivery. It became a tool to improve business efficiency. However, the strategy which had served the business so well for years has come to bite it badly during COVID pandemic and played havoc with manufacturing and trading. The Industries have realized that global supply chain is not resilient enough to support “Just in Time” delivery.

We expect that Industrial and Manufacturing sector will adopt Just in Case model whereas Consumer Good sector will continue with Just in Time model.
Overall, the effect of changes brought in by Pandemic has had a very positive impact on Logistics and Warehousing Sector and we expect the sector to be clear winner in the coming years from investment perspective.