The 2021 Logistics Budgeting Challenge

So the nightmare of 2020 is almost over, at least as far as the calendar is concerned.  However, the negative effects of 2020 on supply chain and logistics budgets will be around long after we turn the calendar to January, 2021.  And, what lies ahead in 2021 just might be more challenging than 2020 was.

Covid-19 has certainly thrown a monkey wrench into just about every company’s supply chain and logistics budgeting process in 2020.  The challenge going forward is to prepare budgets that will be more in line with what companies actually anticipate their expenditures will be for the coming year.

So, what are the additional challenges these budget forecasters will face in 2021?  Let’s take a look.

1. There’s a New Sheriff in Town – First and foremost is the fact that there will be a new administration in Washington.  While we’ve heard limited details of what we might expect to see from this new administration, no one really knows exactly what lies ahead.  What effect will this new administration’s policies have on current and future government regulations affecting the transportation and logistics industry.  What impact will any of the administration’s policies have on interest rates, import tariffs, taxes and the economy overall. Too soon to tell for sure, but we can expect there will be an impact on US businesses.
2. Covid-19 Vaccines – What impact will the distribution of the Covid-19 vaccines add to the already overburdened parcel network and on the overall capacity constraints shippers have been, and are still dealing with here in Peak Season-2020.  You can bet that capacity issues will not be getting better anytime soon.  Also, when will FedEx and UPS reinstate their Guaranteed Service Refund programs.  Shippers not only lost their ability to hold these carriers to the carrier’s published service standards, they also lost a ton of money by not being able to file for refunds for late delivered packages. 
3. Back to Work Considerations – Do we really know when companies will be allowed to fully re-open their businesses.  The fact is the impact we have already felt from a variety of lockdowns has created a devastating burden for many small businesses.  How many of these businesses will ultimately fail and how does that impact other businesses that supply these businesses?  There will definitely be a trickle-down effect that businesses will feel in 2021, how deep those effects will be remains to be seen.
4. Re-Shoring 102 – There was a lot of discussion earlier this year about global supply chains negatively affecting just about every business.  Many companies discussed the need to bring their supply chains closer to home to help ensure a continuous flow of goods to meet their customer’s demands.  Ocean rates have gone through the roof and there is every reason to believe they are not going to drop anytime soon.  So, is this the time to think about changing to more “local” suppliers to support businesses? Is it even possible after the many years of reliance on China and other Far East sources of supply?  

So supply chain and logistics executives and their “Bean Counter” partners throughout their organizations will have many new challenges to deal with in budgeting for 2021.  Not only trying to come up with realistic budget numbers, but more importantly, sticking to those realistic budgets for the coming year.