Nexterus Delivers Update on Impact of COVID-19 on Global Supply Chain
Leading Supply Chain Services Franchise Manages Transportation and Pricing for Small and Mid-Sized Businesses
March 18, 2020 // Franchising.com // NEW FREEDOM, Pa. - Nexterus, a world-class leader with decades of experience in supply chain management and technology, is providing an update on different aspects of the global supply chain to help businesses and individuals understand the challenges COVID-19 is creating for industries around the world.
Nexterus is a licensed ocean and air freight forwarder and United States customs broker. The company is monitoring the situation throughout each day, including country-specific concerns. Nexterus is working with its agents overseas to secure shipping space as early as possible to avoid delays.
In general, Nexterus sees capacity and price issues for both ocean and air carriage in the months ahead. Additionally, the company anticipates port congestion at foreign ports as well as U.S. ports of entry. Ocean containers and chassis for hauling containers also are expected to be in short supply.
Shipping has been directly impacted by the new U.S. restrictions on flights from Europe and Asia to the U.S. The capacity to haul cargo also is severely impacted. While cargo is not specifically halted by U.S. decree, most import goods travel in cargo holds of passenger aircraft. Temporarily eliminating this capacity means cargo must travel on airlines that solely move cargo and not people. Expect all-cargo airline rates to increase sharply.
Nexterus expects the following challenges over the next 30 days:
- Most of mainland China is moving toward normalization. All major ports are operational. Steamship lines are struggling with capacity and will continue the practice of “rolling” containers or delaying sailing dates. There is also strong concern regarding the availability of empty sea containers for loading product.
- Air freight is still a challenge. Space is very tight out of China and most goods are shipping on chartered cargo flights at exorbitant prices. Reports of chartered aircraft prices from China to the U.S. have been approaching $1 million - more than double the norm.
- The prolonged delay in returning to full production may inhibit some small manufacturers from resuming business due to insolvency.
- Factories may struggle in the face of workers’ illness or the illness of family members.
- As production ramps up, capacity across air and ocean carriers will become more problematic. Escalating cargo prices will result. Expect significant delays.
This country is starting to feel the effects of the coronavirus. Nexterus is not aware of any manufacturing or office shutdowns. Vessel space is tight, and bookings are starting to experience delay.
- Restrictions on the movement of people have been implemented in Italy. This has caused staffing issues with international cargo agents and steamship lines. There are no restrictions on ocean freight at the present time.
- Flights out of Europe into the U.S. have been suspended. Freight that was en route is being sent back to its point of origin. All-cargo airlines will continue to be challenged to support growing demand.
- Except for air freight, all other parts of Europe are operating normally. This will change over the next several weeks with schools closed and more people working from home.
In the United States, many cities and states have enacted restrictions on public gatherings and mandatory closures of some retail businesses. Nexterus remains on high alert for even more severe restrictions that may be undertaken by states or the federal government to impose a lockdown akin to what Italy has done in order to prevent further spread of the virus.
The Department of Transportation has liberalized Hours of Service rules for truck drivers, enabling these dedicated men and women to work longer hours to ensure that essential goods get delivered where and when they are needed. Over the next thirty days, it is possible the federal government could prioritize trucking activities to accentuate the delivery of essential goods to those who need them most. Essential goods would be categorized as food, water, medicines and medical supplies and equipment.
Domestic Transportation Concerns:
- Less-Than-Truckload (LTL) Transportation:
- LTL carriers are monitoring the situation, and as of this writing have not entered into any restrictive practices affecting cost or service. Some carriers have begun discontinuing inside deliveries and have instructed their drivers to practice social distancing with perimeters of at least six feet. Carriers have also temporarily discontinued the practice of procuring consignee signatures on delivery receipts to avoid contact. Nexterus does foresee geographic service interruptions arising in locations where hotspots develop with high concentrations of coronavirus patients.
- Truckload Transportation:
- A limited number of long-haul truck drivers in some parts of the country are refusing loads to avoid public contact and time away from their families. To date, we have seen a small amount of price gouging. Nexterus does not believe this practice is widespread nor reflective of the dedicated service provided by most truck drivers.
- Flatbed capacity is tightening in the Sunbelt markets and is driving spot pricing up slightly, as reported by DAT.
- TL rates overall will continue to rise as demand for goods increases in the face of dwindling supply.
Nexterus has been managing domestic transportation for small and medium-sized businesses since 1946. Nexterus is the oldest, privately-held freight brokerage in America and has been architecting Transportation Management System (TMS) software since the late 1980s. Nexterus’ clients use the web-based Fusion Center TMS to efficiently arrange and track all of their shipping needs.
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