Webinar report: Flexport – COVID-19 Logistics update – 7 April 2020
TABS Webinar Report
Flexport – COVID-19 Logistics update
7 April 2020
– Camille Egloff- Managing director and senior Partner BCG
– Sanne Manders- COO Flexport
Impact of COVID-19 in the industries
Covid-19 Logistics Update
COVID-19 is having a huge impact on various industries, creating massive disruptions on the domestic and global supply chains. The impact on the market and volume is not very optimistic and has a lot of decrease. The shareholder return has decrease in many industries such as Industrial Goods, Automotive, Aerospace, Chemicals, oil& Gas, electronics and consumer packaged goods. Others has taken advantage of this situation by seeing an increase in their volume such as the consumer and packaged goods industry, retail, e-commerce and healthcare industry. For professionals of supply chain and logistics, this situation means to have an average understanding of the situation. The retail industry for example, is experimenting an increase on Grocery’s in trucking, parcels and air freight but it is also experimenting a decrease on the non-grocery sector in shipping, trucking and an increase in parcels.
Consumer insights are early indicators and can give some hints on how the COVID-19 impact might the average by industry in the coming months.
The expecting spending after the crisis in categories such as preventive healthcare, fresh food, organic food, household care products will have good perspectives. Also, savings will go on education. On the other hand, categories such as handbags and fashion, luxury brands, outwear, going to restaurants, alcohol, tobacco, are categories that consumers are least favorable to go to after the crisis. 25% of consumers plans to spend more and 45% plans to spend less.
The current lockdown is profoundly changing consumptions patterns. Consumers in the USA are experimenting a huge decrease in entertainment, cinemas, eating out, hotels and also in. categories like apparel and luxury. On the other hand, online shopping is having a huge increase. Companies like amazon, Grocers, mass retail, or pharmacies are being consumed more.
From a survey done by Flexport in late March amount all their shippers in China, they obtain that 92% to 100% are full speed and 70% to 80% mostly resumed. The overall is that the production is ready and ready to go. Moreover, they see from their customers and what are they cancelling in terms of purchase orders that 24% of orders has been cancelled by the overseas ocean east but the current estimate of close Is the 30% right now for Q2. This means that the supply shock is over (for now), but shippers do forecast demand shock.
At this point, Supply shock is over (for now), but shippers do forecast demand shock some factors are a global recession highly like, Shape is not yet fixed could be U shape (significant lost value) or V shape (Contained loss). U shape triggered if shock to labor, capital and productivity growth is large enough.
Current market view on the impact per sector
Retail is somehow taking advantage of the crisis because people are still buying for essential and using e-commerce so for the short term the industry is getting strong. But in the midterm, because retail is very corelated with GDP, the market is not super optimistic, they expect that after the crisis retail will also through a difficult period there will be overstocking, and they expect not to be strong.
Automotive is having a difficult period. The supply chains are global so it’s very difficult for them to function. Midterm the view of the market is that they are going to have difficult time for recovering. People will most likely after the crisis want to take transportation or car sharing.
Navigating the crisis
Immediate execution of contingency measures for the supply chain and foresighted rebound preparation will be key. Ability to navigate in an environment that is very fluid, having and adaptive supply chain, bringing and adapting solutions, switching transportation models from classic ocean models. In the medium term, Analyze the learnings and adapt your supply chain accordingly.
Volatility is the trend. In the size of demand, there is complex demand planning. Also, supply disruptions from suppliers. Rising costs: tariffs + labor + interruption charges. Also, in logistics, in the fulfillment of the deadlines there are many cancellations of service and availability of equipment that cause price volatility and also possible bankruptcies.
Some of the possible options for the industries to speed up are on Premium or guaranteed FCL services, premium LCL, air charters, pay surcharges to secure equipment and loading. On the other hand, to slow down staging transloading and off-dock storage, demurrage and detention and delay in transit or suspension of transit. Some liquidity solutions for companies can be improve collateral, letters of credit, SBA loans or Flexport capital.