AS we are hit by two major interrelated crises, a balanced response to keep the effects of both at manageable proportions is needed to mitigate their immediate but also future effects.
One crisis is Covid-19’s very
contagious influenza infection, the other one is the hype and to some extent
the overreactions manifested largely in overly bureaucratic restrictions, and
limited answers about how to handle the future, beyond the restrictions.
It is important for us to outline
the negative effect of the Covid-19 hysteria on business in general, and supply
chains in particular.
Let’s start with international
logistics:
A lot of flights are suspended
and sailings are canceled. This means that air cargo can be difficult and
circuitous. Since most of the cargo is still carried on passenger planes and
with air travel mostly suspended, it can be very challenging to send
airfreight. Airlines are now planning to convert passenger planes into cargo
planes.
For exports, there is a
sufficient supply of containers in the major International
Philippine Ports such as Davao, Cebu and Manila.
Another challenge for export is
the closure of the Manila International Container Terminal (MICT) at the North
Harbor as what had happened a week ago. This will be a big problem if repeated.
International logistics hitting
the Philippines:
Traffic of imports remains
moderately okay with the Manila International Port (MIP) still receiving about
3,800 containers daily.
Especially worrying, however, is
that food and medical supplies in refrigerated containers (reefer containers)
are facing problems as they arrive in the Philippines. Evergreen and Cosco for
now refuse reefer shipments to the Manila port due to lack of plug-ins, but
acceptreefers for Batangas and Subic.
There also has been a rush of
importers delaying their imports mainly due to government mandated closures of
restaurants and other establishments.
MIP suffers from huge numbers of
reefers already at port and is struggling to accommodate them, some of them
overstaying for long periods already.
Clearance of general and bulk
cargo ships takes long, especially for ships with Chinese crew, as they cannot
berth immediately, and ships stay at anchorage until Bureau of Quarantine gives
the clearance to berth.
The significant number of
factories either closed or only partially operating results in a buildup of
overstaying import containers in the MIP as import withdrawals dropped by more
than 25 percent. South Harbor is now at 65 percent, while the MIP is at
74-percent storage space utilization.
With the government mandated
lockdowns allowing only a few industries considered vital to operate and even
these industries ordered to operate only on skeletal work force, we can expect
a buildup of imports in Manila ports to substitute missing local supply.
However, Batangas and Subic can
still take additional volume. Both are pushing hard to get more cargoes into
their ports where their utilization is still below 50 percent.
Local logistics: From production
to market
Despite the several issued by the
Department of Trade and Industry issues memos coupled with Department of the
Interior and Local Government, specifically stating the free flow of goods,
this is hampered by several local government units having their own version of
lockdowns. And the DTI’s intervention toward unhampered deliveries is focused
on Luzon only. It urgently needs to be extended to the Visayas and Mindanao.
Additionally, DILG has stressed to LGUs not to stop the transport of goods!
The greatest challenge however is
getting people to work. With all types of public transport suspended from air,
sea and land, it has been extremely challenging to get people to work.
Local logistics: From supply centers for food, agricultural products, etc. to consumers.
Regarding domestic sea freight,
there are a number of carriers suspending services either due to a lack of
cargo or the ports they are calling are closed either due to a government
mandated lockdown or lack of workers reporting for work.
Due to curfew and limited opening
hours of wet markets, deliveries must be on time, which rely on supply lanes be
free, so that shortages are not likely to occur. Supply chains have to be
studied and effectively implemented. Several meat processors have giving
warning signals that due to shortage of raw materials and particularly labor
they can’t assure adequate supply to be available to the public in the near
future.
Local logistics: From export
producers to export markets
Once trucks can get through the
checkpoints in the provinces and will reach Manila, and when they go back to
their respective towns, or provinces, they often won’t be allowed to go in
until having passed through a 14-day incubation period. Truckers have,
therefore, stopped their pick-up and deliveries. This is not acceptable.
Truckers need to be provided with special IDs. Life goes on and the economy
needs to be kept going.
Additionally, activities in
Philippine Economic Zone Authority
remain restricted and very limited (especially due to restricted
movement of people), hence, there are only a few export shipments from Peza.
This is a big concern and it is foolish not to keep Peza companies going.
Again, special IDs and special tests are needed.
Trusting that business activities
will be allowed to reactivate operations during the second half of April, what
should be high on management’s list?
Shoring up supply chains
Business needs to reevaluate
their supply chains.
The virus has brought parts of
the world to a quasi-standstill.
Businesses will have to
reevaluate their supply chains and look to diversify them. However, logistical
hurdles are making it harder to get products from around the world due to panic
buying and the threat of labor crunches.
As governments take nationalistic
approaches, they risk disrupting an international system that has become
increasingly interconnected in recent decades.
It’s time to get ready for
business normalization, keeping, or finding the right people, maintaining
equipment, looking for spare parts, and organizing regular supplies of raw
materials!
Feedback is welcome;
e-mail us at [email protected]
or [email protected]
