It is the common view that the global economy is going through an enormous and unparalleled crisis, evidenced by forecasted figures.
For 2020, the WTO expects foreign trade to fall between 12% and 32%. A decline is likely also for the following years, with experts debating whether the shortcoming will amount to only 10% or reach a staggering 17%. Managing Director, Uwe Glaser describes the effects on his company in this guest contribution.
Despite all the uncertainty around us, one thing is set in stone: Globalization will not come to a standstill. However, some major adjustments are likely.
Costs: If important medicinal products are missing in a crisis, the cost factor becomes secondary.
Supply: Supply can only be guaranteed by the fast and reliable transport of medicine from the manufacturer to the user. This requires political support, such as the lifting of existing night flight curfews at major airports, or the removal of driving bans for trucks on Sundays and public holidays, provided they carry urgent supplies.
New business approaches: All companies engaged in global production will have to rethink their strategy. This applies to the electronics and automotive industries in particular which have heavily engaged in global value chains.
The following scenarios are possible:
a) An expansion of the value chains to several countries in Asia
b) Nearshoring to Europe
c) Resettlement of value-added industrial production to the original manufacturing countries, however, coupled with a high degree of automation.
It is foreseeable that all of these three scenarios will apply.
Our customers will require that we support them in this situation and that we adapt to their changed strategies.
In our company’s case, the prerequisites for this are given. Thanks to the cooperation with leading forwarding associations, including our commitment in the IATA interest group Cargo iQ, we are able to offer our clients first class services in different markets as a result of our wide-spread network of partnering firms.
From the very beginning, Cargomind has always had a focus on Central and Eastern Europe, where we have played a pioneering role since 1980. Our branches in Germany, Austria, Poland, the Czech Republic, Slovakia, Hungary, Romania, the Ukraine, Slovenia, Croatia, and Serbia, cover all important submarkets in this region.
That said, the grounding of passenger aircraft caused by the pandemic, posed an unprecedented challenge to our airfreight business. All of a sudden, the available lower deck cargo capacity dropped to almost zero. This essentially meant that 50% of the entire freight capacity was wiped out. In case of routes between Europe and the Americas, the lower deck capacity even accounts for nearly 70%. In contrast, the share on Asian routes is significantly lower (close to 30%).
In order to be flown, airfreight shipments had to be booked on all-cargo aircraft that operate at European mega hubs. As a consequence of these centralized flight operations, smooth running and reliable road feeder services offered by airlines and General Sales Agents became particularly important, to maintain the flow of goods.
Cargomind managed to handle all shipments during the pandemic as ordered by our customers. Despite the lock down and precautionary measures, we were able to keep all of our 25 stations running, not even closing any of them temporarily. However, some activities were shifted to home office, but in the operational departments, this was done to a limited extent only. Against this background, it is time to express our gratitude and respect to all our 250 employees for their great effort in keeping the business running during the challenging Covid-19 times.
In addition to airfreight, rail freight from China became an extremely important mode of transportation during the pandemic. We were able to shorten the transit times by already taking over the containers in Poland at Malaszewicze Station, located near to the border of Belarus. From there, we moved and still keep moving the goods to our warehouse in Vienna, Austria. After deconsolidating and sorting them, they are trucked to the final consignees located all across Eastern Europe.
It needs a masterplan to better weathering the next pandemic storm
Ultimately, ocean freight has been affected by the crisis as well. Vessel operators responded to the lower demand with so-called "blank sailings" (cancellation of scheduled departures), which makes scheduled and punctual shipping more difficult.
For the maritime sector, our branches in Hamburg and Koper are particularly important. To achieve visibility for the ocean business, we use a "vessel tracking software". The visualization of the shipment processes is a prerequisite to ensuring the delivery of the goods at the right place and at the right time.
For Cargomind and other forwarding agents, the question arises as to what must be learned from the crisis in order to be better prepared in case a subsequent pandemic breaks out. Digitalization is a buzz word, the storage and fast availability of sufficient protective suits, face masks or disinfectants is another aspect that needs to be considered. As far as transports are concerned, it can be said that the existence of a masterplan enabling rapid, coordinated and finetuned measures would be helpful in keeping supply chains running in case of a new pandemic, and this should be backed by governments who need to remove operational hurdles.
Finally, I can assure our customers that they can rely on Cargomind during and after the current crisis.
We thank Mr. Glaser for this contribution in which he describes the impact of the pandemic on his company’s business and how the Vienna, Austria-based forwarding agent has responded to the challenges. HS
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