The full effect of the coronavirus has not hit the United States; however, the virus is already making waves throughout the country.
Since its arrival, it has created widespread uncertainty throughout virtually all sectors of the domestic economy.
Many industries are preparing for significant disruption as the World Health Organization has declared the virus to be a pandemic.
Even before the official designation from WHO, the coronavirus was impacting the global supply chain.
It has been altering function in the international market since it first gained recognition as a concern in late winter.
But despite the virus spreading several months ago, according to an article from Harvard Business Review, the worst has yet to hit the US.
The report goes on to state that, “We predict that the peak of the impact of Covid-19 on global supply chains will occur in mid-March, forcing thousands of companies to throttle down or temporarily shut assembly and manufacturing plants in the US and Europe.”
What that looks like from a domestic perspective has yet to be seen. However, we have noticed a few virus-related market trends already cropping up.
Coronavirus Impacts US Imports from China
The spillover to the logistics industry began last month as volume into US ports dropped significantly.
Imports from the virus’s epicenter, China, fell sharply as the country slowed production.
China lost a significant portion of its workforce to temporary quarantine, and production facilities were on hiatus. As a result, outbound truckload volume and rates from ports like Los Angeles tumbled significantly.
According to an article published in Freight Waves, “Fewer ship calls in the midst of the coronavirus pandemic as well as lingering effects from the United States’ trade war with China resulted in a 17.9% year-over-year drop in imports at the Port of Long Beach in February.”
Companies continue to import fewer goods from China, even as the country has worked to contain the virus’ spread. That downturn will likely only be temporary, and we will eventually see an overcorrection, as companies import backlogged goods from China.
What Are Current Coronavirus Impacts on the Logistics Industry?
Despite hurting a few individual markets, the plummet in Chinese import volume is not currently affecting the holistic logistics market.
We are currently seeing several-year highs in freight volume. According to data gathered from Freight Waves SONAR, outbound tender volumes are increasing in record volumes.
This surge is likely in response to increased spending by US consumers. Buyers are stocking up in preparation for the virus and have turned to shelf-stable goods as concerns mount.
According to an article published by CNBC about recent consumer habits, Costco has reported stronger-than-anticipated sales this month as consumers flock to the wholesaler.
Some Zipline Logistics customers, manufacturers of shelf-stable food products, have reported a 10 percent increase in orders from retailers like Sam’s Club and Walmart.
The short-term demand spike has caused some shippers that were typically sending two full-truckload orders to wholesalers per week to jump to 10 trucks to keep up.
Increased purchasing has emptied store shelves as buyers scramble to grab essential goods ahead of widespread coronavirus impacts.
What are the Long-Term Effects of Coronavirus?
The long-term impact of the coronavirus outbreak on the US supply chain remains uncertain.
Only time will tell how severe and how long the virus will impact the economy as a whole.
But in the logistics world, we will likely see rates rise, and capacity shrink in the coming months as the rest of the economy normalizes.
As retailers, hit by increased purchasing, order replacement goods, dry van demand could be a spot that we see an increase.
According to an article published by DAT, that, paired with the inevitable bounce-back from the Chinese import drop, could drive dry van rates up as we head into the spring.
These surges, coupled with the beginning of produce season in regional markets, could cause pronounced effects on rates and capacity. If these conditions coincide with one another, we should see a spike in prices as capacity tightens across the US. This influx could continue well into the summer.
Zipline Logistics Can Help Navigate Uncertainty
The current instability caused by the virus makes it difficult to predict what the logistics market may look like as we begin a typically busier freight season this summer.
But uncertainty and volatility in the market can be mitigated by working with an experienced logistics solutions provider.
Partnering with a third-party provider can alleviate issues during any time of abnormal market conditions. It is essential to develop business continuity plans and have strategies in place to dampen the impacts of the coronavirus.
Zipline Logistics has plans in place to keep our customers’ freight moving through this time of uncertainty. We plan to remain fully operational while keeping our employees safe from the virus.
Coronavirus is scary, but your logistics don’t have to be. Zipline Logistics has a mobile shipper intelligence tool to allow our employees and yours to work from anywhere during the outbreak.
Don’t let this event disrupt your operations. Work with Zipline Logistics to ensure that your business remains on-track during the coronavirus.
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