“Avoid knee-jerk reactions” – what logistics can learn from Covid-19

Logistics firms need to learn from the Covid-19 pandemic and guard against “knee-jerk reactions”, according to KPMG supply chain expert Maureen O’Shea.

Speaking as part of a webinar discussing the future of the sector, she also advised businesses on key recovery strategies and warned them that by fixating on the crisis they risked losing focus on their preparations for Brexit.

“We need to avoid knee-jerk reactions,” she said. “It’s not just a case of surviving through Covid, it’s taking the learnings from it to build the right system going forward. It’s not that everything must jump into Artificial Intelligence and move away from base. Just use the learnings from this to accelerate the rate of travel in the direction you wish to go.

“We’ve learnt about the strengths and vulnerabilities in our supply chain and the realisation that big disruption can happen no matter what you do - and Brexit is highly likely to be a big disruption,” she said.

"There’s a risk that Covid is everything. We’re all talking about it more than anything else. But it’s one element and it’s a compounding risk for all the other things. Particularly, it’s a compounding risk for Brexit because there’s less time and energy to do the other preparations.”

O’Shea claimed the pandemic could ultimately make logistics firms with the right forward strategy stronger and more resilient.

“Get clear on new market demands,” she advised. “Get clear on your business scenarios. Stay close to your business partners and make sure you really understand what the potential outcomes are and how they'll affect you and the supply chain.

“It’s really critical to go deep on your relationships with key suppliers right now. Where you’re single sourcing it’s time to look beyond that. Where you have very tight ‘just in time’ supply chains, learn the painful lessons over the next few weeks and months. Assumptions will need to be removed.

“If you’re a large firm reliant on smaller suppliers you‘ll probably need to be having conversations you don’t normally have with them around working capital and payment terms. You may be a party going to a client asking them to change payment terms or you might be a larger company going to a smaller company asking if they need that support.”

O’Shea used the example of a recent conversation she had with the global head of a major oil company: “Demand has gone through the floor,” she said. “A lot of their suppliers are in existential risk of not restarting because they only supply the oil and gas industry. They are having to make some really challenging decisions about which handful of suppliers are critical to their future.”

O’Shea also advised logistics firms to check their business footprint and what investment they might need. “In particular, make sure you‘re meeting environmental, social and government goals,” she said.

Asked if the pandemic would lead to smaller, more local hubs to help cope with extra demand on final mile logistics, she said: “The challenge is we need to be highly flexible in how we’re liaising. A lot of the shift to online shopping that we’re seeing will stay. So the current levels of last mile deliveries will be close to the levels going forward.

“Does that mean there will be smaller local hubs? Not necessarily. A lot of people will be looking more at how they’re doing clustering. In particular, as the environmental focus increases everyone is more conscious of the amount of packaging they use but also mileage.

“I’m seeing delivery vans multiples times a day rather than single big drop offs. So I think we’ll see consolidation, I think we’ll see environmental footprint being a new criteria.

“What we see today has evolved urgently and under pressure but there probably needs to be a more efficient and environmental approach."

Her “top tip” for employers, she said, was to focus on the right people with the right energy and motivation.

“If staff can see clearly that you are doing everything in your power to protect them, and to only do in person what must be done in person, you’ll reap absolute dividends in staff retention and engagement going forward.”