The fall out from the ‘coronavirus’ is already being felt in many logistics and supply chain sectors. A key issue will be if travel restrictions imposed by the Chinese government prevent employees returning to work after the holiday period or, in a worst case scenario, factories may be shut down completely for an extended time.
Japanese automotive manufacturer Toyota has already announced that it has halted production in the country until February 11th and steel shipments have also been affected from some of the country’s largest producers.
Apple will also be affected, alongside many other global brands, even though its main supplier, Foxconn, is located some 500 miles from Wuhan near Shanghai. For Apple this may impact on the production of a new low cost iPhone due to commence in February.
The Chinese New Year holiday has already been officially extended in many regions although exempt from the extension are the pharmaceutical, supermarkets, utilities and logistics companies.
Air cargo has already been hard hit with some airlines suspending all services to the country. Lufthansa and British Airways have ceased flights until at least February 9th as have many other passenger airlines, partly due to fears about the spread of the virus and partly due to government travel advice which has warned people against visiting the country. US airlines – Delta, United and American – have been the most recent to cancel their services. Airlines operating freighters are not affected, but the reduction in capacity will mean major backlogs when industry starts back up after the holiday (if indeed it does).
Movements of air cargo within China have also been affected as many inbound distribution services are not functioning.
At present, the shipping industry is biding its time before making wholesale revisions to services. The Chinese New Year has already led to reduced capacities and lines are adopting a ‘wait and see’ attitude before blanking additional sailings. Forwarders have been worried that they may end up footing the bill for container demurrage if boxes are left in ports although some shipping lines have assured customers this won’t happen.
The situation has been somewhat ameliorated by the weak demand over the previous few weeks. That combined with the New Year holiday has meant that shipping lines have already acted to reduce capacity by removing sailings in February and March.
In and around Wuhan, the domestic express sector is still working. In fact, according to the Chinese news agency, Xinhua, companies are at full stretch collecting and delivering medical materials and what it calls ‘life necessities’. People have been advised only to send essential goods to allow the parcels companies to focus on alleviating the crisis. Packages and mail are being routinely disinfected although the chances of parcels transmitting the disease are very small.
The Chinese government is encouraging the use of lockers in the region to prevent face-to-face contact between members of the population and couriers.
In terms of international consignments, the postal networks’ International Express Courier service has been suspended and DHL is not accepting shipments to Hubei Province. Large volumes of face masks and other medical peripheries are being shipped to China by the main international express operators free of charge to help alleviate the crisis.
Professor John Manners-Bell, Ti’s CEO, commented, “It is still far too early to tell what the consequences of coronavirus will be to supply chains, the logistics industry and the wider economy. The chances are that the crisis will pass and its impacts will be mitigated by travel bans and extended holidays. This may provide a short downturn in the quarterly results of many global companies, but little more. However, this outbreak must be a warning to politicians and all in the industry that many modern supply chains lack resilience. A more virulent disease could have far worse consequences unless actions are taken to reduce systemic vulnerability.”
Source: Transport Intelligence, February 4, 2020
Author: Transport Intelligence
Find out more about the consequences of coronavirus on supply chains in our special briefing:
‘Coronavirus and long term implications of epidemics for lean supply chains’ – CLICK HERE to read the special briefing.
You can also listen to our latest podcast, ‘The Vulnerability of Supply Chains to Epidemics’ – CLICK HERE to listen.
SUBSCRIBE TO LOGISTICS BRIEFING:
Get the latest logistics news and high level analysis delivered straight to your inbox: