If there’s a silver lining to the coronavirus, it’s that the global supply chain is finally getting its due.
The trucks, trains, warehouses, container ships and ports — once behind the scenes and largely taken for granted — are now in the spotlight. And because of that focus, the global supply chain may evolve faster in the wake of COVID-19 than it otherwise would have.
One person with a bird’s-eye view of this shifting landscape is Will O’Donnell, managing partner of Prologis Ventures, who spoke with FreightWaves CEO Craig Fuller during FreightWaves LIVE @HOME. Prologis Ventures is the venture-capital (VC) arm of Prologis (NYSEL: PLD), the world’s largest owner of logistics real estate.
Spotlight on logistics
COVID-19 “has really shined a light on the logistics and transportation industry,” said O’Donnell. “Three months ago, I don’t think we really would have viewed a lot of these [workers] as front-line heroes. It was an often-overlooked part of the economy.” The outbreak “has proven the importance of a robust and resilient supply chain,” he said, forcing the transportation industry “to adjust on the fly.”
It has “put a lot of pressure on supply chains. Grocery stores are a good example — they need to do fast replenishment and restocking, and that has really been put to the test.”
O’Donnell emphasized, “One of the things COVID-19 has done is necessitate the rethinking of the global supply chains and highlight the need for them to be adaptable to meet today’s challenges.
“A lot of the changes that had to occur on the fly will help companies be more efficient coming out of this. A crisis is a good learning opportunity — and this will help companies really think about how to create resilient supply chains.”
Accelerating improvements
The need for greater supply-chain resilience should accelerate investments in technology and adoption of more efficient practices. “We’re going to see companies continue to invest in optimizing their supply chains and optimizing their operations within their logistics facilities,” O’Donnell affirmed.
He foresees automation gaining the most traction where “it enhances the performance of individuals and doesn’t necessarily replace them,” as well as where it makes the workplace safer.
He also expects more investments into the backbones to the systems that actually garner the headlines. “People think about drones but they don’t think about the infrastructure needed to support them,” he noted.
“A lot of infrastructure will need to be put in place to support the next evolution. When you build a house, you need to build a foundation first. We’re going to have to build the foundation for a lot of the technology [to support logistics] in areas people don’t really think about until they realize they’re not there.”
VC interest in logistics tech
O’Donnell sounded confident that funding would be there to support this next evolution, despite financial fallout from the coronavirus.
He acknowledged that the VC community is “taking a step back and looking at the fundamentals of businesses, making sure the unit economics work and really monitoring the cash burn” and that “everyone has been challenged, deals have slowed down, and people are being very thoughtful [because] … there’s a lot of uncertainty.”
But on the other hand, he pointed out that the supply chain and logistics sector has been less negatively affected by COVID-19 relative to many other segments.
Supply chain and logistics companies “have been fairly very resilient, while travel, hospitality and retail have really struggled,” he said. Similarly, on the real-estate front, retail and office segments will face ongoing challenges, yet industrial warehouse real estate should “see a resurgence.”
In the same way transportation workers are now viewed as essential front-line workers in the fight against the coronavirus, the global logistics industry is proving its economic necessity in the eyes of investors. As O’Donnell put it, “You need products to move. You need things to go through warehouses. That’s all incumbent on people enabling that to happen.” More FreightWaves/American Shipper articles by Greg Miller
