Cushioning the Impact of COVID-19 on The Logistics and Transportation Industry

The COVID-19 pandemic has thrown the world into a state of panic and uncertainty, affecting individuals and businesses to varying degrees. The logistics and transportation industry may have experienced exponential growth in global trade in previous decades, but COVID-19 has proven just how vulnerable global supply chains can be.

 

Dealing with disruptions

In light of the pandemic, how can companies in the logistics and transportation industry cushion the blow and better prepare for the future?

1. Focus on business continuity

Business continuity is important as it gives both employers and employees a sense of security. One of the ways to achieve this is through expert workforce planning.

If your business provides non-essential services, your planning should have included possible operational and factory closures, which have now been widely mandated by our Government. Rerouting the use of your labour force of production to other sites can soften the impact of business disruption and supply shortages as well. 

Engaging a third-party company that possesses business advisory capability with relevant industry insights like RSM can optimise business continuity by, for instance, helping to explore new ventures with the support of its extensive network.

Whether you need assistance with growth strategies, optimising opportunities or keeping back-office functions running smoothly, RSM is able to provide technical support and industry knowledge to help manage the pressures your business is facing.

 

2. Consider the alternatives

Since the coronavirus outbreak started in China's Hubei province, governmental effort to contain the virus have led to many manufacturers halting production and traffic being disrupted. China's global economic significance and the presence of seven of the world's 10 busiest ports in the country, have also affected international supply chinas. Inability to trace the supply chain beyond the Tier 1 suppliers will inevitably pose significant challenge to handle any risk of supply disruption. 

Added visibility on key Tier 2 suppliers — which feed Tier 1 suppliers and have a secondary connection to companies — will improve fulfilment from Tier 1 suppliers, which deal directly with businesses. This will give you more time to liaise with Tier 1 suppliers on the necessary changes to supply chain plans that will maximise plant efficiency even when there are supply constraints.

This also means knowing where to find alternative supply sources and how to activate them.

In addition, it is important to find and evaluate alternative logistics options, and secure capacity amidst issues like port congestion, lower air freight capacity and a shortage of drivers.

 

3. Risk management and future-proofing

Assessing any potential risk surrounding your company’s key, direct suppliers’ ability to fulfil supply requirements. This will depend on changes to their production and order fulfilment, and how these will affect your business. For this purpose, tapping into RSM’s risk advisory services may benefit your business.

Having this knowledge will then allow you to have a clearer picture of cash flow, supply base risk, and perishability, and thereafter decide how best to plan your company’s inventory strategy to handle supply shortages.

It’s also important to make use of new supply chain technologies such as IoT (Internet of Things), AI (Artificial Intelligence), and DSN (Digital Supply Networks) to better prepare your business for future challenges.

 

4. Costing and customer considerations

Finance is the key aspect of business planning, especially in times of crisis. In a time when you have to seek alternative arrangements for everything from supply to transportation, it is important to identify cost-cutting measures and review funding arrangements to tide your business over.

Short-term funding arrangements may be necessary to deal with immediate concerns, especially since this period of uncertainty is likely to see payments and cash in-flows slow down. Maintaining a well-balanced cash flow is paramount to retaining customer confidence.

 

Although we do not know when this pandemic will pass, it is important to continue doing what is necessary to ensure businesses, along with those who help to keep them afloat, to emerge stronger when things have settled down.

If you would like to tap into our professional consultancy services for your logistics or transportation business, please contact: 

Lee Mong Sheong
Partner & Industry Lead,  Logistics & Transportation
+65 6594 7865
[email protected]

Tan Sock Huan
Associate Director & Deputy Industry Lead, Logistics & Transportation
+65 6594 7947
[email protected]