A group of German experts presented last week a preliminary assessment of the impact of the coronavirus pandemic on the German logistics industry. Although a decline is expected this year, the situation of the sector will improve next year. After the crisis, logistics companies will be more willing to implement digital solutions.
German logistics will see a decline of 5% this year, although an increase of 0.4% was still expected in autumn 2019, according to estimates of a 32-person expert group led by Professor Christian Kille from the University of Applied Sciences in Würzburg. The logistics sector is expected to grow by 3% in 2021.
According to experts, quick recovery in logistics is not to be expected – the situation shall slowly improve in the second half of this year.
Most operators will remain on the market, although a significant increase in the insolvency of small and medium-sized companies can be expected, “but without mass bankruptcies,” explains Professor Kille.
Flexibility, risk management and digitisation
According to the expert group, the coronavirus crisis ended the era of unlimited freedom and carefree growth. Therefore, flexibility, safeguards and restrictions currently dominate logistics decisions. The role of risk management will increase.
Every entrepreneur must think about how to prepare the company for future crises,” Christian Kille stressed.
In the future, the success of logistics professionals will, according to experts, depend on transparency and communication, which digitisation can guarantee.
Digitisation is commonly considered to be a lifeline in times of pandemic in the logistics sector and will come about with some delay. This is because the crisis is slowing down investment in digitisation projects. However, experts hope that digitisation in logistics will be implemented to a greater extent after the crisis.
Domestic demand as a driver of future growth
Experts predict a change in the demand structure.
Globalisation will not drive the growth of logistics, it will be domestic demand and the EU internal market,” says Kille.
Many supply chains are likely to be shortened and “companies that respond early to these changes can ensure their competitiveness in the long term,” explains the Professor from the University of Würzburg.
Experts expect delays in digitisation. “Although many companies are developing their logistics projects, most of them are taking a break in the logistics sector,” specialists note. However, it is expected that digitisation in logistics will be implemented gradually after the crisis.
If companies want to achieve transparency and flexibility in their supply chains, this is only possible with digitisation,” stresses Markus Meißner, co-initiator of the study.
However, the key question is whether budgets for running digitisation projects will still be available after the crisis.
Recession in Germany
The coronavirus crisis has, of course, affected not only the logistics, but the entire German economy. The GDP of Europe’s largest economy from the first quarter and forecasts for the whole of 2020 are not encouraging. This year Germany expects a recession of 6.3%, which is the biggest drop in GDP in its post-war history. The global crisis in 2009 was less painful for the German economy – it shrank by 5.7%.
Germany’s GDP fell by 1.9% in Q1, although economists expected a 1.6% y/y decline in seasonally unadjusted data. On the other hand, taking into account the number of working days (i.e. seasonally adjusted), the result is even worse, as it shows a y/y decrease of 2.2%. The period between January and March is the second quarter of declining GDP in Germany, which means a technical recession.