2020 has started on a wild roller-coaster: just as companies were hoping for breathing space after the signing of the US-China phase 1 trade agreement, market sentiment swung 180-degrees as the coronavirus transformed into a massive global pandemic in the blink of an eye.
One-by-one, countries in Asia, EU, and the United States locked down their borders and imposed restrictions on their citizens as well as travelers.
The economic forecasts look bleak. The International Monetary Fund (IMF) sees GDP per capita shrinking across 170 nations due to the pandemic, and it believes that even if the outbreak is short-lived it could drag the world into a 3% GDP contraction this year. A resurgence of COVID-19 in 2021 could leave economies struggling for years to come, it added.
The container shipping industry looks vulnerable in particular. Carriers have reacted to these gloomy forecasts by announcing plans to increase capacity withdrawals that will result in 20% of the trans-Pacific capacity being taken out of service, while the Asia-Europe trades will see cumulative capacity cuts reaching 25% to 30%, according to Sea-Intelligence Maritime Consulting. Some analysts are predicting a very high chance of another major insolvency in the next two years.
Meanwhile, panic buying grabbed global headlines with people experiencing first-time mass panic on daily supplies finding supermarket shelves emptied out, with not a single roll of toilet paper in sight.
The Road to Recovery – A look at China
Although we are still battling the spreading coronavirus, supply chain and logistics operators are working hand in hand to develop a vibrant risk management strategy during this time to speed up recovery once the situation stabilizes.
China, the first to suffer Covid-19, has started showing signs of recovery, according to a Harvard Business Review analysis. Although the recovery will depend on how the global markets recover, it is worth noting many Chinese companies have already moved beyond crisis response to recovery and post-recovery planning. This prepares them to respond should a second wave of new cases occur.
With our long-established presence in Europe and extensive experience managing supply chain and logistics risk management, Contship has come up with three pieces of advice for global supply chain operators to speed up the supply chain recovery process.
1. Establish a Supply Chain Continuity Committee
New measures by the authorities and few workers on site limit supply chain visibility and impact-related services. Rates and service frequency might be affected due to insufficient demand, affecting places even where local business operations are ongoing. It is essential for companies to set up an internal supply chain continuity committee to evaluate the dynamics constantly and reprioritize necessary logistics.
Through close monitoring of supply chain service provider operations, shippers and cargo owners can adapt their supply chain and alternatives flexibly.
Master Kong, a leading instant noodle and beverage producer in China, used detailed contingency planning to restart over 50% of its supply just weeks after the outbreak, successfully supplying 60% of stores that were reopening — three times as many as some competitors. (Source)
Whilst Contship’s businesses and services are all operating, we have experienced service frequency impact due to a temporary fall in demand and some necessary precautionary measures. We have been proactively updating clients and partners with shipping alternatives through multiple intermodal solutions to meet their needs. While clients may be confused by conflicting media reports and government measures, our marketing team has been communicating timely and direct information and solutions.
2. Consider flexible intermodal alternatives like rail
Due to the dynamic, evolving nature of government measures, the availability of different transportation modes has been constantly changing. We see backlogs and yard congestion at maritime terminals due to limited truck capacity, while the closing of borders and thorough customs checks have also hindered clearance speed and raised costs.
So far, rail freight has proven to be the most effective and least disrupted mode for the flow of goods over long distances. In China, domestic rail freight is currently replacing long-distance haulage previously provided by trucks. The first mile is still a problem, but for the long-distance, trains are currently a preferred option.
We advise a comprehensive mapping of the end-to-end supply chain and evaluating intermodal alternatives in the market including adjusting road-rail volume ratios.
3. Post-COVID-19 imports export surge plan
As manufacturing resumes normal operations and catches up with backlog demand, there is likely to be a surge in containerized imports and exports.
To cope with sudden demand, we advise considering rail transport for greater efficiency as a train crew (with a maximum of 2 staff) can move 40 semi-trailers. A transhipment terminal only needs 60 railway stuff with 20 pairs of trains each day to move goods that would otherwise require 800 truck drivers.
Conclusion
Logistics and transportation play an indispensable role in our supply chain and daily lives. With this in mind, Contship thanks our dedicated employees and our staff for their diligent work during this challenging period in ensuring our supply chain services continue.
Contship will apply its utmost efforts to maintain supply chain continuity to support the Italian economy and citizens, whilst also taking the greatest care in protecting the safety and health of our employees, business partners, and suppliers.
This article is part of CS WINdow, Broström Tankers AB's quarterly newsletter, featuring insights on the global supply chain, with a focus on European intermodal logistics. You can subscribe to learn more:
