Are we trending towards a ‘normalization’ in supply chain and logistics?

Aug 1, 2023 | Uncategorized

Are we trending towards a ‘normalization’ in supply chain and logistics?

At a time, when, as usual, there are many questions and concerns about the current trajectory of the economy, in terms of will there, or will there not, be a recession, there are also myriad signs, or indications, that the supply chain and logistics sectors are returning to the cadence of pre-pandemic times.

One of the easiest ways to think about that is by simply looking at how things changed almost immediately, at the beginning of the pandemic more than three years ago, to now. How things changed has been well-documented, to be sure. The list ranges from initial widespread challenges to procure toilet paper and a whole host of other commodities and goods to a massive uptick in e-commerce activity, which led to clogged delivery networks and cargo stuck on the water waiting to unload at various United States-based ports.

There are many other examples of how the pandemic impacted the logistics and supply chain worlds we live in, of course. But now that a significant amount of time has passed, it is very clear that the pandemic effect, as we once saw and experienced it, especially over the majority of 2020 and 2021, has passed and we are now in a new space, of sorts.

That space is the aforementioned cadence of pre-pandemic times. How so? Well, for one thing, there is not nearly as much mention of how supply chain issues are the main reason for economic issues and the stalling out of business throughput. For certain, it was a major part of it, during the darkest days of the pandemic.

While that period was unsettling and fairly chaotic, it was good, in the sense that it placed a spotlight on supply chain and logistics and gave those outside of those sectors a very clear idea of just how vital it is to our economic health and growth, with logistics routinely accounting for 10% of U.S. GDP, give or take a bit, depending on the year and overall economic health at the time.

But now, many of the things we saw occur over the course of the pandemic are seeing signs of slowing. Some of the key examples of that include, for example, the declines in fuel, lower package counts and truck tonnage levels, among others. That is not to say those metrics have bottomed out, they have not. But, at the same time, they are not at the same levels as they were in pandemic times, when consumers were ordering anything and everything online, which stretched and taxed supply chain logistics and operations to unprecedented levels.

That also was true on the labor front as well, which was explained, in detail, in a recent Wall Street article. The article made the case the once red-hot market for warehousing jobs has considerably “cooled off.”

The main thesis for the cooling off was explained this way in the article: “A warehouse hiring spree that made logistics one of the fastest-growing job sectors during the pandemic, as businesses added nearly 700,000 workers in just over two years and increased average hourly pay about 8%, is over. A looser U.S. labor market, a pullback in the growth of online sales and broader economic uncertainty have left many companies choosing to stand pat on hiring as demand for warehousing and logistics services retreats from historic high levels.” 

In a sense, that pretty much describes the post-pandemic nature of the economy at the present time, in the form of things like reduced consumer demand, inflation (which is slowly on the decline), and still-high inventory levels (which are showing signs of coming down). But all is not dire, with some industry observers indicating that calling for an imminent recession could be viewed as premature, pointing to still-solid jobs numbers, and GDP growth.

So, are we “officially” back in a pre-pandemic supply chain and logistics world? Probably not, but much has happened over the last three-plus years that we probably thought would have never happened before. So, that said, things have clearly changed, especially compared to where we were. While things may not truly be considered, or viewed, as normal, there have been shifts, some of which could be viewed as permanent and others not so permanent. Either way, we have learned as a sector how to prepare for the unexpected and are more likely to be able to handle and prepare for whatever comes next.


Original article.

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