Coronavirus has global logistics sector reeling

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Spend Matters welcomes this guest post from Dan Khasis, CEO and Founder of Route4Me, a global route optimization software company.

Since China reported the first case of coronavirus to the World Health Organization (WHO) about 12 weeks ago, the arteries of the global logistics sector have begun to clog up.

The measures taken by governments to curb the spread of the virus, such as a lockdown of manufacturing units and social distancing, are crimping the demand of goods and threatening to disrupt global supply chains. So, perhaps the biggest uncertainty for logistics managers is customer demand. This is even a bigger uncertainty than the shortage of workers. For example, customers who have ordered products online may no longer want them and cancel their orders or may ask for priority delivery.

The Numbers Say It All

According to reports, this unpredictability and slowdown have started to impact the Port of Los Angeles, the largest U.S. gateway for seaborne imports from China. The number of incoming goods plummeted in February, and the situation is predicted to “drive weakness” in demand for domestic logistics services.

According to another report, the number of trains moving goods from two ports, Los Angeles and Long Beach, to Chicago has also dropped by almost 50% from nearly 50 a week to 25.

Clearly, this outbreak is preventing many logistics companies from making their workers and vehicles commercially viable. The overall economic impact of this crisis will run into the millions and billions of dollars.

How is this pandemic impacting the logistics industry?

The lockdown in China impacted the global logistics industry in two ways.

First, China is a significant source of components and finished products, and the unavailability of goods is affecting the supply to manufacturers and retailers globally. And, the longer the factories stay idle in China and elsewhere, the emptier the global pipeline of products will become. If the virus outbreak continues for long, we may see manufacturers and even logistics companies suspending their operations as they run out of supplies or key inputs.

Second, China is a big consumer of goods and services. Economies that depend on China importing their goods are feeling the heat as people in China are limiting their consumption.

Furthermore, seven of the top nine container ports in the world are in China, and the other two ports are in Singapore and South Korea. All three countries have been hit by the pandemic. And, the shutdown means that ships can't get into Chinese ports. Most of the ships are stuck in the dock, waiting for Chinese workers to return to ports so that the loading and discharging of goods can be done.

In Australia, vessels are idled in quarantine zones because ships that came from Chinese ports are not allowed entry into Australian ports until the crew is declared virus-free. And, in Singapore, authorities are asking all vessels that have visited Chinese ports in the last 14 days to submit a declaration form to confirm the crew is virus-free.

Even the U.S.’s ports have been affected. According to reports, U.S. seaports might see a slowdown of 20% between February and April. The Port Authority of New Jersey and New York are expecting at least 10 cancellations out of 180 arrivals scheduled for this month.

Just like shipping, air cargo is being affected. The lockdowns are impacting supply chain operations significantly around the world. DHL, for instance, has suspended deliveries in the Hubei province, the epicenter of the coronavirus outbreak. And even though UPS continues to fly into and out of China, it has reported reduced demand for services as a result of business closures.

Collectively, almost one-third of the world's economy is already affected, and we are still counting as the outbreak spreads.

A double whammy is hitting transport companies. On the one side, they are reducing the number of delivery vehicles as the drivers are hesitant to deliver parcels. On the other hand, to ensure social distancing, a lot of people prefer online shopping over brick-and-mortar stores. This is resulting in a spike in demand for e-commerce items, which is causing a supply issue and delays in delivery.

The challenge for logistics companies now is serving the maximum number of customers in a day. A route planner can be beneficial here as it helps plan well-optimized routes with accurate driving directions, while factoring in traffic conditions, weather forecasts and customers’ preferred time windows. Giving such optimized routes to the delivery drivers ensures they are not wasting time and fuel by looking for customer locations and so can serve more customers in less time.

Conclusion

As days and weeks go by, the slowdown will become more apparent and the uncertainty that accompanies it will increase. Returning to normal will be a slow process. Yet, though concerns and unpredictability are running high, logistics companies are known for taking on tough problems. Let’s hope this global epidemic is one of the many challenges that we will successfully overcome!

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