Supply Chain Shocks, Stoppages, And Shortages

30 April 2021 – Never has a crisis turned the logistics industry on its head quite like this one has. During much of the lockdown period, the international trade landscape was marred by container shortages and imbalances, port congestion, as well as low productivity due to a reduced complement of staff and equipment. Freight News asked Dr Juanita Maree, chair of the South African Association of Freight Forwarders (Saaff), to provide an overview of what happened and the lessons learned.

China, the global manufacturing hub, experienced a slow return to production capacity, which caused international buyers to panic. This disrupted the existing systems. “We saw an unprecedented rise in freight rates, as the entire world scrambled to ship their goods,” explains Maree.

Indeed, the initial impacts came in the form of a supply shock, as traders front-loaded purchases to snap up existing space. In a brief period, the supply shock turned into a demand shock, which created its own set of challenges. The approach was “buy early and buy often”.

In simple economics, if demand rises and supply remains unchanged, the price goes up. “And did the price go up!” says Maree. “Before lockdown, the normal price for a 40ft GP container was $1 800. This shot up to $5 000 in a short space of time, with some carriers even quoting ten times as much on occasion.”

The global disruption meant widespread delays were experienced, resulting in many carriers opting to bypass South African ports. Besides the global event that transpired, South Africa created some of its own challenges. By rightly focusing on the health crisis, the government inadvertently created havoc in the supply chain by drastically reducing movement in public spaces. The regulations created critical unintended consequences.

At one stage, local traders could not even draw cargo that was deemed “non-essential”. In addition, truckers were not allowed to ship goods to the “intended destination” without prior, arduous approval.

“Unfortunately, the trade network is highly integrated and functions as a system on its own,” says Maree. “Therefore, you cannot ask an international carrier to off load only some goods. And besides, the information of cargo rests with the owner and is therefore private. To avoid such issues going forward, we as organised business would like to work closely with government.”

The effects of the disruptions impacted all modalities, as delays spilt over to the borders. Truckers had to submit results of their polymerase chain reaction test to cross borders. However, delays were widespread. With the test having to be done in labs and only valid for 72 hours, truckers for example could not test in Johannesburg because if their trucks did not cross the border within 72 hours, the driver had to be tested again. In finding a solution, the wider industry preferred the antigen test, as these rapid tests are performed in less than 30 minutes at the point of care, thereby enabling immediate results.

Despite the fracas, it has not been all doom and gloom. “We have to take the positives and learn from this experience,” comments Maree. “Covid-19 increased our knowledge of the supply chain immensely and initiated many important collaborative efforts in our industry.”

In summary, some of these supply chain lessons included:

  • Border crossings, ports and airports should remain open for cargo operations, with added flexibility. The role of customs administration is critical in this regard. Also, uniformity in cross-border operating procedures is vital.
  • The supply chain cannot stop. Essential services, like cargo transport, must have the ability to provide the full suite of services they offer in order to promote operational efficiency and environmental sustainability. Furthermore, the international and domestic transportation of goods does not work without pilots, drivers, and crews. People are essential.
  • Digitise processes for all cross-border cargo movement, especially when involving other government agencies (OGAs), by ensuring we have a digitalisation policy in the Government. Some manual processes take as long as two to three days to clear. The private sector believes these should be completed within five hours – or at the very least within a day.
  • Furthermore, there should be a drive to remove old, outdated work flows that bring no value or contribute little towards a compliant, safe, and secure trading environment.
  • Consequently, there needs to be a drive to accelerate the Authorised Economic Operator (AEO) programme. Successful implementation of accredited role-players within the supply chain will result in trade facilitation, whilst at the same time securing the supply chain, by knowing and trusting the traders involved. In effect, customs and business will then collectively share the risk pool in the extended supply chain.
  • E-commerce has grown immensely and is vital in helping households and businesses get essential supplies. It has kept some sectors of the economy going that would otherwise have slowed down dramatically, or even stopped trading altogether.
  • As the vaccine production and distribution efforts are ramped up, sound principles are essential to ensure reliable, safe, and expeditious access to vaccines. We need transparency, as the fiasco with the Personal Protective Equipment (PPE) cannot be repeated.
  • The need for consultation between customs, the Government and other regulatory bodies, the private sector, and other stakeholders is crucial. Too often, uncertainty prevailed in the supply chain, primarily through the lack of official communications on regulations at the border posts. Uncoordinated restrictions (both at the border and inland) have disrupted vital operations in many countries at the national and sub-national level. Although Covid-19 was a health issue, we must ensure that ministries from different departments talk to each other.
  • As the veins of the distribution system for critical supplies, the extended supply chain needs the agility to function optimally.

As building blocks for trade facilitation, we need certainty and sustainability from the Government to assist us in the recovery process. We need to reverse the downward trend of trading across borders, as typified by the World Bank’s Ease of Doing Business rankings. As such, we urgently need to reduce the time and cost to trade.

Supply chain decisions cannot be made in isolation, says Maree, as we are part of the African continent. Through various organised business forums, the logistics industry came together after a collective plea from the industry and put an immense collaborative effort in place to combat some frailties.

Ultimately, the prospects for 2021 and beyond are uncertain due to uneven vaccine distribution worldwide and the potential emergence of new variants of Covid-19. Nevertheless, the message remains the same. “We must engage in a cooperative project,” concludes Maree. “This approach will allow South Africa to demonstrate what can be achieved when the private and public sectors work together in a genuine spirit of collaboration.” Source (FreightNews)