Combating COVID-19: Short-Term Impacts on Supply Chains

A guest blog post from our strategic partner, James A. Tompkins, Ph.D., Chairman and Founder, Tompkins International

From the way we shop to the way we live, work and play, COVID-19 has influenced—and forever changed—every aspect of our daily lives. The same holds true for supply chains—traditional models that were built on predictability are no longer effective in today’s uncertain times.

While the short-term outcomes of COVID-19 will vary by region and the development of a vaccine, here are six ways the virus has impacted the industry as a whole:

• Broken supply chains: Supply chains were completely dismantled for six months, with the initial supply disruption occurring in China. And once product became available again, the lockdown across the world threw off demand. This resulted in the inability to properly synchronize supply and demand.
• Increased digital commerce: Consumers have continued to spend on digital commerce in a big way, resulting in a 30-40% increase in e-commerce over last year’s spend. I project the 2020 holiday season will top that with a 50% increase over last year.
• Increased digital business spending: Business spending has gone heavier on digital commerce than ever before, which has dramatically stretched the capacity of delivery systems because many of those orders are now going directly to people’s homes as that’s where many of us continue to work. This shift has blurred the lines between B2C and B2B sales and where those goods are being delivered.
• Maxed out capacity at UPS and FedEx: These major players are out of capacity due to the explosive growth of e-commerce. The growth these carriers expected to occur over the next three to five years has happened over the last three to five months. This is putting constraints on shippers that I predict will result in a substantial increase in business for regional carriers. In the past, regional carriers delivered 4-7% of the total holiday volume. This year, regional carriers will handle 25% of the volume during the holidays just because UPS and FedEx didn’t plan for this rapid growth.
• Major changes needed for the U.S. postal system: As I detailed in a previous post, the USPS is broken, with letter mail currently down 50% and parcel deliveries way up. The role of the post office has not changed from day one—its job was to bind the nation together. Today, that’s a problem. The postal service must deliver to every address in the U.S. six days a week. For that promise to be kept, there will need to be major changes and that won’t happen because it’s a political football.
• Changed holiday season: The 2020 holiday season will start earlier than ever before. Sales will also occur earlier—Black Friday may very well be in October with surcharges being put in place around the same time. Similarly, delivery cutoffs are going to be earlier in December. Because I’m projecting regional carriers will pick up 25% of the holiday volume, I see this holiday season as offering them a huge opportunity.

While today’s level of VUCA—volatility, uncertainty, complexity and ambiguity—makes it impossible to predict the long-term outcomes of COVID-19, it’s necessary to take action now to recover from the fallout and harness the opportunities presented to the supply chain and logistics sectors.