The coronavirus has re-invigorated the benefits of port-centric supply chains
“At DP World, we believe that port-centric logistics is a game-changer.”
I wrote that more than a year ago in an article for Port Technology that rings truer now than it did then.
The coronavirus has highlighted the precariousness of the supply and demand imbalances that exist across the supply chain. Import destinations and export destinations are often mis-matched, liner boxes are even emptier as demand plummets, and differences in consumer market sizes creates imbalanced cargo flows.
In response to these challenges, the value of port-centric logistics has been reinvigorated and will be more game-changing than ever as companies look to managing volume flows and cutting costs post-Covid. Especially as lock-downs ease and demand steadies.
Ports haven’t been able to rest on the merits of their location for some time now; resilient, nimble companies need ports with integrated logistics ecosystems that go beyond imports and exports. The coronavirus challenge is case in point.
The most obvious benefit of port-centric logistics is intermodal connectivity. They unlock faster distribution times, greater capacity, sophisticated storage facilities and better accessibility to hinterland networks, as well as a suite of secondary services from inventory management to warehouse management. And particularly relevant to the pressures of Covid, the sophisticated ecosystems that ports represent means that shortening supply chains and bringing operations closer to home is a feasible strategy.
But we have also found that owning physical assets makes port-centric logistics uniquely advantageous for our customers, who avoid having to farm contracts among multiple players as a result.
For instance, if the agility and advantages for third party logistics providers comes from being asset light, this is only possible because strong and reliable partners like DP World combine asset-heavy infrastructure with digital capability. We are doing some exciting work on this front in Romania, which I will write about in more detail soon.
Moreover, the benefits – and importance – of port-centric logistics go beyond the immediate coronavirus challenges. Other forces continue to evolve at pace and companies must not lose sight of these at risk of falling behind. For instance, port-centric supply chains are a viable means of tackling climate change issues, by reducing long-distance freight and integrating the use of green technologies at our facilities, such as electric carrier fleets and emission scrubbers.
Running parallel, urbanization will need to be reckoned with. By 2050, the UN anticipates 68% of the world population will be living in urban centres, inviting a re-think of how to effectively connect megacities to local and global trade flows. This may require port-centric supply chains to shift to more hybrid inland models, which we are already seeing success with at locations such as the Rhine. By combining deep sea trade flows with intra-European trade flows, BCOs are able to get strategically closer to a market, while at the same time reducing the pressure on city infrastructures through urban asset-sharing.
Both climate change and urbanization will only be exacerbated as consumers become increasingly accustomed to an instantly gratifying supply chain that can deliver products overnight, an appetite that has been fueled by remote working and is unlikely to slow. Supply chains that are port-centric will perform best at sating this appetite in the immediate term and as we gradually enter the recovery phase.