How the Global Pandemic Affected the Shipping Industry

The global economy has been massively impacted by the Covid-19 pandemic, experiencing an estimated drop in GDP as of 2020 by 5.25 trillion dollars! Not to mention the 195 million people who have subsequently found themselves out of work in the wake of the virus.

The WTO (World Trade Organization) claims that the most optimistic scenario would be global merchandise trade movements falling by 13% in comparison to that of last year—and the worst-case scenario being GTV (global trade volume) falling by 32% (which would be staggering).

In this article, we’re going to analyse the qualitative & quantitative impact on the logistics and shipping industry by the Covid-19 crisis, and what you can do to navigate these unstable waters.

Changes Which Have Occurred to Global Import & Export Activity

All around the world, ports have been experiencing a variety of different changes to levels of congestion. This is due to the nature of the goods which have been imported and exported.
As the lockdowns were implemented across the world, the activity of global import & export naturally dropped. That said, the export of essential goods has increased, China being the most notable country as soon as they were able to stabilise the impact of the pandemic and return to manufacturing.

The port of Yantian, which is where the majority of China’s exports move through is a great example of this. The congestion levels in this port have increased by almost 3 times the normal rate, as of Feb through April 2020. In contrast to this, in 2019 before the Covid-19 pandemic kicked off, Yantian only experienced an increase in 55%. Thus, we can conclude that the most recent spike in the shipping industry is due to the mass exportation of essential goods from China, to the rest of the world.

Now, as we move forward, the shipping level of essentials is going to be largely dependent on the speed at which world governments east restrictions on their own local production facilities and how effectively they will be able to ship these goods across their respective countries.

If these countries are able to effectively distribute their own produced essential goods nationally, then their reliance on imports from countries like China is going to drop significantly.

How the Effects of Lower Global Demand Will Impact the Supply Chain

Again, the huge spike in unemployment has brought a noticeably lower demand for consumer goods, thus resulting in lower port congestion levels. Take New York as an example, which has dropped by 32.4% from Feb through April 2020 as opposed to the 41% increase experienced in 2019 during the very same period.

The majority of the cargo being handled in the port of New York was imported. Therefore, we are able to deduce that a drop in port congestion levels is easily attributed to the fact that consumer demand has decreased significantly as a result of Covid-19.

In addition to that, there have been concerns about warehouse capacity as ports are being overwhelmed with goods not being moved by retailers due to governmental and lockdown restrictions. That said, a relaxation in restrictions will see these levels return to normal soon enough.

There were some fears that as more and more Asian factories reopen, and retailers and manufacturers continue to delay pickup, that US ports and warehouses would be overwhelmed. This however has not been the case, for the most part at least. This is because whilst imports from Asian countries like China are expected to increase, the lower demand for global consumer goods will mean that there is significantly lower import volume from other countries, thus balancing the flow out to a manageable level.

How to Innovate in Times of Crisis

The opportunity for innovation is still very much apparent. Investing in predictive and prescriptive analytics in order to improve the way that your supply chain operates for example, in one such amazing opportunity that is not to be snuffed at.

If you are able to combine quality, real-time data as it is collected (such as vessel arrival times & cargo demand) with machine learning, the predictive analytics gained can be actioned into optimal decision making, and innovation in modern technology thus streamlining your processes.

Rather than constantly having to “put out fires” when faced with external disruptions to your supply chain, instead you can mitigate such issues in advance by having significantly better supply chain visibility through data analysis, subsequently enabling you to save time and money.

This pandemic will pass eventually, and you should use this opportunity to improve your supply chain visibility as best you can right now, in order to gain logistics progress and the competitive edge over your rivals and be ready to dominate the shipping industry over the coming months.