Commentary

Global Supply Chain Effects of COVID-19

Global Supply Chain Effects of COVID-19

The Origin

The below image from South Morning China Post (SCMP), demonstrates how Wuhan, where the virus originated, is centered and acts as a hub for international and domestic travel. This location sits between manufacturing facilities and popular ports. Scarbrough has been following the COVID-19/coronavirus updates from SMCP since the beginning.

SCMP offers informative facts and infographics on the COVID-19, including the most up-to-date numbers on those infected with the virus worldwide, total populations of cities in lockdown, and how the virus is spread.

global supply chain effects of Covid019


Timeline of COVID-19 Effects on Supply Chain

December 2019
  • Wuhan Municipal Health Commission, China, reported a cluster of cases of pneumonia in Wuhan, Hubei Province. A novel coronavirus [COVID-19] was eventually identified.
January 2020
  • Chinese New Year delayed and eventually canceled.
  • Chinese cities under quarantine. 
  • Factories shut down.
  • Land, air, and ocean cargo transportation suspended.
February 2020
  • Blank (AKA void) Sailings start occurring throughout China & Europe.
  • Imports into North America & Europe see a significant decline and is true for other regions around the world. 
  • This effects container capacity for exports.
March 2020
  • Chinese carriers start operating with greater capacity  (with exception of Wuhan). 
  • Trucking shortages occur across Chinese ports. 
  • Factories back to 60-70% capacity [due to lack of parts, material, components].
  • Shelter in place issued to U.S. with exception of essential companies.
  • U.S. ports and airports continue operating. 
  • Duty extensions announced. 
  • Several Section 301 Product exclusions surrounded around PPE announced. 
  • Start to see Chinese air import rates increase significantly.
April 2020
  • Influx of PPE imports and inquiries.
  • U.S. PPE exports restricted with some exceptions. 
  • Chinese air cargo rates skyrocket.
May 2020
  • Shelter in place restrictions start to lessen. 
  • Chinese factories move to 80-90% capacity. 
  • India factories at 30% capacity.
June 2020
  • Start to see less PPE air shipments and more ocean bookings of all commodities as factories kick up capacity.
  • Will this stick?

View Training

Watch the video for a more in-depth explanation of the COVID-19 effects on the global supply chain, as well as international and domestic shipping.


Capacity & Rates – Ocean Freight Imports

  • Changes in capacity & rates.
  • China and EU carrier space is extremely limited because of blank sailings that are issued.  This has become a new norm.
  • Expect cargo “roll over” from China
  • Expect increase in rates, GRI’s and PSS’s

Capacity & Rates – Ocean Freight Exports

  • Minor issues
  • Equipment shortage, but is starting to come back
  • Some blank sailings occurring out of the U.S. & Canada

Capacity & Rates – Air Freight Imports

  • Changes in capacity & rates. 
  • Cancelled passenger flights effect this.
  • In general, rates were up a little first half of the year. 
  • Slowly getting back to normal as demand weakens.
  • Huge demand from China & EU
  • Example China:  Air freight rates skyrocketed first half of this year [masks], but this is slowing down. [ex. $4.50/kg vs $20/kg]
  • Example EU: allow for one full week to secure a flight. Rates are still elevated, but not as much as China

Capacity & Rates – Air Freight Exports

  • Capacity has decreased 25%-75% depending on the market
    •   especially in areas severely impacted by COVID-19
    •   even with converted passenger flights to restore capacity
  • Rates are extremely high. 
    [double the normal price]
  • Fewer departures per day or per week to some destinations
    [this is similar to ocean cargo “blank sailings”]

Capacity & Rates – Domestic Trucking

  • Truck capacity is available in most lanes & markets
  • With the exception of Refrigerated shipments, no equipment shortages in most markets. (Produce season is among us)
  • Pricing pressure
    • FTL volume starting to increase again
    • Leads to increase in spot market rates in near future
    • Tender rejections are low but slowly increasing
      (Carriers are grabbing what freight they can)

Temporary Regulations

  • All continue to change!
  • FDA – temporarily relaxed on imports of PPE
  • Section 301 exclusions on several PPE
    (USTR accepting comments through June 25 for more products including ones previously rejected for exclusions)
  • Duty Exemption – issued, then canceled, issued again
    (due by 4/20 for 90-day extension)
  • Chinese PPE export regulations
  • U.S. PPE export regulations

What’s ahead?

  • New sourcing origins
  • USMCA goes into force July 1, 2020
  • Other trade deals in the works
  • Unit price negotiations
  • New markets
  • More distribution, online fulfillment & warehousing

Free Supply Chain Optimization Consulting

The Scarbrough Group of Companies is made up of global and domestic supply chain experts. We are known for our expertise in U.S. Customs trade compliance, international and domestic transportation and warehousing services including fulfillment and distribution.  We help clients find new ways to mitigate costs, reduce risk and add to their bottom line.  We offer a free 30 minute consultation call with our team of experts to help provide solutions, best practices and supply chain optimization. Please email consulting@scarbrough-intl.com or fill out the form below.

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About Scarbrough

The Scarbrough Group of Companies, headquartered in Kansas City with local presence in every major port in the world, is a complete international and domestic supply chain service provider, offering U.S., Mexican, and Canadian Customs brokerage, Import & Export Transportation Solutions, Domestic brokerage and asset-based trucking, Warehouse fulfillment and distribution services, Trade Compliance Consulting, Large Equipment and Project Cargo moves, as well as Parcel Audit Savings.  Scarbrough is widely known for its trade experts, training, personalized customer service, and customized solutions.  Since 1984, Scarbrough has continued to satisfy its clients by following its motto on a daily basis: “It is our job to make your job easier.”  Moreover, our team of experts is available at your disposal.  We offer free consultations on any topic from supply chain optimization and duty savings opportunities to the basics, helping to guide new importers and exporters as they jump into the world of global trade.  Contact us now.

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