Global logistics is in crisis caused by the pandemic.
Logistics companies are struggling to organize—and reorganize—complex shipping routes—and they do it remotely. Employees are struggling with the delay in production schedules, with violations of the usual routes for carriers. Cargo often needs to be moved to new routes or modes of transport.
“We are facing the fact that supplier companies are closing all over the world. Moving freight to and across Europe has now become an extremely challenging task,” said Grant Wattman, CEO of Agility Project Logistics.
The logistics company’s challenge now is to find effective solutions in a rapidly changing environment, according to Benjamin Liewald, executive vice president for projects at Swiss freight forwarder Fracht.
“We must do everything possible to ensure that the cargo is loaded on time and delivered on time. We have to cope with personnel changes, the search for ships and equipment,” he said. “This task is solved in different ways every day.”
According to Liwald, some manufacturers are unable to meet project cargo obligations on time, which means the logistics company must speed up transportation, find new ships or perhaps a new route that will allow the cargo to be delivered on time.
Another complication is that ocean shipping is currently limited due to the situation in China. Previously, five or six multi-purpose/heavy-duty (MPV/HL) ships and liners called at Chinese ports every week, but during the COVID-19 outbreak in China, there were only one or two per week. Now China is recovering and may soon return to the market, but in Europe the crisis is in full swing. The real consequences for the world remain to be seen as COVID-19 becomes an international crisis rather than a specific outbreak of a contagious disease in China.
In Europe, containerized cargo is being moved to ro-ro container ship mode because repositioning fees have risen significantly.
Marine freight rates for MPV/HL have not risen much as rates have so far been offset by lower-than-expected bunkering costs. Air freight costs for all types of cargo are on the rise as airlines shut down passenger operations due to COVID-19.
“We charter aircraft on a daily basis,” said Reiner Wiederker, general manager of Fracht’s Houston office. “We have just chartered an Antonov 124 for a flight from China to the US.” Mostly charter flights are operated, he said, with one scheduled flight weekly between the US and Europe, and another weekly carrying cargo from China to Europe. The company had no problems finding planes, they negotiated the charter directly with the owners, but the costs increased significantly. Air transport, which used to cost $1.5 to $2 per kilo, now costs $7 to $8 per kilo.
Cargo rates on flights from Hong Kong to North America hit 16-month highs, according to Bloomberg. The cost of transportation from Frankfurt to North America also continues to rise.
As the Covid-19 pandemic disrupts international travel for consumers and forces governments to close borders to non-citizens, air travel is facing significant restrictions, according to analysts at logistics firm Flexport.
Now this is a particularly acute problem. When there used to be disruptions in the supply chain for goods that would normally travel long distances, people immediately turned to air freight to get the supplies they needed quickly. Now, after the cancellation of passenger flights by most airlines, the cargo compartments of passenger airliners are not available.
American Airlines recently announced the launch of exclusively cargo passenger flights between Dallas (DFW) and Frankfurt (FRA) to transport medicines, mail for US military personnel, and telecommunications equipment. It was the airline’s first scheduled cargo-only flight since the last of its Boeing 747 cargo aircraft derailed in 1984.
As the COVID-19 crisis is gaining momentum, many container shipping operators have become very strict about payments. “Money is everything,” Wiederker said. This also applies to air transport. “No payment – no load.”
“If we have problems with a contract, we solve them one-on-one, as always,” Wattman said. “Going forward, we will have to have difficult negotiations with clients because our current contracts do not reflect the new terms. The new contracts that are being written reflect the current uncertainty in the market.”
According to Leewald, Fracht did not declare force majeure except in one instance where a client requested a declaration because they needed it for their own client. From his point of view, companies use force majeure claims as a precautionary measure, especially in the case of long-term projects where clients have made commitments to deliver goods on time and within budget, commitments that then become the responsibility of the freight forwarder. “Companies in general want to play it safe, as it is not yet clear how the situation will develop. In times of crisis, delivery times are difficult to guarantee. Prices are hard to guarantee. Our main task is to find solutions to ensure the movement of goods,” he said. He expects force majeure claims to become increasingly important due to the crisis, and there are already such examples.
Thus, due to the widespread practice of flight cancellations and delays, as well as the cancellation of the charter of ships, DHL Global Forwarding (DGF) declared a force majeure event for air and sea transportation, indicating that due to external events that are beyond reasonable DHL’s control – in this case, due to the coronavirus pandemic – the freight forwarder may face unforeseen obstacles that interfere with its work.
According to Wiederker, an unexpected side effect of the situation is the possibility of revisiting some work processes. For example, forwarders of many projects are known for delaying bills. They are more often involved in trucking and don’t worry too much about billing on time. “The biggest problem in our industry is the cash situation.”
Liquidity and working capital will be a problem through the end of 2020, Wattman predicts. “When we get out of the crisis, the market will not be the same.”
As for other modes of transport, maritime transport is carried out in full and is in demand more than ever. The chairman of Copenhagen-based Maersk, the world’s largest container shipping line, said the company is operating at full capacity despite “serious challenges in global supply chains.”
That may change, however, if China reopens to business and supplies, defeating the wave of the epidemic, while economic activity in the US and Europe is just coming to a halt as people are forced to stay at home to contain the spread of the growing virus.
Meanwhile, on highways across America, trucking companies are experiencing a surge in demand from consumers hoarding essentials, but that trend is likely to be short-lived as the US economy slows.
Stephen Laskowsky, President of the Canadian Freight Alliance, noted that there is a significant imbalance in the supply chain now, as there is strong demand for supplies of goods such as food, toilet paper and medical products, and almost no demand from industries that are temporarily I had to stop my activities.
Currently, in Europe, the problem with cargo transportation is even more acute. With road transport accounting for three-quarters of the European Union’s domestic freight traffic, the European Commission is pushing EU Member States to reduce border restrictions that have in some cases resulted in delays of more than 24 hours, including for supply of medicines.
The Commission has called for the creation of special “green lines” for freight carriers, where checks, including health checks of drivers, will be limited in time and will take no more than 15 minutes.
“The outbreak of Covid-19 is having a severe negative impact on European transport and mobility,” the commission said. “After all, European supply chains are largely possible thanks to the functioning of an extensive network of freight transport, which is currently going through difficult times.”
Now it is especially important to understand how valuable and under what enormous pressure the employees of each logistics company work, who do everything to solve all emerging problems and find effective solutions, often in a matter of hours, lending a helping hand to colleagues and customers around the world, supporting each other during a pandemic.
International road freight transportation in Ukraine, as well as international sea freight container transportation, is successfully carried out by M&M Ukraine (head office in Kiev, subdivision in Borispol and Odessa) in all promising and demanded world directions . “M&M Ukraine” provides high-quality and safe cargo transportation from European countries to Ukraine, from Ukraine to Europe, to China and to the USA.
Based on http://www.joc.com/ http://www.aircargoworld.com/ and open sources.