Authored by: Hariharan Subramanian
With the turn of events in the wake of Coronavirus or COVID-19 pandemic disrupting the entire world over the past few weeks/months, we need to take note that this kind of disruption has never been witnessed or even imagined in our lifetime!
Almost every country in the world has reported at least one COVID-19 positive case. Developed countries like USA, Italy, Spain, Germany etc., are still struggling to contain the spread.
In the initial few days/weeks there has been a short-term impact on the Global Supply Chain due to locking down of Wuhan and the ripple effect leading to shortages in supply for several manufacturers and retailers across the Globe.
With the situation getting better in China, the rest of the world is still struggling to contain the spread. Governments globally have been taking various measures on a war footing, including completely locking down of cities, states, cross border movement and even cancelling international flights. This has lead to complete shutdown of manufacturing units, all non-essential commercial businesses such as malls, theatres, restaurants, etc. The global Supply Chain & logistics has been staring into a long-term impact.
The magnitude & resistance of the virus has exposed the vulnerability of global supply chain & logistics. The global market is witnessing unrealistic demand scenario, shutdown of manufacturing units, reduced manpower of up to 80%, retail inventory of not more than a week, and prolonged delivery gap along the value chain.
Following are some of the top items from Transportation standpoint to consider:
- Fluctuating demand in retail – Due to the lockdown, there is a sense of panic amongst the customers, resulting in hoarding of goods at their end and huge demand in the retail segment. Thus there is a surge in the Trucking segment as retailers are rushing to restock goods but this is temporary as the demand will subside during the lockdown for couple of weeks. There might be a surge again post normalcy.
- Life Sciences – There has been a surge in demand especially from the Life Sciences Industry due to sudden increase in requirement for various medical equipment, accessories and allied products. The industry has been working overtime to produce and deliver them to the end-customers on priority, leading to several expedite shipments.
- Increased Air Shipments – Expedited shipments are also causing high demand in the Air Cargo leading to 27% jump in the air cost.
- Supply Network – The supply network has taken the biggest hit as several ports are either closed or have lowered working hours in Europe and USA. Anyone sourcing the material from another county and using inter-model route, need to take a close look at the route and make sure the Supply Network is still intact.
- Detention & Demurrage – With the large scale impact in Supply networks, Detention & Demurrage charges could emerge as a major cost too. Several Trade Organization are in discussion with FMC to keep fees consistent and fair, especially in the current Coronavirus-impacted global economy.
Based on the current situation, Supply Chain experts predict it can take several weeks post normalcy to resume & achieve routine Supply Chain operations.
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