The Covid-19 pandemic struck suddenly in December 2019 in Wuhan, China & has spread randomly with great ferocity and devastation. Across the globe, 210 Countries and Territories have reported over 2 million confirmed cases & a death toll of over 135000 as on 15 April 2020. A million of those positive cases & 60% of deaths have shown up in the last 13 days alone. India, the second most populous country in the world, detected its first Covid-19 patient in January and is currently going through a surge in infection cases with over of more than 13000 positive cases with about 425 deaths recorded so far amidst an extended national lock-down. The desperation is overriding considerations of safety, leading to breaking down of social distancing as seen often at market places, transit points, local stores etc.
By every assessment, the economic & social impacts are unprecedented in magnitude and global scope. It remains to be seen how the governments and its institutions are able to arrest its immediate impact to restore semblance of stability. The numerous expert comments point towards the fact that while the assault on human health will most likely be temporary apart from the unavoidable deaths, the political and economic upheaval that this catastrophe has unleashed could last for generations. The 2008 financial crisis had also dealt a serious blow to the world economy and we have very important lessons learnt to help us come back strongly in 2020. However, the current economic crisis is more complex, unlike anything ever known in history for its speed, scale and impact. The effects of lock-downs & restrictions have led to closure of factories, businesses & institutions that have severely crippled the economic activities and opportunities impacting the entire mankind with the most vulnerable populations bearing the maximum brunt.
While the focus is on to somehow addressing the infrastructure needs for the deluge of infected population requiring healthcare, doctors, healthcare workers and medical supplies, efforts are on to expedite R&D on medicines and vaccines in the longer run. The mostly locked-down population & cessation of most economic activities have rendered millions of production & service sector workers jobless & stuck at their dwellings. The governments are trying their best to ensure systems to fulfill the essential consumption needs of the population while ensuring the public systems of security, law & order, water, electricity, waste disposal etc. A domain that cuts across every essential action during these horrid times and is affected badly is the last mile delivery logistics.
Global Scenario
The spread of the coronavirus in USA, Europe and other parts of the world and consequent lockdowns, movement of people is severely restricted, specifically from/to countries that are having higher Covid-19 infections. Most nations have provided for their native citizens to be allowed to cross borders with suitable restrictions & precautions. Several countries including Belgium have mandated that the social distance measure of 1.5m must be respected for all types of collective transport of passengers still operational and allowed, including public bus transport. China suspended all cross-border road transportation for passengers and held back inbound and outbound passenger traffic from 20 March until further notice. From 20 March, USA has also implemented a partial travel ban through the US-Canada and US-Mexico border ports of entry.
Goods transport through rail & road has been considered as an essential service & hence is exempt from movement restrictions in most countries of USA & Europe. However, trucking has emerged as a major choke-point in global supply chains as well for everything from food to medical supplies as governments take stringent steps to contain the pandemic, restricting the movement of vehicles and people to drive them.
International body of national associations for passenger or goods transport, IRU estimates that on the basis of the significant fall in intercontinental container shipments, the global road transport activity will witness a decline of up to 20% in 2020, depending on how long the situation continues. This could lead to a global loss in operator revenues of $800 billion. Nearly 6% of all people in employment worldwide work in road transport largely in small and medium sized firms that, due to their size, cannot easily cope with external shocks such as the economic impacts of COVID-19.
Different countries have responded differently to the calamity with regards to transportation sector. Italy, bearing the brunt of Covid-19 in Europe, has suspended all non-essential industrial and commercial production & transport activities. Czech Republic has declared a national emergency and has gone over to grant a general exemption from the driving restrictions on motorways and class I roads in the country for trucks and combination vehicles with certain weight restrictions.
The Russian Government temporarily restricted any movements through road, rail, pedestrian, rivers and combined border-crossing points from 30 March 2020 but in the process exempting truck drivers engaged in international road transport of goods just like Spain & UK. UK even runs supermarket specials to ensure stocks of vital household goods and foodstuffs reach the consumers.
A number of countries including Austria, Belgium, Spain etc. have introduced revised daily/ weekly & fortnightly driving hours limits, daily breaks & weekly rest periods to improve vehicular movements. Terminals at airports, ports and land terminals are getting redesigned to ensure that the workforce have as little social contact as possible. Drivers are being obliged to undergo Covid-19 test at such guarded transit points & terminals before commencement of the next trips. Drivers are further obligated across multiple European nations to use only approved national roads & park in specified areas to rest, have meals or refuel, according to the list of roads & specified parking areas.
