The Logistics of Coronavirus (COVID-19)
There is a lot of concern about how the recent pandemic is going to affect movement of goods and the services provided for that movement. There is a very good reason to be concerned, as many factors of the supply chain are affected by a lack of manpower and transmission of the virus through moved goods. Let's see what I can do to allay your fears:
1. How will the virus affect the movement of my goods?
To be honest, there will be some price increases in the air freight world. Some reported prices have been well over $8/kg from Shanghai to New York. With airlines grounding passenger traffic, the space supply for air freight is significantly reduced. Economic factors are definitely in place. Container traffic costs will also increase. There are more restrictions on the movement of people, who actually drive the trucks and captain the ships, and with delay for processing people who are responsible for the movement, transit times will be affected.
2. Can the virus be transmitted from people in China to my buyers?
This is a question that has been asked, and though I am not an epidemiologist, the articles I have read state that a virus will only survive on surfaces for 3-4 days without interference, assuming the conditions are right (temperature, light, etc.). So, if your customers are concerned that your product is coming from more affected areas in the world (China, Italy, etc), you can let them know the date it left and that if anything was transferred onto products, it would not be viable on the date delivered. If they are still concerned, provide a box of latex gloves. ;)
3. How will this pandemic affect the future of my supply chain?
This is a great question, and I don't have a simple answer. According to one of my sources, Chinese products will suffer a substantial loss, since Hubei is the epicenter to the current global economic loss. As we have already instructed many of our clients to source from other countries thanks to the US-China Trade War, as have many other importer service providers, the movement of sourcing has already changed the dependence on Chinese goods. The type of muscle movement it takes to move a supply chain prevents a ping-pong effect, so I think that wherever the supplier is now will likely stay the same. However, China is brilliant with their Belt and Road Initiative (BRI), and have not put all their eggs in one basket. Their sourcing of raw goods from North Africa, and their hold on so many other facets of the global economy, many of which I am not privy to, will continue to make China a major player in the Global Supply Chain. Some sources believe that China will actually come out on top because of their ability to recover faster from the virus. Part of the justification for this belief is that the number of people affected in China just under 81,000 reported cases, with a loss of under 3,250 people, most with underlying health conditions. As crass as it sounds, this is a minuscule percentage (0.006%) for those infected, not to mention that a mass stoppage of business was not ordered in China as it has been in other countries. However, the number of those affected in the US is not limited to those who have been infected, but to the thousands of businesses forced to close to avoid further transmission. This can affect your supply chain not in sourcing, but in your buyers. So, do what you do best in checking with your customers to ensure that they are still in business and able to pay you. ;)
4. What is the administration doing in the way of regulatory action?
According to Reuters, President Trump has asked the FDA to remove barriers when it comes to approving medications for treatment of the virus. However, nothing was mentioned regarding the waiving of FDA requirements with imports of medical supplies and masks. Additionally, when asked about the additional tariffs against goods from China, this is the information I have: "In a letter dated March 18, the Americans for Free Trade Coalition, called upon President Trump to suspend the Section 301 and 232 tariffs currently imposed on Chinese imports as an additional measure to help those hurting throughout the COVID-19 outbreak. The President responded by saying, "China's paying us billions and billions of dollars in tariffs, and there's no reason to do that. They haven't even spoken to me about that. China hasn't asked me to do that, but we're getting billions of dollars a year from tariffs from China. And I can't imagine Americans asking for that, but it could be that China will ask for a suspension or something. We'll see what happens. China's having a very rough time."" Apparently, the President believes that China is paying these tariffs, which importers know is not the case, since I inform them of the duties that will be drafted from their account by the US Treasury. Importers also know they cannot be reimbursed for these duties without violating the law. Further, according to the WSJ, the US importers are taking the loss, not really passing along the additional costs to buyers, nor negotiating the prices with suppliers. So, if you feel that the Administration needs to learn more about what your costs are and how you are affected, contact them, send letters, reach out to your representatives. They need to hear your voice and your story.
I don't know how helpful this information will be to you or your business, but I hope that all readers reach out to their representatives in Washington, D.C. to let them know what you are dealing with in your business. Rather it is due to forced closures of your stores, your customer stores, or it is the additional duties you are paying, let them know. The reps in Washington work for you and are paid by your tax dollars. Make sure they know what you need to make life bearable for the next several months. And don't let them get away with a terrible idea of taking on a loan to simply survive. You need more than that...let them know!