Coronavirus and its Impact on the Global Supply Chain
Authors: QProducts & Services Team, Under the Direction of Paul Yadron, Sr. VP of Sales
While a number of new cases related to the coronavirus continues to rise in China and around the globe, the impact of the coronavirus has expanded into the U.S. energy, agriculture, and transportation sectors. From a transportation perspective, supply chains have been compromised as China’s government has worked to contain the virus. At QProducts & Services, we want to provide you with the most up to date information on what is occurring.
What is Coronavirus?
According to the World Health Organization (WHO), coronaviruses or CoV are a large family of viruses that cause illness ranging from the common cold to more severe diseases such as Middle East Respiratory Syndrome (MERS-CoV) and Severe Acute Respiratory Syndrome (SARS-CoV). A novel coronavirus (nCoV) is a new strain that has not been previously identified in humans. Lastly, the virus is zoonotic, meaning that it is transmitted between animals and people.
Coronavirus and Supply Chain Disruption
Since the outbreak in December 2019, the supply chain has been compromised from the China marine terminals to the inland destination points. Cargo that has been offloaded at China terminals has been backing up. Domestic freight routing has been hindered because of the measures to contain the spread of the virus. According to Talk Business, less cargo has been shipped from China to the United States as production in China has slowed because factories have been shut down to contain the virus. The lower volumes of cargo and containers have led to fewer ocean shipments to the United States.
Every company that ships products in and out of China has to plan and prepare for production and distribution slowdowns. Closed-off ports and delayed shipments from China are causing ocean reefer rates to increase and capacity to tighten. Less cargo has been shipped from China to the United States as production in China has slowed because factories have been shut down to contain the virus.
About 40% of all shipments that entered the United States in January 2020 came from China, according to Freightwaves. Now, shipments are backing up and being cancelled due to the coronavirus, limiting shipments that can enter the United States. The coronavirus has also removed about 300,000 to 350,000 twenty-foot equivalent units of demand from Chinese exports to the world, reported Talk Business. There is also a limited supply of reefer plugs in China’s ports, resulting in congestion and lack of availability.
Solutions to the Coronavirus Impact on the Supply Chain
We are working to help customers around the globe find alternatives to reefers by using CargoQuilt®
and ContainerKit™ solutions. While we cannot control the delays and cancellations caused by the coronavirus, we can provide alternative solutions. Rather than eating the cost of rising ocean reefer rates, companies can still protect their temperature-sensitive cargo with passive temperature protection shipping solutions.
Passive temperature protection does not require the need for a power supply, while active temperature protection does. Our CargoQuilt® and ContainerKit™ solutions work by passive temperature protection, ensuring quality, safety, and efficacy of temperature-sensitive products within a pre-defined range. In addition, passive temperature protection solutions tend to have a lower cost than active temperature protection given elimination of a power supply and the fixed amount of thermal protection.
Shippers are watching the unfolding impact of the coronavirus closely, and many have already begun to factor delays into their supply pipelines. An ever-growing number of companies are feeling the effects of the deadly virus, with many global organizations fearful that it could get worse. Global tech giant Apple has warned of global “iPhone supply shortages” resulting from its Chinese factories closing due to the outbreak.
“Many companies are turning to charter flights to deal with the lack of supply, these flights have been fluctuating between $500,000 and $800,000 one way,” American Global Logistics said in an update emailed to Supply Chain Dive.
While the impact is substantial, there are alternatives to help combat the rising costs. Supply chain visibility is more important than ever as companies determine the best approach and monitor the risks involved. For now, those who proactively identify specific supply risks and manage it can potentially find solutions or help mitigate the impact.