The stunning reversal of international trade during the Covid-19 pandemic and the logistics operations that underpin it suggest three key lessons in resilience that run counter to conventional thinking. First, beware of binary thinking, especially globalization. Just as expectations about new technologies erasing the effects of borders and distance have been repeatedly exaggerated, so the setbacks of globalization are often exaggerated. Second, your employees are the differentiator when a shock renders plans obsolete. Businesses should view investments in the skills and culture of the workforce as key pillars of business resilience. Finally, the size and direct control of assets can make a business more agile. Despite the typical rhetoric that scale and intensity of assets is associated with inertia, size and scope were clear advantages for DHL and other global companies during the pandemic.
When the pandemic spread around the world in early 2020, merchandise trade declined in the fastest pace ever, only to reverse the course in the middle of the year and exceed its pre-pandemic level before the end of the year. The logistics industry was in the eye of the storm as the pandemic raged through supply chains, and lessons from its successes during this time can help executives rethink how to make their own businesses more resilient.
Some readers may be surprised that we focus on the lessons of logistics success during a recovery marked by port congestion, stranded shipping containers, and even a stranded cargo ship in the Suez Canal. But the fact that world trade volumes have already been set new records in recent months, highlights a pattern of broader resilience. Faced with extreme challenges, logistics companies found ways to deliver and supporting global recovery.
We offer three lessons that are informed by our complementary perspectives. One of us (Pearson) faced the challenge of leading DHL Express, the world’s largest express logistics company, through the pandemic; the other (Altman), in academia, was immersed in data, forecasting and analysis.
Beware of binary thinking, especially on globalization.
The tendency to interpret shocks and potential answers to them in all or nothing terms can lead to overreacting, distract decision-makers and undermine resilience. This model is particularly important – and problematic – in globalization assessments. Just like expectations regarding new technologies erasing the effects of borders and distance been exaggerated many times, the setbacks of globalization are also often exaggerated.
In April 2020, 83% of executives told EY researchers that their companies are considering relocating or relocating in response to the pandemic. But in October, more measured assessments began to take hold and only 37% were still considering such changes. During relocation and nearshoring make sense for some companies there is probably still excessive hype about these changes. During the pandemic, the major economies of Europe and North America actually imported goods more than longer rather than shorter distances, on average.
At DHL, corporate memory, forecasting and close contact with customers helped the company avoid overreacting when trade began to decline in March 2020. DHL’s management team saw how the chains had supply were recovering from previous disruptions, such as 2010 volcanic ash cloud over Europe and the 2011 earthquake and tsunami in Japan. Executives also paid close attention to the range of available business forecasts and examined how customers in certain industries expected to need more rather than less of the company’s services. One of DHL’s key decisions from the start was to focus on avoiding layoffs. This turned out to be the right approach. By the end of 2020, the company had actually added thousands of new employees to its payroll.
To keep a balanced perspective in the midst of rapid change, leaders need to recognize this DHL Global Connectivity Index co-creator Pankaj Ghemawat called the “yo-yo effect of globalization. Binary thinking fuels the oscillations between belief in a “flat world” and the “end of globalization”. There is also no recipe for resilience, as both can lead to over-dependence in one place, the first abroad and the second at home. But the reality of world trade has always been between these two extremes. Trade may suffer setbacks, but the diversification it has proven, time and time again, to make businesses more rather than less resilient.
People are the main differentiator when shocks render plans obsolete.
As the pandemic unfolded, DHL Express had to reconfigure its operations to respond to developments that no network planner could have predicted, such as a sudden increase in PPE flows to China and then Even larger volumes quickly shipped in the opposite direction, followed by an unprecedented crossover. -boom of cross-border e-commerce. In just one week in May 2020, DHL’s global network received more aircraft movement change requests than the previous year.
The key factors that made these rapid adjustments possible were in place long before the pandemic. Long-standing culture employee skills and investment in an agile corporate culture enabled DHL employees to quickly tackle new challenges as they unfolded. For example, DHL Express “Certified international specialist” , launched in 2010 with an investment of 100 million euros, combines training and cultural development with employee engagement, and has since evolved into a group-wide initiative involving more than 370,000 employees. Empowering a skilled workforce to solve problems – contributing in a very tangible way to pressing societal needs – led to a five percentage point increase in DHL’s internal employee engagement metric in 2020, which company follows through an annual workforce survey.
Businesses should view investments in the skills and culture of the workforce as key pillars of business resilience. This corresponds to research highlighting the importance of an organization’s ability to improvise and develop new operational heuristics under pressure. These capacities, in turn, depend on knowledge and training, and they can be improved by greater workforce diversity and a clear business goal.
The size and direct control of assets can make a business more agile.
This goes against the typical story this scale and intensity of assets are associated with inertia. But in this pandemic, size and reach were clear advantages for DHL and other global companies, promoting more resilience. Through its global network and the wide range of industries it serves, DHL has been able to adapt to rapidly changing trade flows and facilitate the boom in e-commerce.
As new technologies fuel growth strategies in light of assets, direct control of assets still has a role to play in building resilience. A major challenge for logistics companies during the pandemic has been the collapse of international air travel. Passenger planes on the ground – which normally carry cargo in their bellies – have led to a huge air cargo capacity shortage. On some key trade routes, it took up to 50% of air freight capacity out of the market. DHL’s control of a fleet of more than 250 aircraft, coupled with operational changes, such as rapid turnaround times to avoid pilot quarantine, significantly reduced the impact of this disruption on the business. and its clients. This scale of aviation assets has also enabled DHL Express to maintain service in more than 220 countries and territories, maintaining critical lifelines for countries around the world.
DHL’s global reach also provided an advantage in areas such as rapid learning on how to safely maintain operations during the pandemic. As the pandemic swept the world, operational changes implemented in one country could be shared and adapted to adapt to rapidly changing conditions in other countries.
The dramatic rebound in global trade and DHL’s experience during the Covid-19 pandemic underscores the importance of not overreacting to changing business forecasts, treating investments in people as key catalysts for resilience and use the reach and control of business assets to move faster. As trade continues to flow, businesses and countries will continue to rely on global and regional supply chains. Optimistically, these vital catalysts for prosperity will be reinforced by the challenges of the past year, contributing to greater resilience in future crises.