Winning Post-Pandemic Strategies for Forwarders
February 1, 2022
Amidst the pandemic, experts predicted that some commodities were headed for a quick recovery, examples being fast-recovering goods such as minerals, gravel, stones, and agricultural products. Others are neutral or slow-recovering due to a mix of market forces.
Fast-Recovering Commodities
Goods that are faster to return include pharmaceutical products, animal feed, food and grocery items, and agricultural and basic commodities. The main factors of market growth are the fact that they are considered national priority, are in-demand, and are more easily available due to the acceleration of e-commerce.
Neutral and Slow-Recovering Commodities
Some products are considered neutral when it comes to market forces post-Covid-19. Such are nonessential commodities in industries like electronics and manufacturing and construction. Several factors account for this, including their potential for reshoring and a decline in consumer demand. There are also products that are expected to make a slow return, such being automotive, textile, furniture, and paper, and basic chemicals. Such commodities are likely to return slower due to reshoring and lower consumer demand.
Impact by Commodity
In the short-term, the automobile market has shrunk due to a decline in discretionary spending and repeated factory shutdowns. This has not been the case with consumer staples such as cereals where decline has been just 5 percent. Several factors account for the slight decline, including a diversified supplier base, high level of production automation, and increased demand for in-home foods.
In some cases, market share is affected by both, mode of transportation and type of commodity. With ocean transport, for example, agricultural goods and other types of dry bulk cargo have been less affected than containerized cargo.
Implications for Forwarders
As most freight forwarders already have short-term crisis strategies, now it is time to think about navigating a path post-pandemic. A comprehensive strategy would include three key components: scenario development, operational strategy, and commercial strategy. Scenario development involves accounting for the factors that affect demand and supply. Having a commercial strategy is about assessing which scenario would be most likely and seizing short-term opportunities. Finally, it is also important to have an operational strategy in place to adjust capital expenditures and capacity until the path to economic recovery becomes clear.
For European logistics providers, this means assessing their performance and market share against fluctuations in trade demand and across trade lanes. A working strategy would be to redeploy staff and increase capacity in robust markets and scale back where trade lanes have been hard hit. Port operators can adopt the same approach when it comes to capacity planning. An effective strategy would be to assess the impact of the pandemic on the top importing and exporting countries and then develop an operational and commercial strategy. Also, port operators may opt for flexible staff planning in periods of low demand or they could try to reach out to carriers that offer better pricing or country of origin or commodity mix. Alternatively, they can focus on maintenance or capital expenditure projects.
