Coronavirus Logistics Update 8 (COVID-19)

Another weekly round up of the effects of the Coronavirus on the Logistics and Supply Chain Industry.   The airfreight industry is particularly suffering. Despite the high demand for airfreight the actual airfreight volumes have dropped significantly in March particularly towards the end of the month as airlines shutdown their passenger network. This meant a massive cut in airfreight bellyhold cargo capacity across the world.  The freight press has widely reported that in the UK Swissport, dnata,  Menzies and WFS cargo handling agents have written a joint letter to the UK government highlighting the extreme pressure the sector is under. They are warning that as the majority of flights are not operating, they are receiving no income and will struggle to remain operational over the lockdown period. They are concerned if they have to begin to wind up operations, shippers are going to face difficulties in moving goods during the Coronavirus pandemic. Once the pandemic is over and industry attempts to return to normal there will then be the issue if the handling agents are able to meet the demands required of them. If they cannot ramp back up fast enough this will result in supply chain collapsing and ultimately hampering the recovery efforts of the UK.

East Midlands airport however is one airport bucking the trend in the UK. It has reported significant increase in adhoc flights and diversions from other airports which had reduced operations or closed them altogether. The airport has reportedly had the least reduction in normal flights of any major airport in the EU. This is also in part as it is a key distribution hub for DHL, Royal Mail and UPS. While e-commerce has had a big increase in the past couple of weeks due to the lockdown in many countries and initially increased the demand for airfreight. Overall the airfreight sector is expected to start seeing a drop off in April as the worldwide economy begins to slow down and demand for goods in some sectors such as clothing falls off due to workers being laid off and then reducing what they spend their money on.

Many companies who offer ocean freight services are actively encouraging the use of Telex/Electronic bills of lading. Many are warning that the use of paper bills may incur delays for the shipments as couriers and the royal mail are experiencing slower delivery times and with a lot of the office staff now working from home, the processing time is much longer.

Shipping lines are being asked to try and help with container detention charges in light of the pandemic closing factories and making other deliveries more difficult. MSC are now introducing a SUSPENSION OF TRANSIT (SOT) service for shippers from China. The SOT is designed to allow shippers to start moving goods from China whose buyers may be unable to receive them due to the lockdown. As Chinese production begins to ramp up and they can ship the goods but have them held in certain transhipment hubs before delivery to the final port of discharge.  This new system aims to achieve several goals:

• Shippers can keep moving goods out
• Congestion is avoided at port of loading and port of discharge
• Allows the shipping lines to keep running services
• Shipping line can calculate and anticipate the requirements for final delivery once pandemic restrictions are reduced
• Helps to avoid high storage and detention charges at the port of discharge.

Overall this may be a service that will equally benefit not just the shipping line, but the shipper and the final buyer. More details can be found on the MSC page here.