Supply chain disruptions amid Covid-19

Martha Rojas, vice president, director project development, at UTC Overseas, examines the impact of the Covid-19 crisis to the supply chain, and the strategies undertaken to keep the can making industry moving.

The spread of Covid-19 to over 200 countries has impacted the world economy and caused major disruptions to supply chains. We initially saw the slowdown in China, but it has since spread to every continent. At this time, it’s not business as usual, and buyers, sellers, manufacturers and logistics providers are all adjusting and finding solutions to keep the supply chain in motion.

In China, as events began unfolding, Chinese New Year was extended and then the country went into lockdown, which disrupted the movement of raw materials and finished goods. As the country’s production slowed, there was a trickle-down effect felt around the world in almost all industries, evidencing how dependent other economies are on Chinese production.

This continuing domino effect is having a negative impact on trade and is causing major disruptions in the transportation network. The global shipping industry depends on the seamless flow of assets based on receipt of raw materials, accurate production scheduling including JIT deliveries, and various forms of transport to final delivery sites. With so many factors in turmoil, it was inevitable that the slowdowns and lockdowns would have an impact on global trade.

The supply chain is facing extraordinary challenges and logistics providers are working tirelessly to overcome the unique difficulties brought on by this unprecedented situation. Today’s circumstances require thorough and early contingency planning as well as increased levels of risk management.

Every transportation sector is dealing with disruptions. Ocean freight is seeing an increased number of blank sailings and schedule changes. There are intermittent port closures resulting in cargo being diverted to other ports, equipment and labour scarcity restricting the flow of cargo, port quarantines and other unforeseeable measures implemented with little to no notice. Businesses are closed and cannot take delivery of cargo and some ports are facing congestion levels never before seen.

While the ports are doing all they can to maintain business continuity and operate normally, they have imposed restricted hours of operation and temporary closures which cause delays for truckers picking up and dropping off cargo. In the EU, border crossing closures and sanitary measures at the border have caused bottleneck delays and gridlock on the roads for truckers.

Airlines are operating severely reduced passenger schedules, in turn decreasing their capacity for belly cargo. Costs are at a premium, showing evidence of triple digit increases, due to limited capacity and priority given to the transport of essential goods. Passenger planes have been put into service as cargo only flights to service the increased demand for airfreight transport.

Increased costs

As the carriers struggle to adjust capacity and to stay operational with a diminished fleet and space, there is a loss of cargo and revenue resulting in increased transportation costs.

“As shippers strive to keep their supply chain moving, they must be prepared to face the unexpected, adapt to the uncertainties and consider alternative shipping solutions such as other modes of transport. For example, a truck/rail combination may provide a benefit in some cases,” states Bryan Fathauer UTC vice president, Midwest region. “Freight intellect on the nuts and bolts of the industry including the touchpoints between services such as airport to trucker, port to trucker, etc., providing the needed ability to navigate the current climate effectively. Having the experience and knowledge of ‘how things work’ is critical at this time.”

Manufacturers from every industry including the packaging industry are facing a compromised supply chain virtually every step of the way. Many companies are reviewing their options including sourcing from non-Chinese suppliers in an attempt to diversify their suppliers and minimise their strong dependency on one country. With the current volatile situation, there is uncertainty as to where and when the global economy will be able to catch up and normalise operations.

“The Freight Forwarding industry is considered essential services and provides the critical links to keep the supply chain running,” states Dean Temple, UTC chief operating officer. “UTC’s back office support teams are fully operational worldwide and are monitoring ports and schedules regularly to stay on top of changes affecting all trade lanes. The safety of our staff and everyone in the supply chain is of the utmost importance to our company but the supply chain must continue moving as we are currently transporting PPE and ingredients for foods and medicines that are used in manufacturing critically needed products.

“We are supporting all our customers during this unprecedented time, but business is anything but usual. We are all in this together and together we will weather these uncharted waters, better days are on the horizon.”

Careful planning now will help to mitigate disruptions to your supply chain. We cannot stop what is happening but we can work together to deal with today’s situation and plan for the future when we return to business as usual.

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