No doubt many US-based engineering, procurement, and construction businesses (EPCs) have had to trim in-house logistics staff as an outcome of -pandemic-induced revenue reductions. 2020 has been a difficult year for EPCs, predominantly those serving the oil and gas (O&G) sector, wherein numerous projects have been delayed or canceled. O&G owners new and old have suffered substantial reductions in capex spend for new or additional production capacity as demand tumbled. However, EPCs were already adjusting to a new O&G market norm prior to 2020. Project opportunities started to diminish as oil prices began falling in mid-2018. There were many fewer projects to be bid and a much longer award cycle that consequently produced a declining need for logistics support services. For those EPCs serving multiple industry sectors, such as wind energy and mining, where business levels remained steady in 2020, some O&G related cuts may have been mitigated.
Has the downturn in projects, and ostensibly a move towards leaner EPC logistics teams, become an incentive for project freight forwarders (FF) to turn away from their capital projects business, or has it triggered an appetite for diversification and specialization, including taking on additional tasks typically managed by EPCs? I believe the latter is the case. While there have been a few apparent organizational structure tweaks and related personnel moves across the industry, none of the FF majors appears ready to exit the projects sector. Conversely, discussions with several FFs reveal an expansion of services — some by providing resources for pre-award project support, some by investing in innovation and technology tools, some by focusing on process improvement and efficiency programs, some by investing in physical assets such as warehouse and laydown space, specialized trailers, or railcars, and some even integrating into carriage and consulting services. All seem to possess a keen understanding that the project forwarding business requires the resources, commitment, and patience to endure the cyclical peaks and valleys inherent to the sector. All also expressed confidence the projects sector will make a strong post-pandemic return.