Since the WHO labeled COVID-19 a pandemic, most countries that are at least minimally affected by the situation have implemented their emergency protocols and safety measures for their citizens.
This is leading to containment measures, cancellations of mass events, production slowdowns and of course, an immediate recessionary effect on stock markets worldwide. In short, a phenomenon that is threatening the global economy.
Supply chains (and therefore the logistics industry) are being significantly affected, directly touching industries such as those producing high-tech goods, textiles, household items and machinery.
At the same time, the logistics and Freight industry, which is linked to the above, is suffering many of the consequences (especially sea Freight).
COVID-19 Economic Impact on Sea Freight
One of the most affected sectors is sea Freight. The National Association of Stevedoring Companies and Port Employment Centers (ANESCO, in Spain) estimated a drop of approximately 30% in the activity of the container terminals in February. This is being accentuated during the month of March.
Taking into account that sea Freight accounts for 90% of the world’s Freight transportation, the International Chamber of Shipping (ICS) has issued, together with other international bodies (such as the WHO), a manual to help the shipping industry mitigate the spread of the virus, and in turn, ensure that this industry does not cease its activity.
The ICS has also assessed an impact of an estimated $350M per week on shipping industry, which translates into a loss of more than $1.2 billion per month.
COVID-19 Main consequences on Logistics Industry
The effect of the coronavirus on the shipping industry will have its greatest impact on the sector (and on the global economy) through the following consequences:
- Increased transit times, which are causing containers to accumulate on the docks, due to the lack of dockers and drivers.
- Increase in the prices of sea Freight services, due to the gap between supply and demand.
- Accumulation of stock in warehouses, since, particularly in China, they still have goods produced from before the Chinese New Year that could not be shipped.
- Other industries affected. Although the transport of essential goods has not been restricted, many other sectors in the different countries are dependent on export or import activity and are being directly affected.
- Decrease in manufacturing production. This is another problem that is degrading logistics activity, with a 2% impact in China (drop in production) during the month of February, representing a loss of some $50 billion in the world economy.
Solutions to mitigate the effects of COVID-19 in the Shipping Industry
To mitigate effects impacting the logistics and Freight transportation industry, in addition to the recommendations of the ICS and the WHO (with the manual to help shipping companies), many companies such as Freight Forwarders are trying to manage most of their customers’ operations with air traffic.
There are also several innovative companies that are joining to do their bit, such as Hyperchain, which has developed a donation blockchain tracking platform to have full traceability of the supply chain in sending donations of medical equipment (we can see more examples of blockchain solutions used to combat coronavirus here).
And in the case of ChainGO, we are doing our bit by offering our blockchain technology software free for 2 months, so that all those logistics operators who are now working from home, can do their job maintaining efficiency and preserving productivity and visibility of their operations.
After this recession, logistics companies will obviously struggle to recover their levels of activity, although taking into account the situation, it seems increasingly evident that many of them will have to adopt new solutions that differentiate them from the rest in order to become competitive again.
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