Coronavirus Pandemic – Impact on Freight Forwarding & logistics Industry

Maritime transport accounts for over 90% of global trade activities. There are over 50,000 merchant ships trading and transporting cargo globally, according to the Chamber of Shipping. The Container Shipping Industry is expected to grow to over 11 Billion USD by 2025, growing on average at a CAGR of over 8%, says Statista.  

Everything was hunky-dory until the COVID-19 pandemic hit the industry and brought global trade to crippling levels. Let us take a look at what’s happening in the industry and when you, as a freight forwarder may see some respite from the situation.

Current Status - What’s Happening In The Industry?

The ongoing COVID-19 situation has changed a lot of things in the industry, for better or for worse. The Coronavirus impact is being felt across the globe as you read this report. However, the real impact will only be felt once the demand for medical supplies and essential commodities subsides and goes back to normal levels. We estimate this will take about 90 days. 

The shipment lead times have increased drastically for deliveries as most vessels being sent from highly infected countries are being quarantined for at least 14 days before docking at the port of destination. This is causing delays in the delivery of raw materials as well as finished products. These disruptions in the supply chain mean that many new product launches may be delayed by as much as a whole year, and consumer requirements and demands won’t be fulfilled efficiently. This is very bad news for the consumers as well as retailers. The fashion industry, as well as the electronics industry, have seen the largest drop-off in demand in recent times due to COVID-19. China, the hub for both fashion as well as electronics has seen many shipments being either canceled or delayed indefinitely. 

China is also a key player in the shipping and maritime trade industry and the global outlook towards China suggests that we will be seeing a lower number of shipments coming from the geographical region, at least for the next 9 to 12 months. The ocean container volumes are expected to reduce by 0.7% which is about 6 million containers due to the disruption in supply chains. Reports indicate that China is ramping up its production facilities to cover the losses. This has resulted in increased demand for freight services in the month of April. The overall global demand growth still stays fairly low at the time of publishing. 

A Look At The Recovery Timeline

The Next 3 to 6 Months look grim for Freight Forwarders and waterway shippers. If the situation doesn’t improve soon we may be heading towards a recession, which seems inevitable. 

The fourth quarter of 2020 is when the industry may begin to stabilize and the first quarter of 2021 is when we can expect stability. Freight forwarders may see minor growth in the second and third quarters of 2021. Experts predict that by the end of 2021 things will go back to normal and the growth cycle will begin.   

In The Long Run - Long Term Impact Of Coronavirus On The Industry

Experts estimate the demand to fall off in the next 3 to 6 months, If there is no cure or vaccine for the nCoV within the next 180 to 240 days. Individual consumer spending will drastically go down as well as individual earnings due to mass layoffs that may happen. This will have an impact on all stakeholders of the shipping industry as lower demands would mean lower supply and shipments. 

Smaller players are on the brink of bankruptcy and may not survive this crisis due to hampered cash flows. This fall will also result in damaged cash flow for larger players as many creditors may not be able to repay their dues. The Force Majeure clause, which typically deals with acts of God, is being invoked by parties with lower liquidity bound by the contract.  

The silver lining to all of this is the extremely low cost of fuel, thanks in part to the ongoing price war between the world’s largest oil producers, namely Russia and Saudi. Oil prices are at an all-time low as of the publication of this article. This is good for businesses as this will result in lower costs and perhaps increased revenue per shipment.

Where We’re Headed - Industry Changes And Technological Disruption

Paul Cuatrecasas, author of the famous book Go Tech or Go Extinct and CEO of Aquaa Partners believes that we will be seeing disruption in the industry thanks to digital technologies which will act as catalysts for change. The post CoVID months will drive change in the industry and push traditional practices towards more digitized ones. 

The standard practices in the industry involve a lot of human input which leaves room for errors. Once a quotation request is raised, the process to send out the quotation goes through the hands of many different people before it finally reaches the customer. This process can be long and arduous and errors are commonplace. 

Many companies in the industry have already adapted to robotic automation. We may see even more investments in segments of robotics and freight technology in the near future. This is the perfect time to digitize the business and move to a more streamlined digital experience.

What Can You Do To Improve Efficiency And Decrease Your Costs?  

The easiest way to improve efficiency and decrease costs is to automate standard processes involved in the workflow with the help of technology. This can be done with the help of Freight Forwarding Software or Freight Management Software such as Shipthis. 

Shipthis ERP software that helps CHAs, logistics specialists, and freight forwarders automate and optimize their workflows and give your customers the ability to directly request quotes, manage shipments, view documents and invoices, and more through a white-labeled custom branded web and mobile app which helps reduce unnecessary documentation.

Our AI-powered platform allows your operations and finance team to search rates, create quotations and invoices, manage bookings, follow up on tasks and revenues as well as onboard new customers.  

Moving Forward

Humans are adaptable creatures. We are certain that collectively, as a society, we will overcome this and come out the other side improved. That being said, the businesses may face hardships well into 2021. This is the perfect time to embrace technology, while the whole world is on pause, take the first step to cope with change. Turn towards cloud-based solutions to help you. Get in touch today to get your free demo and trial.

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