Covid-19: Logistics industry sees 70% dip in capacity

Ambrish Kumar, founder, Logycode Tech Solutions Private Ltd, was of the view that although the lockdown was necessary, the flip-side of the lockdown measure has also caused a kind of mess for most of the businesses

By Author  |  Published: 28th Mar 2020  9:30 pm

New Delhi: The coronavirus pandemic has severely impacted the logistics sector, both in India and globally, as marketplayers say that global capacity has gone down 70 per cent and freight rates have shot up by 6-8 per cent. Further, in India, with the 21-day lockdown, the sector is likely to see much more hardships.

Ambrish Kumar, founder, Logycode Tech Solutions Private Ltd, was of the view that although the lockdown was necessary, the flip-side of the lockdown measure has also caused a kind of mess for most of the businesses. The logistics and supply chain sectors are also impacted, he added. “With the closure of international flights, the belly capacity reduction has impacted the movement of the cross-border trade by air. Only cargo aircraft are operating,” he said.

(adsbygoogle = window.adsbygoogle || []).push({});

“The overall capacity has gown down by almost 70 per cent. This has led to global freight rates shooting almost 6-8 times from the usual. This is expected to further increase as the global supplies need to be replenished through trade and the demand will only increase,” Kumar said. He said that due to the lockdown, movement of essential commodities such as medicines, medical goods, vaccines and drugs, medical equipment, hand sanitizers and perishables, including their import and export, are also impacted as there is a shortage of manpower at airports and seaports.

Further, the road transporters are unable to get the goods from the manufacturing units to the ports due to the closure of state borders, affecting first and last-mile connectivity. Other most-traded commodities such as garments, automotive parts, leather products, home furnishings, and handicrafts are not moving at all. “In a nutshell, the demand and supply gap has increased a lot,” he said.

Rajesh Neelakanta, executive director and CEO of BVC Logistics, was of the view that although on paper, the logistics industry dealing with food products, pharma and medical equipment among other essential items are allowed to operate, things are not really the same on the ground. “In some cities, the authorities have clamped down on all kinds of movement, while in most others, restrictive movement is allowed, which is still acceptable,” he said.

Neelakanta noted that livelihood of a major portion of the logistics industry is impacted and the industry is facing a huge employment loss situation during and in the immediate aftermath of the lockdown.

A report by Clickpost and Shadowfax shows that the demand in the e-commerce segment has increased in pharma, beauty and electronic items while that of apparels has declined. It said the number of stuck shipments has increased by 9 per cent and order delays have increased by 21 per cent. The report showed on March 23, return-to-origin reached a record high of 230 per cent.

The report noted that companies could make a plan for alternative fulfillment locations in case a few warehouse locations become unserviceable, and a completely touchless delivery process can be created using technology. Sector players have also sought support from the government to tide over the difficult times.

Kumar of Logycode Tech Solutions said that regarding the vendor payments, like that of the airlines, shippinglines and other vendors, a deferral needs to be extended for at least three months as the flow of money is hugely affected. “In addition, to ensure the employees are given their salaries, it is suggested if the government can insist on banks assist with 50 per cent of the salaries for some time,” BVC Logistics’ CEO Neelakanta said and added that fuel prices, which form a key element of the sector’ operating cost, should be reduced.

“Fuel prices, a key element of our operating costs, should most certainly be reduced for the next one year as the global crude prices are perhaps at an all-time low, in these past couple of decades or perhaps more. In the general public interest, the OMCs (oil marketing companies) can sustain a no-profit situation for a few quarters,” he said.

Now you can get handpicked stories from Telangana Today on Telegram everyday. Click the link to subscribe.

Click to follow Telangana Today Facebook page and Twitter .