Lockdown Disrupts Supply Chain! Storage Demand High in Asia!

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  • Stricter measures to contain the spread of coronavirus lockdowns in Asia, delays cargo flows across the region.
  • Manufacturers await written approval from the Ministry of International Trade and Industry to continue operating.
  • Till receiving approval, import and export cannot be done during this movement control order period. 
  •  Ocean carriers are working with skeleton work forces, transmission of gatepasses and release  of orders are very slow.  
  • Fall of demand, lack of drivers and other factors that delay operations and high air freight rates have led to an increased demand for storage in Asia.

As countries enforce stricter measures to contain the spread of coronavirus lockdowns in Asia, cargo flows across the region are getting delayed, writes Sam Whelan for an article published in The LoadStar.

Difficulties in interpreting regulations

According to Rickard Ingvarsson, Asia CEO at Scan Global Logistics (SGL), countries are enforcing stricter measures to contain the spread of coronavirus., which in turn creates confusion over how to interpret the new regulations in terms of logistics.

Confusion severe in India

The confusion seems to be severe particularly in India as authorities scramble to clarify rules to keep cargo moving.

Reduced operations

SGL added that a similar situation is seen in Vietnam. With a full lockdown declared, Bangladesh and Pakistan too operated at a reduced level. 

SGL expects the situation to continue with additional countries implementing similar measures.

Approval for operations

As some Malaysian manufacturers still wait for written approval from the Ministry of International Trade and Industry to continue operating, there is a delay in orders and freight.

Movement control in place

Mr Ingvarsson says those waiting to receive approval will not be able to import and export during this movement control order period. 

Cancellations received

He added that nearly 10 cancellations were received from clients yet to receive approval.

Piled up containers

In the Philippines, containers are piling up at the port of Manila, prompting ICTSI to plead with shippers to collect their cargo.

Not enough trucks

This was the case in China while there was nationwide lockdown, finding enough truck capacity to clear the backlog is a challenge. 

Drivers stuck at home

According to SGL, many drivers are stuck at home, due to local regulations, prompting haulage firms to jack-up pay packets by 30% to drivers “just for showing up”, meaning rates are likely to increase.

Operating with limited work force

Mr Ingvarsson noted that as the Ocean carriers are working with skeleton work forces, transmission of gatepasses and release  of orders are very slow.  

Other factors that impacted flow of cargo

Longer national holidays 

Mr Ingvarsson said the longer national holidays in Cambodia and Myanmar would further impact the flow of cargo. 

Factory shutdown

Furthermore, the Cambodian government said today that 91 garment factories, about one in six of the country’s total, have shuttered due to the virus.

Fall of demand

Consumer demand is also falling, with SGL noting the “first significant signs of a major [global] volume slowdown across all transport modes, as many orders are put on hold or cancelled”.

Storage in Asia

All these above factors have led to an increased demand for storage in Asia.

According to Mr Ingvarsson, as shopping has come to a halt in Europe and the US, an increasing request for temporary warehousing is seen in China, Cambodia, Myanmar and others, from fashion and retail customers.

“We also see increasing demand for short-term storing of humanitarian aid supplies until they can be shipped out to countries in need.”

High air freight

He added that Asia Pacific air freight rates remained “insanely high” due to limited capacity, as aid and relief materials and hi-tech accounts take most of the space.

SGL’s block train

Adapting to the air cargo capacity crunch, SGL launched its first ever block train from China to Duisburg this week, which the forwarder said would provide a “robust” alternative to air and ocean.

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Source: The LoadStar

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