The COVID-19 pandemic has dealt a massive blow to the global economy. On the supply side, factories and businesses have been forced to close temporarily due to the shortage of input materials from suppliers and the need to protect workers. Demand is declining, too, as consumers stay home and face the prospect of a large-scale economic downturn.
Against this backdrop, the March 2020 purchasing managers’ index (PMI), which reflects the economic health of the manufacturing sector, slumped to a 92-month low in the Eurozone and also decreased significantly in most Southeast Asian countries.
This confluence of supply and demand shocks have put considerable pressure on the logistics sector.
The decrease in cargo volumes is threatening the business viability of many logistics companies. In February alone, shipping lines cancelled 105 sailings on routes from Asia to North America and Europe. Likewise, the Center for Aviation estimates that most airlines will be bankrupt by the end of May without government help.
The pandemic and lockdowns are also creating a host of operational challenges. The Indian Foundation of Transport Research and Training estimates that 500,000 drivers and cargo workers were stranded at checkpoints across the country during the implementation of the nationwide lockdown.
Yet the world needs logistics now more than ever.
The industry plays a vital role in the manufacturing and transport of essential products, from food to medical equipment, test kits, and masks. When one considers that a ventilator requires over 700 parts from all over the world, it is easy to understand the importance of keeping supply chains going!
Beyond the immediate response to the pandemic, logistics will be key to supporting long-term economic recovery: the sector makes up about 11% of global GDP, and, as the backbone of global trade, supports countless other industries.
As the world scrambles to contain the spread of the virus and its economic fallout, safeguarding logistics has emerged as a priority. Key stakeholders have started taking concrete measures to support logistics infrastructure, services, and workers:
- In a globalized industry like logistics, international or multilateral organizations can play a crucial role when it comes to coordinating operations or protecting the interests of air, shipping, rail, and trucking operators. The International Road Transport Union has called on bodies such as the UN and the European Union to keep logistics chains open and provide financial support to operators so that they can, in turn, sustain the economy. The International Maritime Organization has provided guidance to authorities on the facilitation of maritime trade to keep port infrastructure running and protect the safety of workers. This includes guidelines on ensuring berth access for commercial ships, enforcing adequate border control to clear cargo, facilitating the necessary crew changes, and promoting electronic ship-shore document exchange. In this new environment, an increasing number of ports are also implementing enhanced health declarations for workers, expanding health screening protocols and facilities, and scheduling appointments for ships and trucks to enter the port so that they minimize waiting times and interactions.
- Governments are stepping in as well. To relieve the aviation sector, Denmark and Sweden are providing loan guarantees to their flag carrier, Scandinavian Airlines (SAS). Singapore has announced a plan to waive landing and parking charges to preserve airlines’ working capital, combined with measures to protect the wages of aviation workers. The United Kingdom has recognized logistics personnel as “key workers,” which will allow them to continue accessing childcare and schooling for their children when they work. Other ways to reduce unnecessary stops, limit physical contact, and expedite trucking services include establishing express green lanes for emergency supplies and e-tolling instead of toll booths manned by personnel.
- Various logistics companies have announced measures to protect their employees and adapt operations. These include segregated shift schedules and warehousing locations for safe-distancing, review of business continuity plans, as well as paid sick leave and financial relief for impacted workers. To reduce physical interactions, many companies have set up systems to arrange contactless deliveries either at customers’ doorsteps or at self-service lockers. Several start-ups have launched free digital services to better match the required transport demand with excess supply in real time and provide supply chain visibility, helping logistics operations become more nimble in light of a quickly evolving context.
These initiatives are important first steps in the right direction. Major logistics players will have to align their efforts to build on this momentum and develop a cohesive response to the pandemic. Ambition, coordination, and innovative thinking will be critical—not just to deal with the current emergency, but also to prepare for economic recovery and sustainability. Let’s work together to keep logistics moving!