ParcelHero has studied the impact of the new coronavirus on the retail supply chains worldwide to create ten steps to mitigate the effect of Covid-19 on international trade and logistics, as outlined by Head of Consumer Research, David Jinks MILT.
The sudden spread of Covid-19, the new coronavirus, has created a significant potential threat to global logistics giants and small freight operators alike. While its final effect on world trade has yet to be determined, all logistics and delivery companies must have plans in place to prepare for sudden changes in supply chains and to reassure staff and customers.
Some experts are predicting the new coronavirus’ impact could be greater than the 1918 Spanish flu, and cause a larger recession than the 2008 crash. On the other hand, many health professionals are saying it is unlikely to have a greater effect than many typical global flu outbreaks. Whatever the truth, Covid-19 is already having a significant impact on global supply chains and trade; and everyone, from the largest international exporter, to the smallest man-and-van courier, needs to prepare for ongoing economic and social difficulties.
ParcelHero has put together ten key steps to prepare companies for the impact of the virus:
Set up a central emergency team, that can communicate effectively – working remotely if necessary. If you are coordinating an international company response you should think about videoconferencing systems as the best alternative to regular face-to-face meetings. Business ‘chat rooms’ such as Microsoft Teams, which also incorporates video, or Slack, might be useful to implement now, if you don’t already use them.
Keep staff ‘at the coalface’ informed and re-assured. For example, drivers concerned about making home deliveries, or workers travelling to perceived risk areas such as Hong Kong. Can logistics workers and shoppers really contract the virus from packages? A new report says nearly half (48%) of shoppers have said they would avoid goods from sellers shipped directly from China if Covid-19 continues to spread. But, frankly, the risk seems unlikely. A new report in the Journal of Hospital Infection finds bleach and ethanol-based cleaning products seem to kill coronaviruses ‘within 1-minute exposure time’. And in new studies the survival of two strains of the – similar – SARS virus on a paper surface found one remained active for just 3 hours; although concerningly the other survived 4–5 days in cold temperatures.
Plan for a sharp, sudden uptake of home deliveries. If the Covid-19 becomes more established in the UK, many consumers are likely to want to avoid crowded shopping areas – and may well take up home deliveries of goods and food for the first time.
Be aware of what stock will be in demand and what in decline. The obvious examples might be a surge in demand for face masks, etc, but a decrease in the purchase of toys and electronic equipment typically sourced from China.
Allow for significant delays in China courier services. The Post Office has suspended or changed the details of many services into China and many international courier services have been cancelled or delayed – depending on which region of China is being served. Organisations such as China Post’s Express Mail Service (EMS) are delaying China-UK shipments to disinfect goods. Says EMS: “To ensure the public’s safety, we will ‘double-disinfect’ the parcels and the vehicles that will go through Wuhan, delaying the shipping progress.”
Review your client base in order to set priorities. Which of your customers looks most likely to need to reduce its transport requirements? For example, car sales into China have collapsed by 92% this month; while Bicester Village, the upmarket discount shopping outlet in Oxfordshire, has seen sales to Chinese tourists, its largest group of customers, plummet by 85%, reports the BBC. Be aware of which customers are most exposed to problems in Chinese manufacturing, and which may suddenly need to source from another supplier in another country.
Be aware which international companies may need to change their distribution patterns or sourcing? Chinese sourced goods and components are severely disrupted. That will have a significant impact on sales of many products across the globe. For example, Apple is warning of supply disruption; it only holds around a month’s worth of finished iPhones in stock. And the range of companies exposed to risk may surprise you. For example, Jaguar-Land Rover may be a British based automotive manufacturer, but it is reliant on Chinese sourced components. It has actually resorted to flying vital components into the UK in suitcases – definitely not part of its usual global supply chain routine! And China isn’t the only country facing restrictions: the important manufacturing base of South Korea has been significantly impacted by the coronavirus. Concerningly, areas of northern Italy have also been affected, with roads into some towns and villages currently closed to all traffic, including trucks and local deliveries.
Be prepared for complete changes in global maritime shipping patterns. As China has ground to a halt terminal operations and pick-up of inbound containers in China have slowed to a virtual stop. This is having a huge knock-on effect for all kinds of markets; for example, most reefer plugs (supporting refrigerated containers) at the yards of all container terminals in Shanghai, Ningbo and Tianjin/Xingang are occupied. Companies such as CMA CGM are being forced to divert Reefer cargo to other ports and are imposing port congestion surcharges to cover the extra costs. Meanwhile there are many so called ‘blank sailings’, effectively completely cancelled services, from international shipping giants such as Maersk, CMA CGM, MSC etc. Another unintended consequence is that empty shipping containers are stuck in Chinese ports causing shortages in other parts of the world.
And airfreight…It’s not just shipping that has been impacted. Be prepared to also experience airfreight disruption if your logistics network involves China. Not only are many direct freight services suspended, but also so-called ‘belly cargo’ capacity is reduced; as airlines such as British Airways, United Airlines and Cathay Pacific have suspended commercial passenger flights to and from China. Most commercial passenger services carry freight in their holds. Now this essential cog in the wheel of global freight distribution has suddenly vanished.
Maximise cash flow. Your company’s entire business model may need to be re-examined in the light of a significant coronavirus pandemic. Freight companies and manufacturers must plan operations to maximize cash flow rather than profits, urges Yossi Sheffi, director of the Massachusetts Institute of Technology’s Centre for Transportation and Logistics, in the Wall Street Journal. Unexpected potential changes in global logistics and retail patterns mean liquidity and adaptability is vitally important. ParcelHero advises companies are alert to other economic changes; for example, fuel oil stocks are growing around the world as maritime shipping activity slows, which should result in a fall in oil prices.
ParcelHero, like the rest of the international logistics industry, is planning for the worst whilst hoping for the best. All supply chain and delivery professionals should take steps now to mitigate the potential impact of a coronavirus pandemic.
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