Supply-chain visibility in the time of COVID-19

The worst economic crash of all times – greater than the Great Depression! What took three years from 1929-32 has happened in three weeks. It’s still too early to quantify the depth of the upcoming global recession but leading economists are sure of one thing: the coronavirus has sent the global economy spiraling downwards.

Lowest oil prices for decades

The price of crude oil has plummeted to its lowest level for nearly 20 years. The dispute between Saudi Arabia and Russia, Saudi plans to up its oil production, and the worldwide fall in demand – noticed how quiet roads are? – have hammered the global oil market. The dramatic fall in fossil fuel consumption is undoubtedly good for our climate in the short term, but the longer-term impact of the many enforced oil rig closures could prove negative for ocean shipping. After all, oil wells cannot simply restart production as, for example, an automotive or mechanical engineering plant can. According to Goldman Sachs the shutdown of oil wells has already taken nearly 1 m barrels a day from global production levels, and this figure is expected to rise as producers run out of storage space for unused oil. Yet once the global economy starts to recover from the corona crisis – and economists are predicting a sharp upswing either this year or next – the current drop in oil production capacity would result in a very fast trend reversal to oil shortages and a related price hike. 

Global supply chains badly hit

The socio-economic disruption caused by the coronavirus pandemic is also having far-reaching impacts on global supply chains – especially, but no longer solely, those originating in China. Seaborne trade, which is responsible for the lion’s share of global trading volume, has been badly hit, as blank sailings statistics reveal. Ocean Insights counted 386 blank sailing announcements between mid-March and the end of April, an unusually high figure. Ocean carriers have responded by replacing large-volume vessels with smaller ones to adjust to these lower trade volumes. The measured vessel capacity (in TEU) across major carriers has seen a decline of 23% from mid-January to mid-March in Asian trade lanes alone.

Another disruptive influence on global seaborne trade has come from the widespread firm closures triggered by governments’ lockdown policies. The Port of Hamburg, for example, was recently reported to be running out of space to store incoming containers due to recipient company closures. Container logjams in seaports are yet another complicating factor for global supply chains.

Supply chain visibility – a competitive advantage

In a recent YouTube blog, Christian Titze, Research Vice-President, Gartner Supply Chain Technology, pointed out that supply chain visibility is more essential than ever. It is, he says, the basis for better and more robust decision-making as it enables companies to respond more quickly to disruptive bottlenecks, such as those caused by the corona crisis, and possibly even to avoid them.

But how do you achieve supply chain visibility? Ocean Insights’ Container Track & Trace (CTT) tool enables customers to know where exactly their container is and when it is likely to reach its port of destination. If that seaport were Hamburg with its current container logjam, the kind of real-time information CTT provides would allow a shipper to consider rerouting a container to a different port where it could be transshipped without delay. In these disruptive days reliability and punctuality in the supply chain are much-appreciated factors. If you’re a supplier, visibility adds up to a key competitive advantage in the corona crisis.