France has gone a step ahead to extend guarantees for access for freight transport and logistics workers to their workplace and to loading and unloading places and extra protection measures for freight transport and logistics workers. China mandated that all foreign freight vehicles entering the border should unload at the port or at border control points and all foreign truck drivers will return on the same day. In cases of difficulty to return, the drivers will stay in accommodation designated by local disease prevention and control agencies.
Amidst wide-scale disruption of road supply-chains, the rail freight traffic is mostly holding fort as freight trains run without restrictions according to the timetable.
Indian Scenario
The economic impact of Covid-19 related lockdown on India was quite pronounced in the later half of 4QFY20. The economic growth rate may fall to around 4.8% in FY20 as per World Bank projection and will slow down further to even upto 1.6% in FY21 as per Goldman Sachs prediction which assumes a prolonged covid related adverse economic impact period. However, a strong sequential recovery in H2FY21 is expected.
On the Indian transport logistics front, the pandemic has led to lockdown measures with suspension of most passenger flights, rail & road vehicles. On the cargo front, the trans-border shipping logistics, ports and airport operations have had to be severely downscaled because of poor evacuation from the ports and airports that are currently catering to ensure transit of essential medical & food supplies. The government had declared movement of goods as essential service without any restrictions but there has been a huge shortage of vehicles and drivers that serve the last mile connectivity.
The Indian Railways is the 4th largest network in the world, that transports 23 million passengers a day and its 12,000 trains crisscross 65,000 km of tracks. The passenger operations was suspended for the first time in history along with the national lockdown announcement on 25 March 2020. The dates for resuming passenger services would be taken only after the current lockdown that has now been extended up to 2nd May 2020 with some limited restriction removal from 20 April. However, freight and parcel train services continued to make sure the supply of essential items was not hampered. Also, about 20000 passenger coaches are sought to be turned into quarantine or isolation wards.
As per Indian Railway sources, all freight trains are running on schedule without any restrictions. With their end-to-end logistics digital solutions in place, they regularly transport wagon groups or block trains between fixed destinations on fixed days and at fixed times apart from the usual flexible schedules and running freight train on demand even at short notice. This has been possible because of the spare capacity arising out of cancellation of the densely scheduled passenger train movement. This means that depending on customer requirements, the capacity for intermodal and conventional rail freight transport can be increased at any time. However, there is restricted demand for goods transport because of less economic production as well as shortage of labour & working hands at loading/unloading points.
On the road front, while public movement is restricted in the lockdown situation, occasional arrangements are made to evacuate the stranded or migrating people. Special written permission is required under certain circumstances. All domestic flights have been suspended. - All incoming passenger traffic, at all 107 Immigration Check Posts which includes at all Airport, Seaport, Land Port, Rail Port and all River Port ICPs will remain suspended.
Though the central & state governments have exempted the road freight movement sector from restrictions by classifying them into “essential services”, the daily movement of goods trucks has collapsed to less than 10% of normal levels, according to All India Motor Transport Congress. Poor coordination & absence of timely clarification led to thousands of trucks stranded & checked by officials at every checkpoint every few kilometers amidst delay in official clarification of no restrictions. There are reports that during this period of initial confusion, the trucks were only allowed to cross the provincial border when the owner went to see the officials in person and showed them several government circulars and notifications. During the first week of lockdown itself, thousands of trucks carrying essential commodities were stuck on the roads as they hadn’t received permits from local authorities. Firms were also finding it difficult to get enough passes for movement on road to delivery points.
According to LocalCircles survey amongst truckers, many transporters alleged they were not allowed to cross state borders with empty vehicles after delivery of goods. In an interview dated 25 March 2020 to ABP News, Amul MD R.S.Sodhi was reflecting on the state of milk supply logistics where he mentioned that while the production & dispatches of essential milk & dairy supplies are absolutely normal, he requested support from the government to look into the issue of the returning empty trucks getting stuck at inter-state borders. That initial situation led to panic amongst the drivers & truckers and led to disruption of availability of drivers and trucks. It is important to note here that the road transport accounts for about 60% of freight traffic in India and 87% of its passenger traffic, according to Ministry of Road Transport & Highways.
