Summary:
- Pandemic-induced lockdowns disrupted global supply chains, leading to shortages, backorders, and container capacity challenges.
- Supply chain operations faced hurdles, including equipment shortages, inventory surges, and disorganization in warehouses.
- The pandemic prompted increased risk aversion, carrier diversification, and a focus on supply chain visibility, fostering resilience and innovation in the industry.
In late 2019, whispers of a highly contagious sickness in Wuhan, China, grew into a global pandemic that transformed life as we knew it. COVID-19 brought about unprecedented changes, from remote work to mask mandates, creating an environment where even securing a roll of toilet paper became a challenge. However, one of the hardest-hit areas was global supply chains.
Ocean
a. Lockdown Ripple Effect
As factories shuttered due to lockdowns, a ripple effect surged through supply chains. Customers faced inventory shortages, and backorders piled up for manufacturers.
b. Container Capacity Crunch
When operations resumed, factories operated at full throttle to fulfill orders, but container vessel capacity became a bottleneck. This surge led to soaring rates and frantic efforts by retailers to secure space. Ports worldwide faced import and export dwell surges, introducing prolonged volatility into the supply chain.
c. New Challenges
While ports have returned to normal operating levels, new challenges arise. Droughts impact shipping through the Panama Canal, and conflicts in the Suez Canal further complicate ocean transportation.
Full Truckload (FTL)
a. Equipment Scramble
As containers flooded into ports, a scramble for equipment ensued. Shortages of chassis, difficulties securing port appointments, and extended wait times for container pickups caused dray move costs to spike.
b. Inventory Surge and Overflow
Panic-driven overordering led to a surge in inventory, overwhelming warehouses. This overflow hindered port volume clearance, resulting in increased detention and demurrage costs, contributing to supply chain expenses.
c. Disorganization in Warehouses
Warehouse yards faced disorganization, making it challenging for truck drivers to efficiently pick up loads. Truckload on-time performance plummeted by up to 17%, with an ongoing shortage of truck drivers exacerbating the market’s slow recovery.
Last Mile
a. Ripple into Last Mile
Problems trickled into the last mile market, where on-time performance dropped by nearly 20%. Changes in consumer shopping habits, driven by limited store hours and COVID-19 concerns, led to a surge in online shopping, overwhelming the last mile market.
b. Current State
While volumes have leveled out, the last mile market has adapted and built a more resilient supply chain, inching close to pre-COVID levels of service.
How COVID Changed Supply Chains
a. Increased Risk Aversion
Companies have become more risk-averse in inventory practices, favoring higher safety stock levels and supplier diversification, especially geographically. This shift, though adding costs, is a response to the vulnerabilities exposed by lean and just-in-time industries during the pandemic.
b. Carrier Diversification
Facing capacity shortages, shippers diversified their carrier portfolios, establishing relationships with new carriers. The last mile market witnessed the emergence of numerous carriers, expanding shippers’ options beyond the traditional giants like UPS and FedEx.
c. Supply Chain Visibility
Covid-19 also highlighted the need to know where freight is. Supply chains are complicated and issues in one part of the supply chain typically trickle down and impact every other part. Visibility software like project44 allows shippers to connect the dots faster and mitigate trickle down effects.
In conclusion, the COVID-19 pandemic acted as a crucible for global supply chains, reshaping practices, and revealing vulnerabilities. The challenges endured have driven adaptation and innovation, fostering a more resilient and dynamic supply chain landscape.
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Disclaimer: The information conveyed herein, shared solely for summary and not contractual purposes, comes from both project44 and third-party reporting. The project44 data does not include all available market information, and project44 has not undertaken to independently verify the third-party reporting. Similarly, this type of data changes from day-to-day. Accordingly, the reader should not rely on this reporting to make any business decisions, and project44 expressly disavows any liability arising from any such reliance.
