It all happened so fast.
Everything came to a halt initially and then, as supply chains began to slowly click back into gear, we saw significant network disruptions followed by unprecedented spikes in consumer demand which left some industries hanging by a thread. With countless changes and tremendous transitions taking place throughout the year, 2021 was truly one for the books.
Let’s take a look at some of these takeaways in supply chain and logistics last year:
Air Freight Market Growth Rate Surpassed Sea Freight
A few months ago, research consultancy Transport Intelligence predicted a rebound of the global freight forwarding industry. In their Global Freight Forwarding 2021 Report, air freight was forecasted to grow by 14.9% in real terms, 7.3% more than sea freight. This comes after the administration of COVID vaccines around the world which began as early as December 2020. The falling number of community cases along with the easing of lockdown measures and travel restrictions were expected to contribute towards growth within the air freight forwarding industry.
Meanwhile, in the sea freight market, things were not looking up for a handful of reasons. The obstruction of the Suez Canal incident, for instance, exacerbated the pre-existing supply chain bottlenecks and prompted businesses to turn to alternative modes of transportation. In addition, ocean freight has become so costly to a point where air cargo actually does not seem so out of the question anymore. Today, carriers are charging approximately $7,000 per forty-foot equivalent unit to the U.S. West Coast, not to mention the extra surcharges and premiums that have to be paid.
The demand for air freight has increased drastically due to the pandemic-induced e-commerce boom. Retailers are now looking for faster and more efficient options that would not require several months of lead time. “A lot of our clients have really made it their position to not run out of inventory and if that means a couple of weeks they have to spend a lot more for airfreight, they’ll do it,” said Brian Bourke, Chief Growth Officer at SEKO Logistics. With air cargo, they are able to get their shipments delivered to customers in a matter of days — something that is impossible in the case of ocean freight.
Growth of E-commerce Stabilized Worldwide
2020 was a year to remember for those in the e-commerce industry, with several countries experiencing a robust expansion of online sales. Such a surge in e-commerce would not have been possible without the outbreak of COVID-19 accelerating digital adoption worldwide. In the US, for instance, we saw a record-breaking rise of 63% in e-commerce shipment volume over the holiday period. Most countries in Europe also experienced a similar level of impressive growth during peak season 2020; 85% for the UK, 65% for France, 63% for Poland and 62% for Germany.
Fast forward to 2021, restrictions were increasingly eased and many brick-and-mortar stores were also back in business following the global administration of COVID vaccines. The return of physical retail contributed to the overall slump in US online sales last year. Based on Parcel Monitor’s findings, peak season 2021 was predicted to generate a notably lower growth of 39-58% MoM and 23-32% YoY. According to Forrester, physical stores will account for 72% of US retail sales by 2024.
A similar forecast was made for Europe, with Brexit playing a huge part in the possible slowdown of e-commerce growth. With reference to Parcel Monitor’s projections for 2021 Black Friday and Cyber Monday weekend, the region would see a significantly slower growth of 33-39% MoM and 44-54% YoY.
Shorter Delivery Times Gave Hope to Most Countries
Back in 2020, we observed spikes in transit times in conjunction with the different waves of the COVID-19 pandemic. Supply chain disruptions coupled with an unprecedented rise in demand for e-commerce proved challenging for the global economy, especially in the earlier months of the virus outbreak.
Fortunately for us, things were looking up in 2021, with many regions showing positive signs of recovery throughout the year. As compared to when the pandemic first broke out in 2020, the logistics performance of most countries in Southeast Asia have seen visible improvements in 2021. In Singapore, for instance, the average transit time went from 1.3 days pre-covid, to 1.5 days in 2020 and then 1.3 days in 2021. Similar patterns were also observed across Europe, Americas and Oceania.
This positive outlook could be due to many carriers making a concentrated effort to work around the ever-changing restrictions and growing volume in e-commerce orders. One great example is Hermes, which has ramped up recruitment and set up pop-up distribution centers all over the UK to prepare for peak season 2021. The logistics company has also been working with e-commerce marketplaces to provide end-consumers with more accurate delivery updates in the subsequent peak seasons.
Interestingly enough, we also saw a correlation between vaccine rollouts and logistics performance. As of January 13 2022, more than 9.57 billion doses have been administered around the world, making it the largest vaccination campaign to date. The US government began distributing COVID-19 vaccines as early as December 2020, despite the persistent backlash from its population. As a result, the average transit time of domestic US parcels saw an improvement of 5.5% in the post-vaccination period. Meanwhile in Germany, the average domestic transit time went from 1.81 days in Q4 2020 to 1.23 days in Q3 2021.
State of Supply Chain & Logistics 2022
A major focus of 2021 was to make supply chains more resilient, something that is easier said than done. Maintaining inventory, adding capacity and safeguarding against disruptions do not come cheap and companies are already struggling to stay afloat even without all these extra costs. As the pandemic situation wears on, there is little to no chance of achieving a resolution anytime soon.
About Transport Intelligence
Ti Insight is a leading logistics and supply chain market research company providing strategic market intelligence to the logistics and parcels industry through its:
- Supply Chain and Logistics Market Research Reports
- Global Supply Chain Intelligence (GSCi) online knowledge platform
- Consulting and Market Research projects
- Training, Conferences and Webinars.
Ti aims to provide its subscribers with a vision of how the logistics market will develop over the next year, 5 years and 10 years with quantitative forecasts and qualitative insights for each timeframe.
Ti has acted as advisors to the World Economic Forum, World Bank, UN and European Commission as well as providing expert analysis to the world’s leading manufacturers, retailers, banks, consultancies, shipping lines and logistics providers.