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Managing logistics in lockdown
Logistics under lockdown: lessons from COVID-19 so far.
Sourcing logistics took a massive hit, understandably, from the COVID-19 crisis. Worldwide, countries and regions went into lockdown to protect their citizens – but not all at the same time. So when lockdown restrictions were loosened in places like China and India, their now-reopened factories found that few or no orders coming in from overseas customers whose coronavirus timeline had started later.
China was under complete shutdown from the lunar new year until mid-February. From then, factories began to reopen and the government put a lot of effort into restarting the economy and the export industry. As of now, 99% of factories in China are operational, though some difficulties remain with production capacity and raw materials.
Ocean freight went back to normal quickly. By April, the ocean freight industry out of China was operating much as it was operating before the coronavirus situation. Prices are slightly higher, but delays are fairly few.
Air freight is where the big problem is. The industry was turned upside-down by the near-total stop to commercial flights, which carry a large proportion of the world’s air freight. Rates went through the roof, three or four times the usual prices. And excess demand meant transit time was not necessarily any better than sea freight.
Perhaps uniquely to a situation where medical products became high-priority, exports from China experienced backlogs due to rapidly changing licensing and certification requirements, with rules changes several times in the space of a month as the scale of the emergency became clear.
An unexpected casualty of the lockdown in India was interstate logistics upstream from international shipping. Cargo ports were open, but because goods could not be transported from locations in one state to another, there was no way for goods to get to the ships for export overseas.
Further, for importers using shipping consolidators, reduced factory production meant that there was often not enough cargo to fill a shipping container, so even if your product was on the dock ready to go to Europe or the Americas, it would not go anywhere until sufficient products belonging to other people trickled in.
As in China, air freight was massively hampered by reduced capacity due to slashing of commercial flights. Restrictions on two-driver trucking has also slowed down road transport within India, and will continue to do so for the time being.
The government began a process of dividing India into zones of different lockdown severity, which opened up opportunities for businesses to move their supply chains through locations in less ‘hot’ zones.
So, what does this mean for importers in terms of logistics as lockdowns continue, or for future lockdown situations?
Sameeksha Sachdeva of Seair Global says staying on top of the situation in your destination country is a must. Even though you may be able to ship your goods out, you don’t want your goods to arrive when the area has been declared a hotspot and be left sitting in the port with nowhere to go. “Make sure whichever country you’re exporting to, you’re aware of the regulations there in terms of customs, 3PL capacities, trucking capacities. I think everybody needs to incorporate these kinds of delays into planning for their supply chain.”
Refael Elbaz of Unicargo recommends that importers avoid shipping by air and go by sea instead. They can also consider transporting freight by train to Europe. Though more expensive than sea freight, it is generally cheaper than air – and proved resilient in terms of rebounding from the COVID-19 shutdown disruption.
As post-lockdown opening up begins, it’s the time to negotiate with your suppliers, Elbaz advises. “Suppliers and factories are looking for orders now. Most important is to understand that this is not a regular situation in terms of logistics. Everything is changing. You should expect delays. Use your buffers, negotiate with your supplier, avoid air freight.”