Our View on Logistics: How 2020 Will Impact 2021

November 16, 2020 • Posted in Trends & Updates

The COVID-19 pandemic has disrupted the already complicated logistics network of plastics distribution — and when combined with recent natural disasters — 2020 has dealt this sector a one-two punch. In this blog post, we’ll highlight some of the challenges, discuss how businesses can adjust their supply chains to a new normal and share the key focus areas to help navigate the path forward. 

New Issues Compounding Existing Transportation Challenges

We’ve seen volatile transportation supply and demand with dramatic spikes and drops over the last six months. As the industry recovers, we’re getting a clearer picture of 2020’s lasting impact on the ground transportation market.  

One of the most significant concerns for the trucking industry continues to be the shrinking number of drivers. While the driver shortage was an issue long before COVID-19, stay-at-home orders and shutdowns to help slow the disease’s spread further exacerbated this challenge as freight companies had to lay off or furlough employees. When parts of the country reopened in the summer, transportation companies struggled to get workers to return with many opting for early retirement.

Freight companies have slowly built their workforces back up, but overall operations and efficiency are far from pre-pandemic levels. Transit, delivery and pick-up times have slowed due to protocols in place for social distancing and efforts to minimize person-to-person contact.

For the plastics industry, which relies largely on dry bulk trucking, recent storms in the gulf coast have disrupted production and made many materials difficult to source reliably. When Hurricane Laura hit, it created severe supply and demand imbalances. Today, demand for resin continues to outweigh production and all members of the logistics ecosystem — including distributors like M. Holland Company — are facing increasing costs. Not only is the law of supply and demand increasing the costs of plastic resins and freight rates, but there are additional costs for expedited or long-haul freight that are applying added cost pressure.

Warehousing Operations Face Similar Issues

Similar to the transportation sector, warehousing operations face labor shortages and supply and demand challenges. There was a significant demand for warehouse workers during initial pandemic lockdowns, as many operations were deemed essential. But carriers with cross-dock operations struggled to replace warehouse personnel who left to work for e-commerce fulfillment centers eager to hire experienced workers to meet an influx in demand. While operations have returned to pre-pandemic levels and are now ramping up for the holiday season, COVID-19 may continue to contribute to the worker shortage through higher turnover and absenteeism as the pandemic resurges.

The pandemic has challenged the warehousing sector’s ability to provide timely value-added services. As customers clamored to pack out backlogged railcars of material, warehouse production lead times increased due to increased volumes. This sector was also challenged to procure the necessary packaging materials because of competing demand for surging e-commerce packaging.

Fortunately, M. Holland Company has long-term relationships with our third-party logistics providers, so we continue to get excellent service as our partners understand the struggles of operating in our fast-paced and demanding plastics distribution industry.

Adjusting to a New Normal

There isn’t a catch-all solution to the multitude of challenges facing today’s plastics supply chain. But there are a few areas of focus we recommend to help mitigate increasing logistics costs and improve performance:

  1. Order Proactively for Optimal Success: Getting orders placed earlier is a good best practice because material shortages and transportation capacity constraints make the industry’s “just-in-time” philosophy risky.
  2. Be Flexible on Purchase Order Quantities: Flexibility is key and, occasionally, it is more efficient to reduce a 42,000-pound truckload order by 3,000 pounds to enable consolidation of a two-pallet less than truckload (LTL) order. Ordering a 36,000-pound truckload monthly instead of ordering 9,000 pounds each week could also be more effective. Lastly, when ordering bags, be flexible to avoid re-palletizing bags as it can lead to damage in transit.
  3. Open Early Delivery Windows: For packaged resin deliveries that are stored on the floor (i.e., not bulk loads placed in silos), it is beneficial to allow for early delivery. This could enable your LTL order to be consolidated on a truckload and possibly eliminate transit days, or, in the case of impending inclement weather, would allow for shipment ahead of a storm. M. Holland’s Client Experience team can work with clients to adjust early delivery settings.
  4. Keep a Closer Eye on Warehousing Capacity and Labor: Storage space is not as readily available as in past years, so capacity planning is essential. Recruiting new warehouse personnel is also more competitive than ever before, so placing additional emphasis on retaining warehouse talent is crucial to business performance.

The one-two punch of COVID-19 and an active hurricane season have undoubtedly challenged plastics distribution. But by putting our time, collaboration and talents into the key focus areas outlined above, we can absorb those blows and get back to delivering valuable logistics services in the plastics supply chain for the remainder of 2020, through 2021 and beyond.

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