Since the situation with COVID-19 is rapidly changing, it requires all of us, in addition to health measures, to urgently prepare measures that will preserve our business and, consequently, our jobs.
Due to the coronavirus outbreak and its impact on supply chains, retailers have stepped up their efforts to give consumers with essential goods and to protect the health and well-being of the customers and communities they serve. Despite some delays and disruptions, retailers are now taking extraordinary measures to keep products moving to store shelves and consumers’ doorsteps.
Although the main point of concern about coronavirus is a public health risk, the effects it has on the economy and transport is seriously concerning. In response to the coronavirus pandemic effect on freight markets, some of the companies are cutting approximately 10% of its workforce.
Many companies face the challenge of retraining and re-deploying team members to new divisions while working remotely and using all available tools and technology.
With the supply chain industry facing several challenges, including shifting customer demand, restrictions and potential material shortages, the outbreak has forced many to rapidly adapt their supply chains.
The borders within the Schengen area and between the European Union and the rest of the world are partly or entirely closed. In order not to disrupt supply chains, the flow of goods is free from these restrictions. However, certain arrangements and specific measures taken by countries have a direct impact on freight capacity, rates, processing speed, delivery time.
The COVID-19 outbreak has a significant impact on our transport systems - freight services on land, at sea, and airborne.
Impact on road transport in the EU
The production and distribution of almost every good, at some point, depends on services provided by road transport operators. In the time of a pandemic, the most immediate concern for the road transport sector is to keep up the safest way to supply chains, especially for essentials such as food and medical items.
Road traffic is still active but subjects to disruption and deceleration due to increased border control and sanitation (driver temperature measurement) and special arrangements such as the closure of certain border crossings.
As more and more governments adopt new measures and guidelines, the situation in Europe is developing faster. Although well-organized, the European network has recorded fewer delays at several European borders due to increased health and safety measures.
The closure of many companies, being pick-up or collection, addresses for our network, is affecting our operations and service. Closed companies on both shipper and consignee side lead to decreased volumes and the need to cut selected international linehaul frequencies and conduct reroutings. In specific lanes, it can cause delays of 1-2 days.
In the next few weeks and months, we can only assume that the outbreak will continue severely impacting the global economy, trade, tourism, and thus the road transport sector as well as the supply chains and mobility networks it supports. Yet the industry is doing its best to cope with the crisis and takes its social responsibility seriously in this challenging situation.
Impact on air transport in the EU
Passenger air flights have been stopped, significantly eliminating cargo capacity on most lanes. The movement of goods is still prohibited. Shipping is still possible in all regions, but connectivity is minimal.
Shipments of most goods are being deliberately delayed. To extend sailing times and cut costs on canal fees, some carriers are sailing around Africa to Europe. Shipments of critical goods like masks and other protective equipment are expediting usually by air transport.
There will probably be further reductions and suspensions of scheduled flights as the coronavirus continues to spread around the world. The supply contraction will cause unpredictable rates, reduced air freight capacity, and create delays in the next few weeks or months.
Our airfreight operations in Europe continue running. However, with the majority of flag carriers having closed down their passenger networks, we experience significant capacity constraints to all major markets. Increased congestion at airports and cargo rerouting via European hubs are affecting overall processing time and transit times of shipments. Freighters are back on schedule and carriers offer more charters on congested lanes such as Europe to the US.
Impact on sea transport in the EU
Despite challenging conditions, ports and shipping companies are still operating, but sea transport is dramatically marked by the impact of coronaviruses. Therefore, sea transport will be doubly affected and will have to face the challenge of a negative start at the beginning of this year.
With continued blank sailings and the dynamic situation at various borders, impacts on our sea logistics business and barge operations in Europe become noticeable. The governments of Italy and Spain have decreed to close non-essential factories and commercial activities.
Although cargo transportation is still allowed to sustain the supply of goods, the delivery might be hindered by closed manufacturing sites and warehouses. The ports are operational with a slower gate in/gate out process and delays in customs clearance. Processes in Italian ports are more time-consuming due to reduced working hours. China has made significant efforts to curb the epidemic, so the operation of their terminals, depots and CFS are almost back to normal.
Since the situation with COVID-19 is rapidly changing, it requires all of us, in addition to health measures, to urgently prepare measures that will preserve our business and, consequently, our jobs.
Croatian industry significantly depends on imports and a large number of entrepreneurs are involved in supply chains with multiple countries. Delays or interruptions in the supply of raw materials, make it more likely that some contractors will force to suspend production. The eventual diversification of suppliers and logistics operations will take longer. Employers are continually adjusting their services and improving their mode of transport to continue delivering goods to customers on time.
It is inevitable that the world economies, and especially the freight forwarding industry, will undergo significant reductions in work volumes in the first quarter of the year, but the question is now whether we can expect a normal, V-shaped recession recovery later this year or something else entirely? In a V-shaped recession, the economy suffers a sharp but brief period of economic decline, followed by a recovery.
