Logistics and COVID-19; an industry response to a global crisis

When it comes to Covid-19, it is worth remembering that the logistics industry is no stranger to disruption. Logistics operations for a large organisation can be vast, spanning dozens of countries and potentially hundreds of suppliers.

These huge supply chains are endlessly optimised and, in many cases, can be driven to the point of fragility by an endless search for efficiency.

A break in the supply chain can cause logistical issues with build-ups of resources in warehouses, delayed shipments and late deliveries to manufacturers. These delays often have a ripple effect, and costs for delays can quickly run into the millions.

There are numerous threats to the supply chain, threats that logistics companies have to contend with, not just now during a pandemic, but throughout the year.

These potential threats include things like extreme weather such as typhoons, global politics, or even technical issues.

In this article, we take a look at some of the crises management plans that logistics industries have in place and how these crises management plans are being implemented to ensure the smooth operation of the supply chain.

Logistical Complications Caused by COVID-19

Shutdowns have caused work and supply bottlenecks in factories

Quarantines being enforced have led to work and supply shortages. Factories have either had to suspend operations or continue but with a reduced workforce and implement additional health and safety procedures to contain the outbreak of coronavirus (COVID-19).

Travel restrictions and the resulting labour shortages have created backlogs in factories and ports. These backlogs will likely take time to resolve and could have far-reaching knock-on effects for the end customer.

Labour shortages cause congestion at airports and seaports

The congestion for international trade has been particularly vulnerable as each nation attempts to stop the spread of the virus.

Many countries have, for this reason, implemented “buy local” campaigns to encourage consumers to support local businesses and reduce the strain that is currently building on international shipping.

As a result of these labour shortages and the respective congestions caused at pinch-points, freight operations have slowed down; delays in shipments (including critical shipments of medical equipment) and demurrage costs are beginning to make themselves felt.

Impact on overseas supply chains

The impacts of COVID-19 have taken a toll on the global economy, having a major impact on global supply chains.

For example, the automotive industry has suffered a supply shortage of key car components and several major car manufacturers have, over the last few months, had to suspend operations for intermittent periods.

For example, domestic factories in South Korea (Hyundai, Ssangyong and Kia) and Japan (Nissan) suspended production in February as they were forced to seek supplies either from alternative markets.

In addition, the COVID-19 has had a disruptive impact on global pharmaceutical supply chains.

Most notably, shortages of essential personal protection equipment (PPE) such as medical grade face masks.

Ensuring Logistical Success

To ensure the consumer pipeline and protect customer satisfaction as much as possible logistics companies have taken a number of steps.

Crises management plans

In 2015, the top 4 typhoon events in Southeast Asia caused an aggregate of over $33.5B USD in damages, more than 138 days of recovery time, and impacted nearly 7,000 supplier sites.

We mention this just to highlight the scale of disasters that companies have to contend with. These disruptions can be seasonal or entirely unexpected, such as the current pandemic.

One thing is certain though, because of an increasingly global supply chain and their subsequent susceptibility to major global events, logistics organisations come to the table prepared for the worst.

Dual Sourcing

This strategy is a form of hedging one’s bets. This is when organisations contract more than one company for a stage of the supply chain.

This could be multiple manufacturers or shipping companies. For a clear example of why this is important in 2017 Maersk, the world’s largest container shipping company with over 700 vessels, had their IT systems completely taken down for over a week by a malicious malware called NotPetya.

Those companies that were able to, at least partially, move their shipping to another company were able to mitigate the financial damages. Essentially, logistics/supply chains need to react quickly to interruptions.

Communication Channels

Unexpected crises can have a big impact causing costly delays. Organisations need up to date and real-time information on all their respective suppliers.

One of the key ways to manage this is through continuous dialogue with the various parties involved.

If you can identify pinch points or disruptions quickly, suppliers can react fast and minimise the logistical and financial impact.

Final Words

COVID-19 is just the latest crisis to impact the logistics sector, it certainly isn’t the first and it certainly won’t be the last.

Understanding the nature of potential vulnerabilities and keeping current on disturbances that can impact processes can help teams better handle and mitigate problems related to global supplier concerns.