Emerging intact from impacts of coronavirus will be a slow crawl for supply chain and logistics

It is safe to say, at this point, society and the global economy, in a sense, will need to crawl before they walk, in order to get a handle on the ongoing and relentless impact of the coronavirus.

Given that everywhere you look and go, the coronavirus has dwarfed all other topics and for good reason. Please don’t take that personally, politics (specifically the election), weather, and sports. And with that as a backdrop, the impact of the coronavirus on supply chain and logistics operations can very well be viewed as equal parts alarming, confusing, and staggering, not to mention a few other adjectives, to be sure.

That was made clear in a research note published recently by Credit Suisse analyst Allison Landry, which asked addressed the global supply chain chaos being driven by coronavirus.

“With China production coming back online at a very slow pace and coronavirus feared to reach pandemic status, global supply chain disruptions appear all but inevitable,” wrote Landry. “Beyond the more obvious implications for international air and ocean freight markets, we also see the potential for a significant tightening of capacity on the domestic transportation front in the coming months. In the meantime, however, we expect sustained weakness in freight volumes – prolonging the freight recession that began in late 2018.”

What’s more, Landry observed that it still remains to early to definitively pinpoint the eventual magnitude of negative repercussions for global trade and U.S. imports, while definitively stating that it translates into an unlikely recovery for domestic freight volumes anytime soon. Taking that a step further, she noted that lower import levels will lead to sustained weakness for intermodal, coupled with softer trucking volumes that could place additional pressure on contract rates with bid season approaching.

To say the least, these are not good signs, given that the 2019 freight market, in general, did not come all that close to matching the impressive output seen in 2019, and that was well before any talk of coronavirus came to light.

These less-than-good signs were also evident in the Manufacturing Report on Business issued yesterday by the Institute for Supply Management (ISM).

A computer & electronics products manufacturer said in the report that “coronavirus is wreaking havoc on the electronics industry. Companies are delayed in starting up production, which is resulting in longer lead times, constraints and increased pricing. It's a mad dash to dual source stateside in case China isn't back online soon.”

In the same report, a food, beverage, and tobacco products respondent said coronavirus is impacting supply chain operations, with softness in demand, coupled with experiencing havoc on items sourced from China that may cause significant delays to production. And a fabricated metal products respondent observed that coronavirus is front and center as a major supply chain risk, with access to information in China, from the respondent’s supply base and customers, “slow to come by.”

At last week’s RILA (Retail Industry Leaders Association) LINK 2020 conference in Dallas, Nick Fafoutis, Senior Vice President, Sales & Chief Commercial Officer, for global ocean carrier CMA-CGM, said that coronavirus is an event that in which nobody truly yet understands its true impact.

And that comes for a few reasons, he noted, including: how it will have a profound impact on operations; there is “zero” visibility to what lies ahead; and that it will have a significant impact on the logistics sector for all of 2020.

“From a carrier perspective, we have never seen an event like this,” he said.  “It is a very fluid situation…and networks remain profoundly impacted.”  

As the days go by, the worries remain intact, as does the uncertainty that accompanies it, too. Given the largely unchartered waters we are in, it is likely to be a slow drawn out process, in order to return to “normal,” or even a semblance of that, something we would all sign up for now. While concerns and anxiety are currently running high, supply chain and logistics have seen its fair share of hurdles and challenges and made it through to the other side. Here is to hoping this will end up being another one of those times.