Five priority areas retail supply chains can take to navigate the coronavirus pandemic are suppliers, merchandising, distribution, logistics, fulfillment.
Suppliers: Secure demand
Due to surging demand for essential non-discretionary goods, retailers are facing network-wide shortages. For the most important product categories, strategic suppliers held daily meetings to discuss the possibility of securing a fast and adequate supply of necessary products.
Merchandising operations: Redirect inventory
As retailers recalibrate their product orders to match consumer demand, they will need to reorganize and make some changes when it comes to purchasing, planning and other inventory management operations. For stocks to move quickly, retailers will need to bypass or override their algorithms for ordering, replenishing, scheduling, and converting shares.
Distribution
Distribution is the supply chain segment where demand trends for nondiscretionary and discretionary goods begin to overlap significantly. Some companies reassign current employees to have more capacity in nondiscretionary categories where products are selling fastest. Some discretionary-goods retailers are choosing to cross-train and reassign back-office and store personnel to support e-commerce operations.
Logistics: Balance between agility and flexibility
Maintaining the flexibility of logistics is essential for limiting disruption to essential services. The surge in demand across nondiscretionary product categories is slowly eating away at excess capacity. Freight costs have also spiked, with double-digit percentage increases in spot rates from February to March.
The outbound-tender rate-reject index, which measures adherence to contracted rates for shipping, has also increased by 20 percent, indicating that carriers are rejecting contracted rates.
Fulfillment: Deliver reliably
Due to self-isolation, quarantining and stay-at-home orders emerging as a result of the pandemic, companies are seeing a notable increase in online shopping and local deliveries for non-discretionary goods. It has significantly changed the way most companies operate so far and is not a negligible change.
In several countries, consumer surveys show a likelihood of greater spending on groceries and less spending in discretionary categories. Immediate action across the supply chain can help retailers meet consumer demand during the COVID-19 pandemic.
The pandemic has forced retail executives to mount urgent efforts to adapt their supply chains. Whether by revising their purchase orders and merchandising plans or by reallocating all kinds of resources - working capital, inventory, employees, transport capacity, to where they are needed most.
The best that retailers can hope for in this tightened environment is to secure enough capacity to get essential items on store shelves reliably and swiftly. This can take some time, creativity, but also additional expenses.
Railway Logistics
For Eurasian rail, freight conditions are quite stable. Trains to and from China are currently still scheduled. Local terminals in China and Europe remain in service. There are now no restrictions on rail transport crossing countries along the route. Only delays to the trucking service at European borders are possible.
HUBBIG will continue to operate the weekly Eurasia Express block trains connecting Xi’an with many European destinations through on-carriage options. With a direct line via Kaliningrad/ Mukran, cargo will reach Europe within 12 to 14 days.
Charter flights
Charter flights have various purposes, from meeting the business requirements of companies, transporting emergency shipments, to situations requiring emergency medical interventions. Charter flights provide services of traditional aircraft but can adjust according to customer requirements.
Working closely with our key airline partners, our airfreight experts maintain regular space allocations on major Asian and Transatlantic routes. They have established additional weekly charter rotations to service both markets for urgent supply needs.
A weekly fixed operating schedule and new charter movements on high demand trade lanes will help to avoid production and supply chain delays and ensure the continuation of your operations caused by present and future implications of the coronavirus outbreak.
Hubbig also offers transportation from Shanghai - Zagreb via charter flights once a week. The price of the package depends on the dimensions of the cargo you want to import / export, and the minimum size of the cargo is 70kg.
Keeping road transport supply chains and mobility networks open is crucial to helping us all cope with the COVID-19 pandemic in the comings weeks and beyond. The impact of the coronavirus outbreak on the shipping sector will be determined by when the Asian giant’s economic activity starts to bounce back.
More than ever before, maintaining flexibility within logistics is essential. The current surge in demand is slowing consuming excess capabilities. Our focus is on servicing our customers and carriers and coming out of this stronger than we were before.
After the pandemic, the main focus will be the further evolution of e-commerce into a mostly tech-savvy industry with cargo drones, 3D printers and robotics at its disposal.
COVID-19 will have a disruptive power across all sectors but particularly in the supply chain and the transportation sector. It won’t just be in the short-term. Investment into freight tech companies will help the existing industry to connect all the different players, shippers, brokers and carriers on the maritime basis to optimize current operations.
In this incredible and dramatic global health situation, Hubbig’s logistics services, as well as our worldwide network, play a crucial role. In this situation, the freight forwarding industry and agencies are saving lives around the world - by sending medical equipment and supplies to medical professionals, delivering the necessary goods to private users and finding solutions to anyone affected by the pandemic crisis.