Digital freight forwarding helps shippers realize fewer headaches and improved operations through faster forwarding and scheduling. However, the use of digital supply chain management platforms in the global economy appears to be increasing as the coronavirus spreads around the world.

As explained by the Wall Street Journal, experts expect the coronavirus to contribute to a massive slump in production abroad and in the U.S., with significant disruptions to carrier freight availability. While the spot market reaches a breaking point, it will rebound quickly as companies attempt to maintain baseline operations. In other words, the need to survive the outbreak and maintain operations will become paramount, and companies will rapidly raise rates, especially those that have a higher risk of spreading the virus.

To keep prices under control, supply chain leaders need to understand the value of digital freight forwarding to mitigate disruption to the shipper’s supply chain as COVID-19continues to spread.

The Latest Updates on the Coronavirus’ Effect on the Supply Chain

According to the Harvard Business Review, the coronavirus is having a disastrous effect on global supply chains. The impact of the virus will attain peak levels in mid-March, and companies are quickly throttling or closing operations to reduce its spread.

As the Chinese economy suffers, so too do the shippers and manufacturers that rely on raw materials and parts from the APAC region suffer. The most “vulnerable” companies are those which rely heavily or solely on factories in China for parts and materials. The activity of Chinese manufacturing plants has fallen in the past month and is expected to remain depressed for months. The Wall Street Journal also recently highlighted Apple’s woes in their marriage to Foxconn & their reliance “on a workforce of more than three million indirect workers in China.” They’re now investing in their Vietnam & India-based supply chains but it’s likely too little, too late.

The whole situation is reminiscent of the SARS epidemic, but the spread appears much worse. As the virus progresses, supply chain professionals of all sizes will be forced to enforce transparency initiatives, implement processes to circumvent traditional supply chain workflows and work closely with their customers to secure products or services.

Digital Freight Forwarding Set to Become Central to Coronavirus Disruption Protection

Digital freight forwarding is a complex process that relies on algorithms and robotics process automation to streamline freight forwarding processes. Unlike traditional interactions, including the need to visit warehouses and speak with shippers on-site, digital solutions are well poised to overcome the heightened fears during the coronavirus outbreak.

For instance, digital transformation within freight forwarding has the potential to reduce the risk of contamination by effectively allowing companies to avoid the risks of in-person meetings or at least drive those interactions downward. According to MarketWatch, “many of our booking partners prefer to use their own credentials to submit U.S. manifest filings and we permit them to do so,” the company said in emailed comments. “As a result, freight booked on our contracts and manifested by our partners does not appear in Panjiva, PIERS or ImportGenius as Flexport volume.”

Also, for example, the coronavirus is forcing a re-evaluation of existing processes and procedures used to execute supply chain functions without disruption during a disruptive event. As a result, companies that successfully deploy digital solutions and minimize contact with affected regions may realize these added benefits:

Reduced stress when faced with potential disruptions.

Improved review of existing contingency plans.

Increased supplier/carrier bases to overcome potential disruptions.

Dual sourcing strategies that reduce product pricing.

Increased use of analytics to understand the supply chain.

Increased visibility that builds trust with supply chain partners and customers alike.

Better disaster and emergency management planning will lead to preparedness for future events.

Best Practices to Contain the Coronavirus in the Supply Chain

Supply chain leaders should take these specific steps to quarantine the coronavirus in the supply chain and reduce its potential transmission:

Short term

Identify key suppliers in areas affected by the lockdowns: Customers should start to analyze whether any of their critical suppliers, distributors, or warehouses are located within one of the lockdown areas in Hubei Province or in one of the affected areas, such as in Shanghai, Zhejiang, Jiangsu or Guangdong, and may be impacted by an extended production shutdown after the Lunar New Year. Secure alternative sources and increase inventory levels: Knowing the suppliers most exposed and vulnerable to the current situation can significantly reduce the response time needed to activate mitigation measures and leverage time as a competitive advantage when deciding to secure alternative sources from elsewhere in or outside of China and increase inventory levels. Although countries like Vietnam or Taiwan also celebrate the Lunar New Year, production is not halted entirely or for as long as in mainland China. Educate internal staff and key suppliers: Organizations should educate their staff as well as their key suppliers about the symptoms of the virus and enforce precautionary measures such as taking sick leave if symptoms show. Lost productivity from the absence of several employees due to sick leave can be significantly less expensive than a possible downtime from closing an entire plant because of sick employees or from disinfecting the site.

Long term

Monitor potentially disruptive supply chain risks: Use real-time supply chain risk monitoring tools to continuously keep abreast of further developments regarding the city lockdowns, government shutdowns of industrial areas as well as potential transportation disruptions and assess its impact on one’s own manufacturing and logistics networks. Be mindful of using dual-sourcing strategies for key components: Reducing the number of suppliers has become a norm to allow for more strategic relationships with a handful of key suppliers. However, given the expanding nature of supply chain risks, firms should consider undertaking a strategic cost-benefit analysis to assess if the added cost of sourcing from different geographical locations and alternative suppliers can be worthwhile to prevent future shutdowns. When possible, diversify the risk. Draft and test contingency plans for a supplier outage: Companies should create related contingency plans in case a plant is, for instance, quarantined because of the virus. In the long term, it is recommended to set up good business relationships with logistics providers or contract manufacturers that have the capability to transport or manufacture similar products in nearby regions or countries. Accounts from inside and outside of China point to a global economic disruption from the coronavirus, but experts have yet to determine how extensive it will be.

Plan for the Unexpected by Implementing Coronavirus Prevention and Mitigation Strategies in Your Supply Chain Now

While the coronavirus might be the most recent event to upend the global supply chain, it will certainly not be the last. Supply chain leaders need to take the considerations of the coronavirus and review the limitations of their existing operations and how the coronavirus served to highlight such inefficiencies or limitations.

More importantly, supply chain leaders should also start thinking now about how to respond to the COVID-19, even if existing freight forwarding best practices are unaltered, as well as how future health epidemics could be contained within specific aspects of the supply chain. Visit Cargologik to learn about the value of digital freight forwarding and its importance in reducing such risks now.

