- Nearly 60 million people in China are living in cities on “lockdown” status
- Lockdowns can significantly affect shipping
- As of now, UPS and FedEx will continue to fly in and out of China
- Always be prepared to expect the unexpected
Regarding the coronavirus outbreak (now officially called COVID-19): as of this posting, it’s all about taking precautions, and fortunately, we’re seeing quite a bit of that. However, if the virus is not successfully contained soon, we could experience a significant lag in global production, plus the delivery of goods.
And while panic is not on the agenda, here’s where we need to do the unfortunate math: as of this posting, the outbreak has taken the lives of more than 3,200 people, although it’s important to note that over 51,000 people have recovered. Current cases worldwide stand at just higher than 95,000. This has happened mainly in China, where nearly 60 million people are living in cities on “lockdown” status.
Lockdowns Affect Shipping
Lockdowns can have a major effect on shipping; slowdowns (or worse) could affect industrial production across China, including such industries as automotive, pharmaceutical/medical supplies, high-tech manufacturing, and more.
Nearly 80 percent of the world’s trade volume is carried by sea, according to the United Nations Conference on Trade and Development. On top of that, China hosts seven of the world’s ten busiest container ports. Other huge port centers include too-close-for-comfort Singapore and South Korea.
Apple, which has major manufacturing operations and sourcing in China, has been hit with concerns over a delay in product manufacturing and delivery. Hyundai, the carmaker, has recently suspended production at its South Korean plants due to a disruption to the supply of parts.
The Harvard Business Review advises supply chain managers to map their chains and identify key or at-risk suppliers immediately. Any uncertainty or suspect location on the chain should be used as an opportunity to redesign the supply chain, and identify secondary sourcing backups or new production markets.
Major Carriers Affected
Major carriers have also been involved in the conversation. DHL has reported “severe disruptions to inbound and outbound air cargo shipments, trucking and rail cargo services.” As of now, UPS and FedEx will continue to fly in and out of China, but UPS has seen reduced demand for its services due to business closures.
The union representing the United Parcel Service (UPS) reached an agreement with the company to make flying to mainland China “voluntary.” Pilots not choosing to fly in and out of China will be “temporarily replaced on those flights.” Pilots opting out will be required to take an unpaid leave of absence, but can also use paid sick leave if they are not rescheduled on another route.
More Supply Chain Stats
The virus may not be the only issue affecting the global supply chain. The latest figures from Lloyd’s List Intelligence reveal that, as of January 2020, the total amount of idle vessels in the world containership fleet is 326. This represents 3.4 percent of the entire global fleet. Note that normal seasonal reduction in demand already sees numbers rise. However, those numbers have inched up again in February, to 3.7 percent of the global fleet. On top of this. containers have reportedly been stacking up at a number of ports due to a lack of truck drivers.
More of the latest related stats: the purchasing managers index (PMI) decreased to 50.1 from 50.9 in February 2020, according to the Institute for Supply Management (ISM). This is not terrible news—in fact, the index is still in growth mode—however, the report shows that new orders fell and backlogs increased as a result of the coronavirus threat. Also reported, possibly as a result of the outbreak: production delays, longer lead times, lack of supplier visibility, and a challenge to sourcing parts.
A Run on Supplies
A panic—whether real or not—often ushers in a rush of hoarding and panic buying (and selling). Many shoppers have already binged on buying items such as toilet paper and hand sanitizer.
Online stores were hard hit as well as brick-and-mortar. Kroger’s app alerted customers to a limited number of sanitation and cold/flu-related products to only five of each per order. Recently listed as out of stock on the Costco and Target websites: certain disinfecting wipes and cleaners.
Any business importing from China is feeling the pressure. Loss of inventory or sales can also mean a loss of rankings on Amazon or Google.
Taking a Proactive Approach With Your Business
At this stage of the story, you may want to take some initial steps toward dealing with the virus as well as the reaction to it. Here are a few suggestions:
Be transparent with your staff and customers
Be sure that your people always know as much as you do. Give steady, regular reports about the state of the virus, always from credible news sources. If the situation is affecting your business, be forthright about it and discuss the ways you plan to deal with it. Be sure to address panic and myths surrounding the disease, and reassure everyone that you are on the case and will keep everyone posted at all times. This will go a long way in building trust and preventing panic. Be sure to make it known that you don’t think of this situation as business-as-usual.
Be flexible with flexible employee schedules
The idea here is to reduce or eliminate the risk of transmission. Consider allowing employees to work from home if possible. Insist on sick employees staying home (non-negotiable). In the digital age, business goes on with the help of Skype, Slack and other platforms that allows for long-distance communication. While you’re at it, make sure there is plenty of hand sanitizer on hand in the office and warehouse.
Work on a Plan B
With China in crisis, learn to expect the unexpected. Disruptions are going to become a thing, for sure. Create imaginary scenarios that will force you to deal with lowered inventory levels and outages. Figure out what type of materials and other purchases you may need to make in advance, before a panic. Additional plans should include alternative strategies for transportation and cash flow. Don’t be afraid to work with your vendors and customers on this—they may appreciate it more than you know.
Keep your eye on the big story
An epidemic or pandemic can be unpredictable, changing course, worsening or rife with false alarms. Be flexible with your plan to deal with the dilemma, as priorities and situations may change or shift. As long as you’re informed from reliable sources, you can be effectively proactive in your policies.
Stay Safe—and Sanitary
When it comes to selling online, the danger of coronavirus may start with something as simple as human hands. According to the World Health Organization (WHO), hands can be hosts for viral diseases and also have the easiest access to spread the virus.
The WHO website states: “Hands touch many surfaces which can be contaminated with the virus. If you touch your eyes, nose, or mouth with your contaminated hands, you can transfer the virus from the surface to yourself.”
Bottom line: in advance of any crisis, protect your supply chain by being prepared with solid plans. This will help you avoid scrambling for solutions or being taken by surprise, and help to reduce or avoid panic or chaos.
Navigating the Coronavirus – Webinar: Wednesday, April 1
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