'Fragile' supply chains exposed during pandemic, heralding new risk averse approach

Wed 29 Apr 2020
Posted by: William Barns-Graham
Trade News

international supply chains

The “fragility and vulnerability” of supply chains have been exposed by COVID-19 and the logistics industry must re-evaluate the “inherent risk levels” of current models, a leading industry figure told the Daily Update today (29 April).

Supply chains around the world have already been significantly impacted by the COVID-19 pandemic, with Lloyds Loading List reporting forwarders could “see volume declines of 20%-30% in air and sea freight in the second quarter of this year with a “trough” of 30%-50% in April.”

The Freight Transport Association’s latest weekly survey also found 91% of respondents experiencing a general business downturn with 29% having customers already gone out of business.

Financial management

Over 90% of logistics companies who say they are in danger of financial collapse in the next four weeks state that a lack in demand is the principle cause

John Lucy, manager for international transport & trade procedures for the FTA, told the Daily Update:

“The global outbreak of Covid-19 has exposed the fragility and vulnerability of all supply chains, and the one certainty is that now is the time to re-evaluate the inherent risk levels associated with current models.

“In the future, logistics companies will be far more risk averse and will need to be more diversified and extremely focussed on financial management, as there will be an unprecedented financial risk from previously stable customers.”

He added that the industry had been “caught off guard” by the sudden spike in panic buying at the start of the crisis, followed by a collapse in demand.

Mr Lucy added new problems continue to mount, with delays on Irish, Dover and Calais ferry routes and unprecedented delays on deep sea container routes.

One freight business also told today’s Update that the industry is “very much in unchartered waters” due to uncertainty about future cargo capacity.

The firm, which asked to remain anonymous, said rates and future contracts would not be renewed and added that “a lot of traditional alliances will end as people will have a reluctance to commit to any long-term strategy”.