Global Logistics – Resilient Logistics

The coronavirus pandemic has shown us, both impressively and frighteningly, how fragile and precarious our interconnected and globalized world has become. Supply chains that had functioned flawlessly for decades collapsed. Flights were canceled indefinitely, trucks were barred from crossing borders, and countless container ships were stranded outside ports.

And as if that weren't enough, and as if workarounds in the supply chains had temporarily eased the situation, the next disaster struck: The container ship "Ever Given" ran aground in the Suez Canal. It blocked all shipping traffic for almost a week. The Suez Canal is one of the world's most important trade routes, especially for the tightly scheduled supply chains of the European market with China and its Asian trading partners. Thirty percent of the world's container volume is handled annually via this trade highway, and this figure is rising. The "Ever Given," measuring 400 meters long and 60 meters wide, can carry just over 20,000 TEU (standard container sizes). In 2020, approximately 18,800 ships transited the Suez Canal.

For container ships, it's usually not about speed, but about arriving on time. Scheduling is tight. If parts from the Far East are missing, production in Europe comes to a standstill.

The Suez Canal is also the most important trade route for oil from Saudi Arabia, the United Arab Emirates, Kuwait, and Iraq, connecting Europe and North America. Following the Ever Given accident, the price of oil also rose.

Similarly, exports, including machinery and machine parts for the Asian market, experienced significant delays.

The Suez Canal disaster: an unfortunate coincidence during the coronavirus pandemic? Actually, not quite. It's rather surprising that something like this didn't happen sooner. In 1980, the capacity of container ships in global maritime trade was 11 million deadweight tons (dtw), while in 2020 it had risen to 275 million dtw. That's an increase of 2,500% within 40 years. Deadweight tons is a measure of how much weight a ship can carry. No new shipping lanes have been added during this same period, nor will any be.

Shortly before the start of the COVID-19 pandemic, a survey on the greatest geopolitical challenges of 2020 was conducted and published as part of the Global Risks Report 2020. It addressed the greatest threats to the world and its people. The report is based on a global survey of approximately 750 risk experts from business and politics, NGOs, and governmental organizations. Nearly 80% of respondents from the World Economic Forum indicated that these challenges included economic confrontations and tensions between major powers.

Likewise, political polarization at home, extreme heat waves, destruction of natural resource ecosystems, cyberattacks on infrastructure, protectionism regarding trade and investment, populist agendas, cyberattacks on data, recession in a major economy, and uncontrollable fires.

Some identified scenarios, such as cyberattacks, protectionism, and populist agendas, are familiar to us from recent times.

Experts had not anticipated or planned for a pandemic or a “small” multi-day complete closure of the sea route highway.

This makes it all the more important, especially for logistics, to react to this development and take precautions.

A survey conducted in March 2020 among 2,900 respondents from senior management revealed the following:

52% of respondents stated that changes are being made to global supply chains in response to global events. 40% are planning a reassessment, and only 8% see no need for changes. Nearly 40% of the companies surveyed also indicated that they are planning workforce changes.

36% are planning further steps in automation, while 41% are considering revising the current speed of their automation.

Opportunities for change in global logistics towards resilient logistics

The regionalization of supply chains will be one of the consequences. Increased reshoring (bringing production back to domestic markets – Made in Germany) also seems plausible in some areas.

Strikes, in particular, but also climate change and acts of war, were already known risks to global supply chains. As early as 2015, according to a DHL study on "Risk & Resilience," three out of four companies reported being affected by supply chain disruptions. These included conflicts in the Middle East and strikes at US ports. The latter caused an estimated €7 billion in damages to American retailers. Disruptions in production and transportation processes had already exceeded the $380 billion mark of 2011 by 2015.

Even back then, resilient supply chains were described as a solution to global risks. Risk management and improved controlling were among the solutions.

Ultimately, however, the global supply chain seems to be reaching its limits. New and faster sea routes cannot be built, and a viable alternative for freight transport is unlikely to emerge for a long time. Strictly speaking, the next logical and logistical step would be the ability to teleport goods. But as we know, that is far removed from any serious future planning.

Sustainable logistics

While the costs of sea freight and air transport have steadily declined since the end of World War II, the costs of communication have plummeted to almost nothing. The end of the line seems to have been reached.

The risk of rising costs due to the accumulation of global risks makes regionalization and reshoring all the more attractive.

In addition to robotics, autonomous power supply and full automation of logistical processes, regional raw materials and products have long been a serious alternative.

Sustainability is a principle of action for resource use, in which the long-term satisfaction of needs is to be ensured by preserving the natural regenerative capacity of the systems involved.

Sustainable Supply Chain

In general, global supply chains are complex and difficult to monitor. Existing and functioning supply chains are largely left untouched. The fear of risks and the potential consequences of deterioration or even failure is too great should necessary optimization and improvement efforts fail to deliver the desired results. Many companies turn a blind eye to this and are unaware of potential problem areas. In a crisis, it is easy to deflect responsibility by citing the complexity of the issue.

Honest and open self-transparency and a conscious approach to potential risks (risk management) are crucial steps in gaining a holistic understanding of one's own supply chains. This forms the basis for future strategies to optimize purchasing decisions and supply chain management.

Sustainable intralogistics

Sustainable intralogistics consists of efficient storage and energy efficiency in warehousing and logistics processes. Automation, up to and including full automation, is a crucial advantage and a key factor in cost reduction and knowledge retention, particularly in intralogistics

• Flexible scalability of intralogistics to current conditions
• Sustainable and autonomous energy supply through renewable energies (Learning from Amazon Logistics)
• Increased resilience to changed or unexpected events:
  • Buffer bearing concept in combination
  • Micro-fulfillment
  • Micro-hub
  • Local decentralized hubs – logistics centers
  • Autonomous Retail Systems
  • Expansion of CEP services for last mile logistics

For globally competitive regionalization, the listed points, in their intersection, are a key for each economic sector, which must be designed and adapted accordingly.

For this, it is recommended to work together with internationally established and experienced specialists.

globalization

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