COVID-19 complications multiplying for global supply chains

Cargo capacity, storage, supply-and-demand imbalance are rapidly escalating challenges for shippers, say Flexport shipping experts

A Lufthansa A330 cabin loaded with air freight; more commercial airlines are using empty passenger spaces to ship cargo | Flexport

Rising air freight rates, dwindling warehouse space and clogged cargo terminal arteries are among the challenges North American shippers face in the new pandemic economy.

Those were among the key points delivered Tuesday in a COVID-19 logistics update presented by global freight forwarder Flexport.

The California-based company, which helps businesses with all aspects of freight movement and financing, opened its first Canadian office last November in Vancouver.

Chandrakant Kanoria, Flexport’s head of network operations, and Silvio Strathausen, the company’s senior director of air freight for the Americas, outlined the rapid changes disrupting trade routes and international supply chains, especially for an airline sector that the International Air Transport Association estimates faces 2020 losses of US$252 billion as passenger demand evaporates.

Strathausen noted that freight capacity from China has consequently dropped by an estimated 400 air cargo flights per day.

This comes as China’s manufacturing sector has begun to ramp up production as the country appears to have stalled the spread of COVID-19 within its borders.

But demand for products outside of China has fallen off a cliff, especially in the United States, where major urban centres are now grappling with a surge in the spread of the pandemic, and, as Kanoria pointed out, where 47,000 retail stores have closed in about a week.

The result is a reversal of the imbalanced supply and demand equation in play at the beginning of 2020, when demand was strong in North America, but supply was constricted because many of China’s factories had been shut down to try to limit COVID-19’s spread.

Now the supply from China is getting back on track, but demand elsewhere has evaporated.

Businesses hoping to move freight consequently face capacity shortages, higher costs and more delays at major global air freight terminals and logistics hubs, such as Luxembourg Airport.

Strathausen said that some passenger airlines have switched to “ghost freighters” to move goods in both the cargo belly and passenger areas of their aircraft.

With less overall air freight capacity available and air terminals operating with fewer staff, Flexport has warned businesses to expect delays in air cargo of between one and seven days.

Kanoria outlined similar challenges at ocean cargo terminals.

The spike in cancelled container ship sailings on major trade routes to and from Asia thus far this year, he said, has created a shortage of space for the empty containers that are not being taken back once ships drop them in North America.

That, in turn, is driving up demand for warehouse space at a time when many warehouses are reducing their operating hours as staff pandemic concerns increase.

Kanoria said that major warehousing operations such as Amazon are now accepting only household essentials and medical supplies.

“They don’t have the capacity to handle other items.”

Kanoria added that there is a rising backlash over what workers claim are inadequate measures in place to protect them against COVID-19 infection.

The warehousing shortage is adding another unknown to COVID-19 complications because shippers are scrambling to find places to keep inventory once it arrives via ship or plane, and truckers taking product from terminals to destinations are now finding many warehouses closed or full.

Strathausen and Kanoria said businesses need to focus on staying informed, planning for flexibility, managing their finances and building deep customer relationships through collaboration and communication in what is unprecedented marketplace turbulence.

Kanoria added that companies also need to plan now for their post-recovery future by “building your brand, helping people and building relationships. Now is a time to set up a more resilient supply chain with more automation, visibility and control.” 

trenshaw@biv.com

@timothyrenshaw