September 23, 2020
As the European economies open after Covid-19 and lockdown in each country is gradually lifted, the headline news is about pubs and hairdressers opening and asking where can people go on holiday?
There is a more serious question about the logistics of transporting goods around the country and importing and exporting goods around Europe. The logistics relationship between the UK and EU member states is of primary interest to us.
When the virus virtually closed China in January the international supply chain virtually broke down and in the months that followed many important lessons were learnt.
Like many industries the logistics industry was woefully unprepared for this global shutdown. The airline industry totally collapsed regarding business and holiday traffic. So, the industry turned in part to additional freight shipping and the transportation of medical supplies including emergency PPE equipment.
Container ships are parked in harbours around the world and it is unlikely they will carry anything like the volume they had pre virus inside the next 18 months to two years.
Customers will turn to multiple sources of supply with ‘double-down’ logistics plans and there will be a trade off between local sourcing and higher production costs.
There are high level debates going on at ministerial level about localisation of production to support the supply chain and to boost national economies. It is worth noting across Europe GDP is down 20-30% in the first 2 quarters of 2020.
In practical terms for businesses in the UK, that means sourcing from Europe as opposed to the Far East to ensure faster delivery and more robust supply chains. But which European countries can we rely on in the short, medium, and long term and how complex will the process be?
The main lesson that has been highlighted during this crisis is that we are very interdependent. Like never before, companies need to understand how to be resilient, how to manage risk and how to respond to sudden and sharp changes in their global supply change landscape.
A lot of things have been said about the new normal – arguably the ‘new normal’ will be a continuous state on ‘abnormal or non-normal’.
The lockdown has created an unprecedented demand for goods from grocery and take away meals to clothing and household goods to be delivered to the doorstep – this has created opportunities and strains on domestic delivery logistics services.
Whilst there will be a return to the high street there will not be a return to base zero. The ‘Genie’ is out of the bottle and the logistics industry needs to adapt to this. This is also a wakeup call for producers and distributors who will also need to react to new customer expectations. Those expectations include fast turnaround and confidence in delivery.
Of course, with all the excitement of the pandemic we have forgotten there is a trade war in the background with the USA increasing tariffs on Chinese products by as much as 25% and China responding in a similar vein. This obviously influences the delivery time of components circulating around the world and the price of those components. With every major state in the European Union suffering recession there will be pressure for the EU bloc to increase tariffs to countries outside the bloc to raise much needed revenue for the EU and its member states.
Whilst in theory the 27 member states of the European Union are open for business and the rules on quota’s tariffs and VAT arrangements haven’t changed – local lockdown is still going to create a problem. Most of Western Europe (France, Germany, Italy, Spain, Portugal) all say they are open for business as usual, but local flareups such as the recent German Meat Processing plant incident will cause disruption and this will carry on into the ‘new normal’ – so contingency planning is essential and promoting that you have it in place a very positive marketing message to your clients.
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