Forecast of global logistics trend after Covid-19 (Part 2)

Comments in the report of McKinsey and Oxford Economics think that the impact of the crisis will vary significantly depending on the goods (shape, size of goods, storage requirements and specificity in the process). shipping ...) and the time it takes for the supply chain to be interrupted.

Suy thoái kinh tế toàn cầu do ảnh hưởng bởi Covid-19

Disruptions are defined by both supply shocks - when many production activities are delayed because countries apply measures of social blockade / spacing and demand shocks - due to the global economic recession.

For example, in the well-controlled epidemic scenario and partially effective economic interventions (scenario A1), the trade volume of the automotive industry (expensive, durable goods) in the short-term is expected will be reduced by more than 50% as many factories stop operating and consumption declines. On the other hand, the trading volume of cereals (essential commodities) can be reduced by no more than 5%. Supply will only slightly decrease due to circulation while an increase in home demand for food will compensate for the decline in outside consumption.

The extent to which each mode of transport and the trade route are affected depends on the mixture of goods circulating on the route. Therefore, when planning for the future, so the actors in the supply chain (from shippers, warehouse owners, transport units ...) must calculate the interaction between the factors in sequences, and often need to be based on scientific simulations that use full data, even big data.

In scenario A1, in the second quarter of 2020 the demand for air cargo transport will decrease by 14% (in volume) compared to before the crisis and will not increase back to the level of 2019 until around mid-2022. .

The decline in demand for ocean freight is similar, although the recovery may take longer. In sea freight, the dry cargo segment will be less affected compared to container cargo, because this segment includes many essential goods such as agricultural products. Dry and container tonnage will decrease by 14% and 16%, respectively, before the crisis.

In the container cargo segment, twenty feet (TEUs) units will be affected, by 19% less than before the crisis; This is because this segment has a larger revenue and higher fuel costs than the average.

The impact of the crisis on individual trade routes will also vary significantly according to the evolution of the nation's COVID-19 and accordingly the goods being transported on the trade lane. For example, in container shipping trade, in scenario A1 the decline in demand will fluctuate in the range of 6% for South American exports to Europe (including mainly agricultural products) to 20%. For some Asian exports (mainly including machinery and equipment).

If public health efforts allow rapid and effective disease control (scenario A3), this decline may be limited to about 2% to 11%; but also up to 8% to 27% in the case of ineffective economic interventions (B2 scenario).

According to scenarios simulated by the two organizations McKinsey and Oxford Economics, the impact on Asian exports appears to be greater than the continent's imports and the impact on the western trade routes. may exceed the southern routes. In addition, the resilience of production and consumption centers, such as the economy of China, Europe and the United States, also affects the overall impact level.

Identify strategies to win the crisis with a detailed understanding of trade and logistics scenarios

Currently, most businesses are gradually adapting to the crisis, while planning a new normal. Data on the impact of the crisis on each type of goods and country, the impact on each mode of transport and the trade route are necessary inputs to the three crisis management processes as follows:

The first is building a scenario: A detailed, well-grounded understanding of the factors affecting aggregate supply and demand will allow companies to develop their own views on which scenario they need to plan. and which models, solutions or even will fit in each case.
The second is to formulate a trading strategy: Detailed data can form the basis of an early indicator system that provides real-time assessment of the most appropriate scenario at any given time; Help them identify short-term opportunities - focus on sales force, product supply and pricing strategy.
The third is to deploy the operational strategy: The bottom-up supply and demand model can be used to adjust capacity and capital expenditure quickly when the shape of the process of recovery (V-shaped, or U-shaped ...) become clearer.

For example, an air or ocean freight forwarding company that wants to locate a recovery will need to know its own market share and performance in each trade route and changes in trade demand. trade. The answers must be adjusted to match the actual developments. They also need to revise their commitment to competencies in the heavily affected trade routes but where they have a large market share. At the same time, it is also necessary to redeploy sales teams to increase market share in trade routes where they have a small market share but are less affected by the crisis.

The same approach for goods and freight should also be used by stations, ports, wharves, etc. to support the planning of service capacity recovery as well as their post-Covid-19 trade strategy.

For example, for selected scenarios, a port operator can model the expected impact of the crisis on their largest import and export counterparts (possibly nations or multinational corporations ...) and use this data to develop and operate post-Covid-19 strategy. They can decide to manage their capacity and make specific plans for their workforce in a flexible way until the need for full recovery. Enlistment of maintenance projects / activities should also be considered in the current "idle period". In addition, seaports can also access to shipping lines for attractive prices, thereby increasing throughput to ensure regular revenue does not fall too sharply ...

Phaata (Adapted from McKinsey)