The State of Uncertainty in the Freight Market!

Freight Market

Truckers and shippers have real fears over the effects and long-term impact of the supply chain coronavirus disruption on the freight market. The coronavirus, also known as COVID-19, continues to change basic supply chain functions.

UPS and FedEx both have released statements professing their need to continue shipping as an essential business, but it will be harder for smaller, more local carriers to keep up with their pace. Meanwhile, the global air cargo volume has dropped significantly, explains Greg Knowler, JOC Senior Editor, “up to 5,000 tons of cargo in air freight from China to the U.S. have vanished per day.”

The entire situation seems to be on track to a worsening, and shippers need to understand that the supply chain coronavirus is having a worldwide impact that will undoubtedly continue for the coming weeks.

COVID-19 Puts the Global Supply Chain to the Ultimate Test

The biggest problem with the effect of supply chain coronavirus concern is its impact on global trade. While over the road trucking might have an advantage in the strong demand among retailers today, American airlines and United have already made changes to air travel for cargo-only flights between the US and Europe to reduce risk of transmission and attempt to meet the sudden spike in supply chain demand, reports Emma Cosgrove of Supply Chain Dive. 

It is a grand irony that this black swan event has stimulated a run on grocers and retail that’s reminiscent of the bank run during the Great Depression. This is a stunning turn of events as it is the first cargo-only flight for American Airlines in 36 years, carrying medical supplies, mail for U.S. active military, electronics, and e-commerce packages. 

The impacts are not just limited to air freight market changes. According to Jim Stinson of Supply Chain Dive:

“XPO informed the Securities and Exchange Commission that it was terminating its review of strategic alternatives, including the possible sale or spin-off of one or more of XPO’s business units.” CEO Brad Jacobs announcement is even more troubling:

He told Morgan Stanley analysts in September 2019 that “he was going to spend up to 15% of his time exploring possible acquisitions. 

Some deals Jacobs had been discussing eventually went through, with XPO buying Kuehne + Nagel’s non-core logistics assets in the U.K., providing “inbound and outbound distribution, reverse logistics management and inventory management” services in the country. The deal is expected to close in the second half of this year and both parties have agreed not to disclose transaction details.”

This turn of events alludes to more companies retracting plans for strategic developments, but they also mean companies are looking to conserve resources and meet the changing demands in the freight market. It is an unfortunate situation, but again, preparation and continuous improvement will prove their value more now than ever in the history of the connected supply chain. 

Why Preparation and Continuous Improvement Enable Business Continuity Despite Uncertainty

The situation surrounding the novel coronavirus has led to industrial output falling by more than 13.5%, and retail sales have shrunken 20.5% compared to 2019’s same reporting period. Moreover, this effectively wiped out the 8% growth achieved from the holiday shopping season, so it is reasonable to assume the total impact has now reached 28.5% percent decline in total shipping volume and growth, explains CNBC.

With that in mind, China has already started its long trek back to work and ramping up production. This comes as more counties and states issue shelter-in-place orders for their residents. 

Shelter-in-place sounds drastic and life-changing, and to an extent, it is. However, it provides specific exclusions for essential business, including visiting grocers, picking up essential health supplies, like medications, and engaging in curbside pickup or delivery of restaurant foods. In other words, the supply chain is engaging in a rapid movement into buy online pickup curbside service, which is in correlation with higher e-commerce ordering rates. 

Best Buy now offers curbside pickup to cull the spread of COVID-19, and At Home, The Home Décor Superstore, has temporarily closed all stores. This timeline will be extended based on shelter-in-place orders. However, At Home has now implemented a policy that will allow call or email for curbside pickup.

Shipper Must Remain Forward-Thinking Now More Than Ever

This is a novel time in which global and local shippers must think outside the box. For years, Cerasis has worked to help shippers of all sizes find a way to offer faster, more affordable, and more integrated deliveries, and the effects of supply chain coronavirus disruption have forced holdouts to rapidly evolve operations to meet the new normal.

As the industry rolls forward, capacity will again increase, and store shelves will finally get a welcome sign of fully stocked toilet paper. However, there remain weeks in this crisis, and shippers need to start thinking now of what can be accomplished during the current situation to avoid such freight market problems in the future. Also, improvements in operations will naturally lend themselves to better risk management.

Freight market article and permission to publish here provided by Kevin Jessop at Cerasis. Originally published on Supply Chain Game Changer on May 20, 2020.

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