The lock-down situation also led to severely restricted movement of the courier and e-commerce delivery personnel. Grofers saw some of its delivery staff getting arrested and over 60,000 deliveries affected. So while the loading/unloading labour supply dwindled, the increasing anxiety and consequent movement of last mile delivery personnel to their home-bases led to a huge shortage of loading/unloading labour & delivery personnel. Big-basket has not been able to bring back their staff to work, despite offering higher pay and Covid-related insurance packages. Amazon even decided to use its global US$ 25 Million Relief Fund to help its trucking partners providing middle mile logistics in the event any of them are quarantined or diagnosed with Covid-19.
On an average, e-commerce firms are working at only 30 per cent of their capacity. These firms are not only facing last mile delivery challenges but due to restricted movement of goods and the closure of factories, there are severe supply disruption issues as well. Goods stocks are not available in time and in adequate quantity. It is estimated that of 220 million Indians who access digital services through their smartphones, less than half of them indulge in on-line shopping. The vast majority in small towns and suburban India still prefer the colony store, which remains a far more personal proposition. Here too, the crippling of supply chain & the anxiety led excessive purchasing while the stock lasts has led to empty shelves.
For the heavy goods manufacturers like steel, MD of Jindal Steel remarked that that in the domestic market, they were delivering material to the nearest railway station to customer, who in turn were arranging the local transport to take it to their facility. He went on to comment that currently availability of truckers for customers to unload material from the rail/road/port point was a big issue and once the lockdown is lifted, truckers will return to work.
While most electronic industry players are having sources of finished goods because most production units in China have already started operating, the last-mile issue of local logistics is a serious cause of concern. Alliances & partnerships are taking shape to ensure home deliveries like Bigbasket-Uber, Adani Wilmar- Swiggy, Flipkart-Spencer etc.
The way out
All is not lost as history has taught us important lessons and we witnessed resurgence from desperation each time humankind is posed with such challenges. In order to address the most immediate concerns of making most essential medical supplies & food supplies available to the locked-down populations across the world, last mile logistic delivery needs & challenges need to be addressed on priority.
The government needs to quickly remove all doubts and issue a uniform classification of essential items across the states, which needs to go down clearly to last mile delivery agents. The delivery disruptions of e-commerce platforms needs to be addressed on priority in terms of quick & adequate passes, digital checks, stopping harassments by law & order agencies. Inter-state transport movement will need to stabilize and movements across check-posts need to smoothen. Facilities at terminal points need to be created to address the medical & essential needs of the drivers and loading personnel.
There are reports that government officials have asked industry bodies and manufacturers to submit key concerns and requirements to begin manufacturing activity. All leading electronics players including Samsung, LG, Xiaomi, Godrej, Panasonic, Blue Star etc. are holding virtual meetings with stakeholders and government officials to chalk out a resumption plan, being monitored by an empowered group of ministers (EGM).
Once train services resume, Indian Railways is mulling options like running special passenger trains only in areas which are not hotspot zones, keeping middle berths vacant in three-tier coaches and disallowing unreserved travel to curb spread of the virus. The Railways Board Chairman Mr. V. K. Yadav indicated that the government plans to divide the country in to three zones viz. red, yellow and green depending on number of cases. In the ‘red’ zone, no transport service will be introduced, the ‘yellow; zone will have restricted services and ‘green’ will see no restriction in number of service of passenger trains.
Railways has already, for the first time, introduced time-tabled parcel trains for nationwide transportation of essential commodities and other goods identifying 40 new routes for such parcel vans. The national transporter has notified as many as 27 fixed routes out of which 17 routes were regular scheduled services, while the rest of them were only for single trip on demand. The Railways have also approached e-commerce giants Flipkart and Amazon to bring them on board to avail the parcel train services while India Post too have loaded their parcels on the time-tabled trains.
Railways has also recently asked the cement firms to offload their goods from freight trains so that they can be used to supply essential commodities to various parts of the country. In order to meet the current demand, Railways is using 50-60 rakes per day to ferry food grains but there is a demand for more rakes. About 300 such goods trains loaded with cement are lying loaded at various destinations because of poor demand from construction sector.
