COVID-19: The Impact on Transportation and Logistics

Published on July 7, 2020 by Bryan Gayhart in COVID-19, Transportation / Logistics

The “new normal.” No one knows exactly what this will look like, and the economic outlook for the week, month, and year ahead change daily. The impacts of the coronavirus pandemic are being absorbed in every corner of the economy, and the supply chain is no exception. Significant declines in international trade, manufacturing, and commerce are driving significant declines in transportation and logistics as well, resulting in an imbalance of supply and demand for companies serving the transportation and logistics industries.

Carriers are repositioning their fleets to serve areas that are significantly affected by COVID-19, as this is where the majority of shipments are going. The adjustment results in increased lead times, additional costs, and increases in health and safety risks to an industry that is already significantly impacted by a labor shortage. The imbalance comes as the demand for goods or products being shipped out of these areas is out of balance with the demand for goods or products being shipped in.

As economies start to reboot, challenges lie ahead in returning to an efficient supply chain. Mitigating the impact of COVID-19 comes down to being prepared. Consider the following opportunities as part of your risk management and business continuity strategy:

Strengthen relationships with suppliers. Having visibility into the broader supply chain will allow you to be more agile and strategic in your own business. Agility within the supply chain creates an opportunity to capitalize on chaos in the marketplace while competitors are scrambling to adjust. A well-developed risk management program would provide insight into supply chain issues.
Big Data – embrace it and use it to drive decision-making. Use it to reevaluate your business using “what if” scenarios, to understand dependencies, and to analyze profitable customers, routes, products, etc. Forecasting and cash flow modeling has never been more critical as the level of uncertainty in the economy is unparalleled.
Use the COVID-19 pandemic as an opportunity to focus on your customer service delivery model. Now is the time to look after the customers you have. Through listening to the needs of your customer, you’re creating an opportunity for your company to thrive, and by being available and staying in contact with your customers, you’re adding value and creating customers for life.
Mergers and Acquisitions – Companies that survive COVID-19 intact will have opportunities to grow through acquisition. Alternatively, consider a merger with a complementary service provider, where one-plus-one adds up to more than two.
Focus on cash flow management. Cash is king – understanding your short-term liquidity needs and how that interacts with your cash flow forecast is critical. Analyze key performance indicators such as days sales outstanding and days payable outstanding to see how shifts in the indicator will impact your business. Evaluate your suppliers, and use this time to negotiate more favorable terms or possibly even discounts. If you’ve received PPP funds, ensure that you’re maximizing the use of those funds and that you’re set up for success when submitting your application for forgiveness.

Additional Resources

The Barnes Dennig team works with transportation and logistics companies of all sizes, with our dedicated professionals drawing on experience with some of the largest transportation and logistics companies in the country to help you operate more efficiently and enhance your bottom-line business results.