Impact of Covid-19 on the transportation and logistics sector

Impact of Covid-19 on the transportation and logistics sector

As per a March survey conducted by the Institute for Supply Chain Management, nearly 75 percent of companies reported supply chain disruptions in one form or the other due to coronavirus-related transportation restrictions, and the figure is expected to rise further over the next few weeks.

Pandemic Outreach:

From rickshaw pullers to airlines, all have been affected economically by the pandemic. “Almost 2.5 million trucks among the 5 million are off-road, according to the Indian Foundation of Transport Research and Training”.

Timeframe:

For instance, there is a 40% to 60% increase of product being moved into grocery stores and warehouses in the US since COVID spread started.

Effect of COVID 19 on the industry:

For the logistics industry, the lack of clarity on policies on transportation of essential and non-essential goods, lakhs of stranded vehicles on roads and the absence of migrant laborers, a key resource for warehousing and transportation segments, are big dampener and the current challenges and the outlook for the logistics industry, Rampraveen Swaminathan, MD and CEO at Mahindra Logistics, said it will take several weeks for the industry to stabilize after the lockdown is lifted.

Revenue Impact:

The coronavirus outbreak has stalled the continuous growth of cargo volumes, which registered positive growth for the period December 2019 to February 2020, to a negative year-on-year growth of 2.01 percent in March 2020, dragged lower by a significant drop in the container and liquid cargo volumes, said a CARE Rating report. Gujarat Pipavav’s volumes are likely to take a hit as 85 percent of its volumes are container-led. TCI Express, Bluedart, DHL, and Fed Ex among others are also witnessing permanent demand loss with drivers having flown to hometowns or left stranded. Essential commodity transport is getting delayed by the many checks at state borders leading to delays in last-mile delivery.

Sales/Opportunities impacted:

The disruptions have had a huge effect on the workforce, with many businesses lacking the financial resources to keep workers on the payroll without revenue coming in.

  • The slowdown in demand & supply
  • Implications on the workforce
  • Need for policy intervention

Jobs lost:

52% of firms except for job loss due to COVID-19 Majority of the CEOs surveyed see revenues of firms falling by around 10% in the previous and current quarters. During this lockdown, a majority of the companies engaging in the production of essential products and the supply of ancillary goods are facing operational constraints. On the jobs front, about 52 percent of the companies surveyed foresee job losses, in their respective sectors. While the proportion of jobs that are expected to be cut is quite staggered, 47 percent expect less than 15 percent of job loss, and 32 percent of the companies aim to cut 15-20 percent of jobs.

The purchasing power of clients:

Now, the just-in-time mindset of LEAN manufacturers is seriously challenged by the fact that Asian factories are at 40-70% of capacity and oceangoing vessels and ports have been closed.

Post-COVID 19 Scenario:

A decades-long focus on supply chain optimization to minimize costs, reduce inventories, and drive up asset utilization has removed buffers and flexibility to absorb disruptions, and COVID-19 illustrates that many companies are not fully aware of the vulnerability of their supply chain relationships to global shocks.

Fortunately, new supply chain technologies are emerging that dramatically improve visibility across the end-to-end supply chain, and support companies’ ability to resist such shocks.

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