The impact of the coronavirus crisis on the logistics industry
It doesn’t always dominate the headlines, but the logistics industry performs one of the world’s most vital services: transporting critical supplies, people and goods across the globe. But, since the coronavirus started, borders have closed and transport has been limited. This meant supply chains were severely disrupted, if not broken altogether. One estimated economic impact of COVID-19 on the global logistics industry is that its gross value added could be down 6.1% in 2020.
The situation is unprecedented, says Gaston Tchang, strategy & innovation manager at the Port of Amsterdam. “We had the financial and banking crisis in 2012 and 2009,” he says, “and we had a decrease in trade then – but not as huge as this. Due to the lockdowns there was a decrease in both demand and supply because companies had to stop producing. That hadn’t happened in the earlier crises.”
Edward Witlox is managing director of Bonded Services, a logistics service provider headquartered near to Amsterdam Airport Schiphol. He agrees that the initial impact was startling. “China went into lockdown in February,” he says, “and we saw because of that our volumes at that time dropped 50-60%, so we got a major negative hit.”
With the world shutting down, logistics companies faced tough challenges, but in Amsterdam firms were quick to adapt to the changing situation. When the crisis hit the Netherlands and the country went into lockdown, Amsterdam Airport Schiphol was one of the most affected by the measures. In June 2020, 471,000 air passengers passed through the airport, almost 93% less than June 2019.
But, says Schiphol’s head of cargo Bart Powells, the airport responded to this new situation immediately. “Usually we have around 200,000 passengers a day – at the height of the crisis there was only 10,000. But, immediately passenger seats on planes were being loaded up with cargo. Though we didn’t have passengers, there was huge growth on the cargo side – 107% growth on air traffic movements in the first few months of the crisis.”
Working together to get through the crisis
True to the Dutch capital’s supportive business ecosystem, companies also came together to help each other through the worst part of those first few months. “The individual companies in our ports are mainly SMEs that faced financial or operational problems due to the coronavirus crisis,” Tchang says, “so, for example we helped them by providing extended payment terms without charging interest or extra costs for seaport dues and inland port dues.”
Amsterdam’s location as a gateway to Europe also helped keep the city’s logistics industry going. “The city became a major entry hub for all kinds of e-commerce goods,” explains Witlox, “and, of course, also masks, gloves and all kinds of medical equipment. If you see what happened to e-commerce, it exploded. It really exploded. So we were forced to ensure we could deal with the tsunami of parcels that were arriving.”
How the Amsterdam Area’s business ecosystem supports itself
Apart from the most obvious advantages for a logistics company to be based in the Amsterdam Area, such as its strategic location and connectivity, Powells thinks that it is also its expertise in other sectors and status as an innovation hub has also helped support it throughout the crisis.
“We now have the European Medicines Agency (EMA) here and we focus a lot on PPE and pharmaceuticals,” he explains. “And Amsterdam is known for that. So, EMA coming here drives the focus of the City of Amsterdam in that regard. That’s one way that all the different sectors here support each other. Amsterdam becoming a life sciences and health hub helps the logistics industry. And, the fact that the city is a tech hub as well – the tech firms and data centres that are here helps our industry. It’s all connected.”
Accelerating the digitisation of the logistics industry
One impact of the coronavirus crisis on Amsterdam’s logistics industry is that is has accelerated its digitisation. Though projects were already planned, the enforcement of social distancing and need to reduce contact between people has helped push companies’ plans forward.
Usually, when cargo is trucked to Schiphol, paperwork passes between the driver and airport workers before it can be unloaded. Now there is a concerted effort to digitise these processes. “We started this before we knew about coronavirus, but this process has accelerated its implementation,” explains Powells. “It’s also driven some of the companies we work with, that were reticent about the change, to welcome it.”
“I think that we have seen the crisis is helping to accelerate those digital projects,” agrees Tchang. “But, of course, although there are a lot of benefits of working digitally, I see people also want to get to work again in a normal way. So, I think in the future there will be a sort of hybrid form of the old and new way of work.”
As well as digital processes being accelerated, there has also been more focus on green initiatives and investments since the outbreak of the crisis, Tchang says. “Obviously, the coronavirus crisis has caused problems, but it can also be an opportunity. The so-called ‘green recovery’ that the government wants to make is being used for green investments - including to support the energy transition in the industry.”
Why business leaders are remaining optimistic
At the start of the outbreak, uncertainty was perhaps the word that best summed up the mood in the logistics sector. But since then, business leaders in the Amsterdam Area’s logistics sector say they are optimistic about how it can weather the storm created by the coronavirus.
“There are so many uncertainties,” says Tchang, “the only certainty is that the recovery will take some time. However, I think we are still optimistic about it – goods need to be transported; people need food.”
This optimism, Tchang says, is in part spurred on by Amsterdam’s close-knit business community. “At the beginning of the lockdown period we had daily calls with our clients to keep in touch. It is a real partnership and a close community in Amsterdam. Things come in cycles and we are positively looking forward.”
Witlox also believes that the robustness of the Amsterdam Area’s logistics sector – including being home to Schiphol – means it can deal with any problems it may face. “It’s the third entry point in Europe,” he says, “and I think Schiphol was quite quick in grasping the change from passengers to cargo. It was able to quickly change which is very positive. And that’s supported our business, because without that we would now have a major problem.”
The future of logistics in the Amsterdam Area
Without a working crystal ball, the future is even more uncertain to predict than the coronavirus crisis was. But, for companies like Bonded, which saw a huge increase in demand as shoppers moved online, the future is bright. “In our business, where parcel distribution is the key point, this very sorrowful situation has had a positive effect,” explains Witlox. “If I look at what's happening in the Amsterdam Area, a lot of logistics companies came over here, partly due to Brexit, and there's a lot of warehouses being built. There's still a huge demand for logistic workers.”
Rather than causing a huge shift in the industry, Tchang believes that in the future the industry will take what it has learned from the coronavirus crisis to be more adaptable than ever before. “That’s the one thing we’ve learned you need to be – flexible,” he says. “Firms have to take measures and try to look what is possible given the regulations. What I see in our port but also at other companies is that being adaptive and reinventing themselves where necessary can be successful.”
Read more about the Amsterdam Area's logistics industry.