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How Coronavirus Could Affect Supply Chain And Freight Shipping

In addition to the illnesses and deaths associated with COVID-19, the novel coronavirus, how could this issue affect the trucking industry and the supply chain at large? Here are five likely possibilities.

Benzinga · 03/16/2020 15:00

In addition to the illnesses and deaths associated with COVID-19, the novel coronavirus, how could this issue affect the trucking industry and the supply chain at large? Here are five likely possibilities.

1. It Could Hinder Global Movement

Conferences, sporting events and other large gatherings are rapidly getting canceled. Beyond those choices, some people reason that it's best to stay put. 

Jacob Funk was part of a team that investigated the effect of the coronavirus on global movements, such as when people travel between countries for study, work or pleasure. 

Speaking about a potential impending deglobalization effect, he noted, "It occurs every time you have events that disrupt supply chains, and students and tourists are the people portion of supply chains. We must be clear that the coronavirus is a shock to mobility. The impact [to mobility] is very large if the outbreak is not contained [outside of China]."

If people delay plans to take vacations or study abroad, those decisions have a ripple effect on the supply chains of various industries, ranging from foodservice to hospitality. They affect American transport, as well as people-based movements happening elsewhere. 

2. It May Hurt Employment

Even before the coronavirus hit, the freight industry was in a recession. Cass Freight Index statistics showed that January 2020 marked the 14th consecutive month of year-over-year declines. Some American ports are particularly feeling the pinch since COVID-19 became a concern. 

Eugene Seroka, executive director of the Port of Long Beach, mentioned how one in nine Southern California jobs are port-related. He clarified, "That's a million jobs. Less cargo means fewer jobs. The truck drivers are not pulling as much freight. The longshoremen are not being called out to work as frequently as they normally would be."

Weston LaBar, chief executive of the Harbor Trucking Association, gets more specific: "Business is down 60% to 70% for the last week of February and into March. The coronavirus has already cost our industry millions upon millions of dollars in lost productivity and administrative costs."

Some people in the freight and trucking industry are already getting less work. If that continues, the overall decline in employment opportunities could be vast. 

3. It Could Impact Future Production

Outside of supply chain shortages for finished goods, the coronavirus could slow down the delivery of products not yet built. 

Jack Buffington, an assistant professor who teaches supply chain management at the University of Denver, explained, "You're seeing electronics being impacted, you're starting to see some pharmaceuticals being impacted. The way the world's supply chain works, people think of manufacturing as finished products, [but] they have to understand, a lot of it is components. So, this proliferates across the entire world's supply chain."

Any supply chain slowdowns don't only affect consumer goods. Defense branches of the government have requirements for their contractors' purchases, and the coronavirus could cause unforeseen consequences as parties try to fulfill those. 

4. It May Curb Spending

Retailers around the world temporarily closed stores to try and halt the spread of COVID-19 among communities. However, even if many shops remain open, experts anticipate a psychological shift that will make consumer confidence plunge. 

Michelle Girard, chief U.S. economist at NatWest Markets, spoke on CNBC recently about what could happen. "It's the psychology change here as the virus begins to spread that is most worrisome for me. People just begin to pull back on their willingness to be out there and spending, and of course, in the U.S., the consumer has been the economic bright spot."

If that happens, the people who work in warehouses to pack orders, drive them to their destinations or otherwise deal with aspects of American transport and the preparation of goods will experience negative ramifications around the world. However, companies offering deliveries to consumers' doorsteps may see surges in business.

5. It Exposes Supply Chain Vulnerabilities

COVID-19 harshly illuminated supply chain problems, but brands must evaluate what they can do. 

Richard Wilding, a professor at the Cranfield School of Management, urges businesses to assess and mitigate supply chain weaknesses immediately. "Companies need to urgently review their supply chain to find out how exposed they are. They need to ask the question as to where their suppliers and suppliers' suppliers are located and review other sourcing locations, which, although often more expensive, can protect from disruptive events such as this," he said.

An Impact On The Trucking Industry And More

It's anyone's guess as to when COVID-19 cases might settle down and let the world get back to as much normalcy as possible. Supply chain professionals must stay educated by doing things such as watching the Cass Freight Index and working continually to positively impact the aspects within their influence. 

Image by jbarsky0 from Pixabay