Coronavirus (COVID-19) continues to wreak havoc on global supply chains. While China’s manufacturing and logistical networks have started recovering, the U.S. is just beginning to feel the COVID-19 logistics impact. Ascent’s global transportation and trade team has compiled three tips to help companies know what to expect in the weeks to come.
The timing of the Coronavirus outbreak occurred just before the world’s largest exporter was set to celebrate its biggest holiday, the Chinese New Year. While U.S. retailers were equipped for two weeks of downtime due to the annual celebration, many were not prepared for what became over a month of factory shutdowns.
Fast forward a month and the COVID-19 logistics impact is now a much larger global issue. With the spread of COVID-19 across the United States and most of the world, many companies are working through supply chain contingencies to avoid significant impacts to their bottom lines.
Below are three recommendations on what to expect from our transportation and trade professionals:
The additional cost to expedite a shipment may be difficult for a CFO to accept. Still, when inventory levels are running low or are at risk of stock-outs, it becomes clear that the choice to expedite freight is in the business’ best interest.
Ensuring that products reach store shelves or front porches to meet consumer demand will be a balancing act for many supply chain executives over the next few months. Although expediting cargo via air or ground will cost more, it is expected that getting products in the hands of customers will outweigh the inflated cost. Empty shelves or out of stock notices on e-commerce websites pose an existential threat to businesses but expedited solutions can provide peace of mind that recovery is on the horizon.
Overall, companies should prepare to pay more than usual for any method of transportation over the next several months. Our team predicts that price will have a lower impact on mode decisions in the immediate future, as getting inventory on shelves or in warehouse distribution centers as quickly as possible will be the main priority.
While the breakpoint for a particular shipment or PO could shift over the next several weeks, shipping managers that use transportation technology to quickly compare pricing will be more equipped to evaluate their options and make intelligent shipping decisions.
Supply chains are incredibly interwoven; as such, domino effects will continue to be felt around the world for the foreseeable future. History has shown the transportation industry that when major disruptions such as COVID-19 take place, it will be months before the global supply chain is fully balanced.
COVID-19 logistics disruptions are occurring around the world and some of the most common disruptions include imbalanced carrier capacity, inflated spot market prices and equipment misplacements, to name a few. These disruptions are leading to the elimination of service guarantees, unpredictable product lead times, extended transit times and overall supply chain uncertainty. While this culmination of factors creates unforeseen challenges, partnering with a logistics provider that has an extensive network and comprehensive service line will help companies navigate the unexpected.
Ultimately, supply chains are an interconnected collection of raw material providers, manufacturers, ports, transportation providers, government agencies and more. Thus, it will take time for all parties to work in concert so that the global supply chain can return to 100 percent normalcy.
Due to massive backlogs caused by extended factory downtime, challenges will inevitably arise and create purchase order (PO) nightmares for anyone involved in the planning, buying, moving or selling of products. As manufacturers begin producing at full capacity, bottlenecks are likely to cause some, if not all, of the following scenarios to surface:
Dependency on one supplier or one country of origin becomes more evident during global disruptions such as COVID-19. Supply chain diversification is widely recognized as a prudent strategy, but it’s easier said than done.
In the short term, companies can be evaluating and documenting their exposures so that once normalcy is restored, a remediation plan can be implemented. Our team does not recommend making drastic sourcing changes but does encourage companies to create detailed risk mitigation plans. Longer-term mitigation plans should have buy-in from C-Level executives and have representation from all internal departments including sourcing, purchasing, sales, logistics, finance and IT.
These three tips are certainly not comprehensive solutions to what companies are currently experiencing but if there is one key takeaway from COVID-19, it’s been the highlighted need for supply chain understanding, preparedness and planning.