Gartner advises that the supply chain disruption monitoring and response programs need to be in place now based on a virus impact geography matrix. Data analytics need to be used to regularly assess how customer spending & buying behaviors might be affected. Companies further need to make sure all inventory is within reach and outside impacted areas and logistical hubs. The financial & contractual implications for supply failure and delayed supply needs to be worked out and provided for. Buffer stock needs building up as movement of goods will be increasingly getting more support from the governments.
The mounting pressure to reduce supply chain costs in an increasingly global economy led to companies getting global and adopting lean manufacturing, offshoring and outsourcing on a large scale. Consequently, such is the dependence on international trade that the covid-19 led supply-chain disruptions has led to wide-scale stoppage of manufacturing activity because of lack of parts. In the longer term, the logistics world may never be the same in the post Covid-19 era. Frugal logistics chain would be increasingly developed for both decentralised supply bases and lower risk of disruption. Companies will be increasingly diversify supplier base and ramp up local sourcing. A positive that can emerge for India if it is able to leverage the strong possibility that some economies & large corporations are expected to adopt de-risking strategies and shift their manufacturing bases from China.
Medicine and hospital supplies replenishment needs to be very closely monitored for the next one year atleast till R&D leads to definitive medicines that cure or a vaccine that prevents covid-19 infection. As the usual rail & road transport flows get back to normal, special efforts and an extensive delivery mechanism including refrigerated containers will have to be in place to ensure that the vaccine for covid-19 prevention, whenever it is ready, reaches every infected region of the world as a priority. The earliest time in the multiple predictions that talk of a vaccine development is 9 to 12 months from now.
The rapid response & direct market interventions of the Governments, Central banks and international organizations have led to a quick recovery from trough in some countries including China, US & some European countries thereby giving hopes of a V-shaped recovery in other countries as well. History is replete with examples of V shaped recoveries in the last 50 years where recoveries approximately match recessions in duration and magnitude. However, if the recession inflicts longer-term damage to balance sheets or labor markets, then the recovery of lost income, profits and asset prices is slower, i.e. a “U” shaped recovery which could be painful. Events, actions and impacts are still unfolding to take a definitive call on impact & recovery for the Indian economy and its logistics sector.
However, leading through a crisis requires taking the long view apart from managing the present. Anticipation and analysis has to be complemented with trust & cooperation. The combined impact of economic and human tragedy is going to set us back hard. Global & Indian economic recession is inevitable. Only the magnitude and duration will unfold in the times to come. Mankind’s tryst with history of epidemics and shocks and the lessons learned thereof are aplenty. Addressing the necessities of the moment must ultimately be coupled with a global collaborative vision & program. The historic challenge for leaders is to manage the crisis while building the future. There is no other option.
References:
· Dasaklis,
Thomas, Pappis, Costas, Rachaniotis, Nikolaos, 2012. Epidemics control and
logistics operations: A review. International Journal of Production Economics. 10.1016/j.ijpe,
393–410.
·
http://www.nauticalcargo.in/impact-of-corona-virus-on-the-industrial-sectors-of-india/
· https://www.jpmorgan.com/global/research/2020-covid19-recession-recovery https://logisticsinsider.in/coronavirus-a-lesson-for-supply-chain-risk-management/
·
https://www.bollore-logistics.com/en/Pages/news/Coronavirus_Impact_Update.aspx
·
https://www.iru.org/apps/flash-getfile-action?id=889&file=global-coronavirus-covid-19-outbreak.pdf
·
https://www.wsj.com/articles/the-coronavirus-pandemic-will-forever-alter-the-world-order-11585953005
About the Author
Dr. Kamal Kishore Sharma
Professor of Practice – Business Strategy & Corporate Governance
Adani Institute of Infrastructure Management, Ahmedabad.
Dr. Sharma has experience across a diverse range of functions in challenging contexts viz. Strategic Planning & Vision Development at a US$4 bln steel plant; operating within tight financial discipline and ambitious budgets during downturn; turnaround management with a sick enterprise; Greenfield project building & operation stabilisation; Organisation Restructuring & Development in an M&A integration environment; Large multinational team communication & coordination; Commercial Business Development in an Entrepreneurial environment; a General Management (CEO) role at an Engineering Organisation; Vice Chancellor (A) & Dean at a large university in NCR Delhi; Ideating, Seeding & Growing Startups in Social Impact domain etc.
Comments
Post a Comment