Covid 19: Effect of the Pandemic on Logistics and Supply Chain
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The COVID-19 outbreak that started engulfing various nations across the globe is forcing governments, national and international authorities to take unprecedented measures such as lockdown of cities and restricting the movement of people to check and control the exponential spread of the pandemic. This has consequently affected global trade and supply chain which has come to almost a standstill.
Most countries have restricted or stopped international flights and air travel, which has led to a deferred slowdown as far as the movement of goods are concerned. This has in turn shrunk the air freight capacity limited to the available and operational cargo aircraft and ferry passenger flights carrying only cargo. The shipping sector has also been hit as vessels are placed under quarantine for weeks before being allowed into the ports thereby slowing down processes. Shipping containers are stuck at the ports and on transit at state borders.
At the same time, raw materials or manufactured goods are unable to reach ports due to the lockdowns. Moreover, the demand for raw materials has reduced for the most traded commodities as most countries now require medicines, pharmaceuticals, medical supplies and medical equipment. Hence, shipping lines are operating underloaded thereby disrupting the balance of the ratio between revenue and the operational costs. Furthermore, there is a severe shortage of manpower at the air cargo facilities, terminals, shipping ports, inland container depots, warehouses, customs, government authorities and so on due to lockdowns which again hinders any scope of supply chain movement.
The first- and last-mile transportation and intermodal connectivity of goods within the domestic segment of the supply chain has come to a standstill during the lockdown. This has affected the movement of supplies that is directly proportional to the increase in the cost of commodities.
Only essential commodities are permitted to move. The apparel, fashion, electronics and other sectors serving non-essential categories of goods are severely impacted with lesser or no demand during the lockdown. India’s online retail industry is worth around $60 billion out of which the essential commodities are a small percentage. The concerns are delayed deliveries, delay in procuring goods, unexpected transit halts and shortage of manpower. In a nutshell, the demand and supply gap has increased.
There will be a phenomenal reduction in the desire for consumable goods and products and more demand for essential goods in trades between nations. The only trading commodities that we can assess in the forthcoming months would be pharma, vaccines, medical goods and supplies, hospital items, perishables and food products.
Prediction of the forthcoming market conditions and how much the growth rate of the global supply chain is affected is not feasible due to the uncertainty of the pandemic spread. The global supply chain management market was recorded to be worth $14.5 billion in 2018 and growing at a CAGR of 10.5 per cent to reach almost $24 billion by the year 2024. However, it is a fact that this average growth rate will definitely come down and reaching the targeted figures will get deferred by a couple of years. There is a deceleration to the movement of goods across nations causing a considerable gap in demand and supply.