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Robert.Jervis_43227 Oct 02

Shippers look to outsource more after COVID-19

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Latest insight from Ti
The COVID-19 crisis has hit the logistics sector hard, disrupting the supply chains of many shippers and creating a challenging market environment for 3PLs. Whilst supply chains have already been adapted to much of the initial physical disruption of COVID-19, the market is still adjusting to the loss of volume and revenues that the collapse in demand has led to.

The disruption has been felt by every organisation and the scale of the market wide impact is now becoming apparent. Ti’s latest projections show that the global contract logistics market will shrink by 4.5% in 2020, while the freight forwarding market will contract by 10.2% (both measured in revenue terms).

With shippers’ volumes falling so much, and consequently LSPs’ volumes falling too, both sets of organisations are reassessing how best to run their operations in the future.

Ti’s latest survey, sponsored by Bollore Logistics, assesses the future of supply chains and asked over 400 logistics professionals about their plans for the future, in order to gauge the changes which are taking place. The survey reveals the extent of the changes shippers are planning to prepare for the post-COVID future across business planning, sourcing, freight procurement, use of technology and outsourcing strategies.

For shippers, outsourcing decisions are of vital importance, at a time of disruption it is crucial to place their supply chain operations in good hands. For LSPs, outsourcing decisions offer the potential for growth that outpaces the organic growth of the sectors they serve, so long as shippers choose to outsource more. Conversely, if shippers decide to resume control of their own operations and bring logistics contracts back in-house then the logistics market is likely to grow at a slower rate than the sectors it serves.

Ti’s recent survey asked logistics professionals about their plans for outsourcing in the future. The results showed that the vast majority of shippers plan to retain control of their own supply chain management, with only 10% looking to outsource this function. COVID-19 has certainly raised the profile of logistics with the wider public and it seems that most organisations currently see logistics as a critical competence and wish to retain overall control. However, there does appear to be a higher propensity towards outsourcing physical operations more in the future, which may help to boost the growth of the 3PL market.

In terms of how respondents manage their pool of logistics partners, two broadly supported strategies for supply chain management appear to have emerged, with 43% planning to increase the number of partners they work with and 30% planning to decrease their pool of partners. Both strategies have their merits and can help to diversify risk, more suppliers may grant shippers access to more available capacity in times of crisis, whilst fewer stronger relationships with larger providers can grant access to capacity via those companies’ own networks and their own large supplier pools. As we move through the later stages of the pandemic it will be interesting to see if either of these strategies becomes dominant.

If you are considering outsourcing your logistics operations or would like to diversify your pool of logistics suppliers, then please take a look at Ti’s new Supply Chain Leaders tool, which can help you to find new relevant suppliers in minutes: https://www.ti-insight.com/product/supply-chain-leaders/