Chilling realities of Recession for Logistics: What Lies Beyond the Frost?
The logistics industry, often considered the backbone of global trade, is facing turbulent times as recessionary pressures and job cuts cast shadows over its landscape.
Maersk recently announced that it will cut ‘10,000’ jobs globally. There is consistent news of family owned generational businesses filing for bankruptcy and ‘smaller firms’ going out of business in the wake of poor demand.
The current situation has been a result of global pressures, unexpected recession and unforeseen slump in the sector. The economic downturn has impacted the logistics sector, raising concerns about its resilience and future trajectory. Understanding the causes, challenges, and potential pathways forward is crucial for stakeholders within this industry.
Exploring Causes
Several factors have contributed to the current recessionary strains felt in the logistics sector.
During the pandemic, most logistics companies had to increase their capacity and efficiency to keep up with the increasing demand and low supply. There was massive hiring and companies paid more to retain or hire good talent.
However, after the pandemic, things cooled off. The client side was stuck with high inventories and the container prices took a long time to rationalise, resulting in low demand for shipping across the world. Today the shipping costs have tanked and are lower than pre-pandemic era. With significantly lower revenues, increased efficiency and the global downturn, the logistics industry is left with the only option of restructuring to ensure they stay in business.
Some of the other reasons for job losses in these economic challenges are
Redundancies due to Automation
Automation and technological advancements streamline operations but can also lead to the displacement of traditional roles, impacting jobs in warehouses, transportation, and administration. As the demands were high during the pandemic, many businesses moved to automation and now with the reduced demand, they need to recover the operational costs, which means fewer people handling more machines.
Reduced Demand
Recession-induced reductions in consumer spending directly affect the need for logistics services, resulting in downsizing and layoffs. Even with the festive season looming large, there is hardly any uptick in the goods' movements, pointing at muted celebrations.
Spillover from other Industries
Recession has resulted in job losses in other sectors and industries. With uncertain job markets, people aren’t spending much, thereby restricting demand for goods and services. The job losses in logistics can also be seen as a ripple effect of reduced purchasing power.
Unexpected Slump in Demand growth
Post pandemic, the global economy was expected to make a V shaped revival, however even as we are closing 2023, the global economy is still limping. ‘According to IMF’, world economic growth is pegged at 2.9% for 2024, a 0.1% downgrade from 2023.
Future of Logistics in 2024
Despite the current challenges, the logistics industry is poised for transformation and adaptation:
Greater availability of skilled people
With businesses letting go of people, there is a highly skilled and talented logistics workforce that is looking for opportunities. Hiring them now will lead to greater talent and skills in organizations looking to hire in logistics or allied domains.
Technological Integration
Continued advancements in technology will drive innovation and efficiency within logistics. Embracing technologies like AI, IoT, and blockchain will streamline operations and create new job opportunities in tech-related roles.
Upskilling and Reskilling
With automation altering job landscapes, upskilling and reskilling programs will be critical to equip the workforce with the necessary skills for evolving roles in logistics, such as data analytics, cybersecurity, and supply chain management.
Emerging Markets will lead the way
‘According to IMF’, while the projections for developed and advanced economies hover between 0.6 to 2.2% the emerging economies and developing Asia are expected to be around 4-4.8% hence it will be important for businesses to relook at their strategies for these regions and have a bullish approach in these markets to maximise profits.
The logistics industry, facing the brunt of recessionary pressures and job cuts, stands at a crossroads. Embracing technological innovations, prioritising resilience in supply chains, looking at newer markets and investing in workforce development will be essential for navigating through these challenging times. For employees, this is the time to skill up and focus on allied areas to ensure they have a unique proposition for the employers. It could be improving technology skills, learning and mastering ESG frameworks or even understanding green logistics. While short-term uncertainties persist, the industry's ability to adapt and evolve will pave the way for a more agile and robust logistics landscape in 2024 and beyond.