23 Mar Coronavirus: How to Continue Your Supply Chain
With COVID-19 spreading rapidly changing lives and livelihoods, we want to know: what’s next? How do factories operate again? And how do you know when your cargo moves?
Usually, Chinese New Year (CNY) creates a temporary and manageable disturbance to global trade. Predictably, peak season precedes the 1-2 weeks before CNY when over 50 percent of country travels home and factories are closed. Generally, manufacturing levels return to normal after around 3-4 weeks. It’s a well-known pattern modified by businesses.
Out of the ordinary this year, however, and COVID-19 unleashed very different market dynamics.
Expert View: COVID-19 Effect by Modes
In March 2020’s first week, the trucking market recovered to 80%, making it a fairly bright spot. If the pattern persists, trucking will hit 90% market recovery from March 9 week and see complete recovery by March 16 week.
Some freight flies in commercial aircraft bellies, and those flights resume, but not quickly.
The China-NA air freight market jumped over 50 percent in the week after February 24, followed by another 50 percent increase on March 2. The underlying cause is the cancellation of passenger flights carrying 40-50 percent of China-NA air freight capacity. The backlog of volume, decreased availability from airlines, doubling prices in a short time, and space disappearing overnight all make a difficult situation. Passenger flight capacity is dictated by passenger demand, which depends on how the virus spreads globally and is hard to predict.
Asia to NA (TPEB) trade lanes are experiencing a lack of demand. NA ports announce early closures to balance supply and demand. Closing the conventional contract season on May 1 could be an inflexion point, but it’s too early to say.
Even then, China’s restored. The optimistic pattern began in North China, followed by South China, and finally East / Central China, the Coronavirus area most affected. Large firms have reopened mostly, but SMEs are returning to work at a slower pace (about 80% for North China and 50-60% for South China and East / Central China).
Naturally, complete recovery would depend on global demand. Many had hoped shipments would run at full capacity between late March and early April. Yet since COVID-19’s maximum impact on North America, Europe, and other areas are still uncertain, it’s unclear when that will happen.
Supply Chain Recovery
Most registered factories were mostly operational and expected to return to full capacity in 2-4 weeks. A significant majority said their primary shipping method remained regular ocean freight.
Keep in frequent touch with your logistics provider for versatile approaches, reduce delays, and minimise miscommunications.
Understand how logistics providers plan to meet their obligations and hold their vendors accountable.
Consider shipping semi-urgent by rail or air.
Trucking: Create a 2-3 day freight schedule buffer (equivalent to blank sailing).
Be sure that your shippers ask their truckers to arrange all required licences. Pay particular attention to pick-up venue.
Consider barge shipments in areas like Shenzhen and Shanghai where cities have plenty of water connexions. Barge shipping would be the best choice if roadblocks / checkpoints are burdensome.
Many barges deliver 100 TEUs of capacity and can easily attach to the mother vessel.
Air: passenger cargo space will resume, but not fast. Core carriers ‘ most optimistic prediction is April to mid-May end.
Be open-minded and versatile with alternatives: look inland, national airports. Unexpected locations may better accommodate air cargo. Split shipments; better than nothing.
Ocean: See premium pricing-based options to ensure space. It’s perfect for hot shipments.
Sea-Air Option: combination of two separate modes of transport by initially linking ocean freight to an air hub and then continuing as air freight. This could suit semi-urgent shipments. With a transload solution, accelerate ocean shipments from China to the US: ocean-to-US domestic trucking helps shipments to reach the mainland faster, reducing congestion.
If / when the economy picks up, US financial resources would be strained. Consider port congestion and the demands of delivery dates.
When negotiating contracts, seek to reduce confusion and concentrate on negotiation before tariffs expire to ensure no disruption in commercial issues and space allocation.
Generally speaking, we expect season contracts to be concluded.
China stopped travelling and several events and economic activities to slow COVID-19 spread. Lower demand also dampened operation. Now most of the world is going through a similar phenomenon whose implications for populations, economies, and supply chains are not yet completely understood. Yet we’re not absolutely pitch. The more valuable knowledge we share, the more light we can shed on the right steps for our businesses and communities. That’s the spirit these findings hold.