Coronavirus: Be prepared for the worst
Head of Consumer Research | ParcelHero
Manufacturers, exporters and freight companies of all sizes are facing up to a new threat that’s unlikely to have featured in most organisations’ risk analysis. The coronavirus could have a worldwide impact bigger than the 2008 crisis, or it could run its course like a typical flu outbreak. David Jinks MILT, Head of Consumer Research at ParcelHero, says everyone involved in logistics needs to prepare for the worst, even while hoping for the best.
This year’s Big Problem was supposed to be Brexit. From the smallest man-and-a-few-vans operation, to the largest 3PL CEO and retail supply chain manager, it’s what we were all planning for. But with the sudden spread of a new coronavirus – Covid-19 – in China, there is now a new potentially far greater threat to global logistics giants and small freight operators alike. And it is extremely difficult at this stage to assess what its final impact will be on our industry.
Let’s face it, few of us have drawn up any kind of risk assessment that covers the potential impact of the coronavirus. As well as killing thousands of people it could also potentially wreak havoc on global supply chains, causing a knock-on effect on national and local manufacturing and deliveries. Some scientists are likening the coronavirus to the 1918 Spanish flu outbreak, which killed more people than died in World War I. Financiers are claiming it could have a greater impact than the 2008 subprime mortgage crisis. But many health professionals are saying it is unlikely to have a greater effect than a many typical global flu outbreaks.
Let’s look at the absolute basics. Can logistics workers really contract the virus from packages? Frankly that seems unlikely. A new report in the Journal of Hospital Infection finds bleach and ethanol-based cleaning products seem to kill coronaviruses ‘within 1-minute exposure time’. And in new studies the survival of two strains of the – similar – SARS coronavirus on a paper surface found one remained active for just three hours – although worryingly the other survived 4–5 days in cold temperatures.
And significant measures have been taken at the centre of the outbreak to reduce any risks. Organisations such as China Post’s Express Mail Service (EMS) are delaying shipments to disinfect goods. Says EMS: “To ensure the public’s safety, we will ‘double-disinfect’ the parcels and the vehicles that will go through Wuhan, delaying the shipping progress.”
Global and local disruption
Wuhan, and the wider Hubei area, is a key manufacturing centre: Almost half of its economy is industrial production; for example, Britain's Lotus is soon opening a car factory there. The region has focused on the development of advanced and emerging manufacturing industries and it has officially encouraged privately-owned businesses based around advanced technologies and the internet; to build new household brands.
At the lowest rung of the supply chain ladder, that means many of the Chinese products UK consumers purchase daily on eBay and Amazon are likely to be produced in the region; while many British traders who source their stock from the Chinese B2B online wholesaler Alibaba and its B2C arm AliExpress are also likely to be impacted.
Climbing up the supply chain, many manufacturing industries rely on global supply chains to source components. A car, for example, may be manufactured in the UK, but still have components sourced in China. Because manufacturers were expecting stretched supply chains because of Chinese New Year, a greater than usual number of components had been stockpiled. But as some factories have still not re-opened after the new year, supply chains are already being stretched. JCB and other UK manufacturers are now reducing production levels in anticipation of component shortages. JLR, the UK's biggest carmaker, with three factories that produce nearly 400,000 vehicles a year, doesn’t have enough parts to continue past mid-March at the latest. It has actually resorted to flying vital components into the UK in suitcases – definitely not part of its usual global supply chain routine!
Across the globe companies such as Apple are warning of supply disruption. It only holds around a month’s worth of finished iPhones in stock.
And there are less immediately obvious ways in which international freight distribution is being impacted. British Airways, Air France, American Airlines, Lufthansa and others have cancelled all flights to mainland China. Many commercial passenger services also carry freight in their holds, of course. Now this essential cog in the wheel of global freight distribution has suddenly vanished.
All this impacts not only on manufacturers, but also the wider logistics and freight market. From DHL Supply Chain, a key part of JLR production, to the last mile deliveries of mobile phones to consumers, everyone involved in the logistics and retail chain could be impacted in some way. Whether you are a global manufacturing giant, an international courier, or a local road haulage company, the consequences of a worldwide pandemic, should it happen, will impact on everyone.
What can freight companies and logistics professionals do to mitigate the potential impact of coronavirus on their business?
1. Set up a central emergency team, that can communicate effectively working remotely if needed. Globally used videoconferencing systems are the best alternative to regular face-to-face meetings. One popular option is Facetime if your organisation uses Apple equipment. Business ‘chat rooms’ such as Microsoft Teams, which also incorporates video, or Slack, might be useful to implement now, if you don’t already use them.
2. Review your client base in order to set priorities. Which of your customers looks most likely to need to reduce its transport requirements? Which may need to change its distribution patterns or sourcing?
3. Freight companies and manufacturers must plan operations to maximise cash flow rather than profits, urges Yossi Sheffi, director of the Massachusetts Institute of Technology’s Centre for Transportation and Logistics, in the Wall Street Journal.
4. Research changing market conditions. There is likely to be considerable spare shipping capacity in Asia for example, with a reduction in freight rates.
5. Keep staff ‘at the coalface’ informed and re-assured. For example, drivers making home deliveries, or workers travelling to perceived risk areas such as Hong Kong.
Currently, it’s far too early to assess what the impact of the coronavirus will finally be. Reported cases in China are dropping slowly as I write, and, as we move into spring, it is known that warmer weather slows the spread of coronaviruses considerably. It’s best to plan for the worst while trusting for the best. Let’s hope that by the end of this year, it’s once again Brexit that is keeping us occupied and awake at nights.
For ParcelHero’s latest information on delays, service disruptions and any potential risks, see its constantly updated guide here
Posted on: March 4th 2020