The COVID-19 pandemic has changed not only the lives of many people, but also the global and local markets. Around the world, there has been a significant reduction in production capacity due to the closure of borders between countries and the introduction of a self-isolation regime. The coronavirus pandemic has disrupted the familiar ties between manufacturers and consumers and has made major business changes for logistics companies. Leading world experts have analyzed and systematized ongoing and future changes and trends that have influenced the logistics business in general.
The spread of the coronavirus has dealt a severe blow to global logistics and supply chain security for raw materials and finished products. So, on April 7, large international organizations: the International Road Transport Union (IRU) and International Transport Workers’ Federation – issued an open letter to governments of all countries requesting support for the transport industry in the face of the spread of COVID-19. The crisis caused an imbalance in freight traffic associated with changes in demand, production suspension and imposed restrictions. Because of this factor, national governments and international organizations must give the highest priority to maintaining the continuity and strength of supply chains.
Major global logistics trends:
- Decrease in freight traffic on a global and local scale. The reasons are obvious: the closure of countries’ borders, the massive closure of retail outlets, the growth of the dollar, isolation of the population, a decrease in demand and purchasing power, as well as a state of fear and uncertainty among consumers. Many factories and plants around the world are closed for quarantine – there is nothing to transport and there is no one to transport.
- Lack of simple, clear rules of the game in quarantine conditions for representatives of the logistics market.
Logistics in China
There is a positive example of Asian countries, where the peak of the epidemic has passed and the traffic from countries to Europe is beginning to recover. For example, 90% of China’s factories have restored their work and are already sending goods.
All types of transportation have suffered in China: air, sea, rail, road. The usual multimodal schemes were destroyed. Logistics companies had to urgently look for an alternative to the “broken” links: for example, to replace road transport within the provinces with rail. Logistics issues could be the hardest hit in the automotive industry, which threatened the supply chain between auto parts manufacturing sites and assembly plants. However, logistical congestion was overcome.
In the context of the epidemic, rail transport has become the main tool in transportation. It was by trains that a significant part of China’s anti-epidemic and medical cargo was transported. Railway teams from many Chinese provinces worked around the clock and helped factories, factories, construction and trading companies get back to work in a timely manner. In February, Guangzhou restored rail links with Russia. In May 2020, there is a high demand for rail transportation from Asia.
It was also possible to solve problems on sea lines, despite the fact that sea logistics is less elastic and requires more time to restore the normal rhythm. But here, too, operators tried to respond flexibly to the situation by deploying emergency feeder services. Individual car companies also worked effectively in difficult conditions.
The customs services of the Chinese provinces also work effectively in an epidemic, which significantly reduced the time required to process priority cargoes, opened up green corridors for anti-epidemic and medical cargo, as well as raw materials and spare parts needed to restore production. Many customs offices have switched to the “first release – then the end of customs procedures” regime. It also helped reopen businesses and normalize foreign trade.
In general, freight is being transported, although the supply chain between China and Europe is still disrupted.
Logistics in the European Union
The EU economy is currently experiencing all the consequences of quarantine measures. The movement of freight transport has not been completely closed, however, certain restrictions apply. In addition, the number of customers for transport companies has decreased significantly. The exponent of the number of cases in Europe is currently still growing.
In general, experts predict a fall in the European freight market by at least 40%.
The authorities of European countries are introducing various preferences for the main players in the logistics market and, if companies have representative offices in Latvia, Germany, Italy and other European countries, they will be able to reduce the tax rate and not pay rent during the crisis (this information should be followed on government websites countries). If an organization needs to terminate contracts due to force majeure, then it is necessary to obtain a document from the local authorities confirming the recognition of the epidemiological situation in the region as force majeure. For example, in Lithuania such a certificate can be obtained from the regional chambers of commerce and industry.
The main logistic trends in the EU:
• The volume of both intra-European and international traffic has decreased.
• Due to the self-isolation regime introduced in all European countries, the roads have become almost empty.
• The EU has canceled restrictions prohibiting the movement of trucks on weekends.
• Rates within Europe are reduced.
Logistics in Russia
At the moment, Russian logistics companies are going through hard times. According to experts, in Russia alone, losses in the transport sector at the beginning of May 2020 exceed 230 billion rubles, with most of it accounted for by the aviation segment, which practically stopped logistics operations. Warehouse areas are idle due to a decrease in the volume of cargo turnover. Railway operators, stevedores and trucking companies found themselves in a difficult situation. At the same time, there are those to whom the pandemic has brought new perspectives: logisticians note that the general trend is the shift in freight traffic to rail transport.
Thus, in connection with the global crisis provoked by the COVID-19 pandemic, the logistics industry is in dire need of support. The quarantine measures taken to suppress the coronavirus epidemic have led to the congestion of most airports and sea terminals and, as a result, the violation of the terms and conditions of cargo delivery.
Quick adaptation to changing conditions will help logistics companies to quickly “recover” after the crisis. It is obvious that even in the post-crisis period, trends will continue to affect the logistics industry around the world.