COVID-19 and Southeast Asia Supply Chain – updates March 2020

This article was authored by Aersure and was initially published here. Reposted on TLD with permission from the author. 

Summary:

• Travel restrictions and factory closures are disrupting business and supply chain activities, fallout spreading from China to Southeast Asia
• Every transportation method has its upside and downside; daily delivery eCommerce becomes the unlikely winner
• Communication to customers and partner is vital for managing the impact

In a nutshell

The Coronavirus pandemic is causing worldwide disruption. With new confirmed cases every day and the virus appearing in new countries, communities are left in a state of panic as there is no end to this situation ahead. The impact also spills to the logistics world. The restriction of movement in many countries has stalled deliveries and shipments. With cancelled flights and delayed sea freights, many eCommerce companies have found themselves riddled with goods stuck in warehouses. But this isn’t the end of it: with fewer delivery services available in cities and fewer couriers willing to work, the delivery of goods can still delay even if they arrive in ports.

Ripples effect from China

The situation in China is also impacting eCommerce business significantly. The outbreak has severely disrupted travel and transportation, making shipments harder to travel across and out of the country. Also, the closure of factories in many industrial hubs has halted productions that are vital to many businesses. The combination of two setbacks has ripple effects across many industries, primarily to eCommerce companies where speedy production and delivery are essential. Even if some companies are seeking alternative material sources outside China, the short-term impact will still be prevalent as the sourcing process takes time. With the economic slowdown due to the virus, we can also expect demand for bulk shipments to decrease.

Outlook in Southeast Asia

The logistical slowdown in China is also making a dent in Southeast Asia’s economy. As many of the raw materials and labour come from China, the travel restrictions have halted economic and logistic activities in places dependent on the country’s supply chain infrastructure, ranging from Indonesia to Singapore and even Myanmar.

Similar to China, some places like Singapore and Hong Kong have seen a surge in demand for online shopping and deliveries. While this can be an opportunity for some eCommerce retailers, things such as maintaining stock inventory, prolonged shipment or ability to cater to the increased demand can be an issue.

In essence, the Coronavirus has three significant implications to eCommerce delivery:

1. Shipping delays will be likely and severe due to reliance on sea freight and restrictions on air transports
2. The lack of traffic and production in China means materials will be harder to source in the short run
3. It’s difficult to predict the length and severity of this issue, so contingency plans are important

Delivery methods in depth

No matter the transportation method you’re choosing for your shipment strategy, there will be advantages and disadvantages. As long as you’re aware of the implications and have an adequate backup plan, you too can cushion the impact and adapt to the situation. Here are what we know:

Air:

There are now fewer flights worldwide. With the decreased demand for air travel, flights cancelled, tighter border control and the closing of Chinese ports, we can expect increased difficulty for shipping by air. The result is that shipment delays are more likely to happen. If you’re relying on air freight, be prepared for sudden changes and always have an alternative.

Land:

The implementation of land transport differs between regions. The coronavirus has impacted the utility services in some places like Hong Kong, resulting in a slowdown of delivery by courier. On the other hand, as people are shunning interactions, the demand for online grocery delivery services has surged, making this business model the unlikely winner. With the virus still disrupting our lives in the foreseeable future, we can expect the demand for online commerce to continue rising.

Sea:

Sea freight becomes a promising alternative to air freight. Since sea travel is relatively less affected by the port closures and travel restrictions, freight ships are now more reliable than flights. The downside is that it takes more time, which will significantly add more lead time to the delivery process.

Communication is key

Indeed, many aspects of life are now out of our control, and this applies to eCommerce business and shipments. It’s hard to predict which port or flight will be affected next, so delays are more likely to happen than before. In this case, communication is critical, whether it is to customers or partners. Remember to notify them of the situation before confirming a shipment, and when surprises occur, be sure to let your counterpart know. If possible, think of different alternatives or contingency plans if you encounter any troubles.

What’s next

With further outbreak possible, we should be calm and anticipate development. But one thing is sure: with less human interaction, the rising demand for eCommerce is likely to continue.