We want to give you a short overview of what is happening in the world of logistics procurement from our perspective.
The market has dropped enormously for most carriers. Estimates go from 50 to 80% of the business. Most shippers are holding off on new freight tenders yet there is interest in running new tenders as soon as May. This could well be postponed depending on how well the coronavirus is being detained and how logistics will be subsequently impacted. Currently, most companies are focusing on working with their current partners and use the spot market where it makes sense.
Our view for the coming months: eventually this crisis will have a major impact on demand in logistics and there will most likely be serious overcapacity which in combination with price pressure and cash flow problems will lead to many bankruptcies. Re-balancing the risk in the carrier portfolio and optimize reduced flows with adjusted rates is probably something many shippers will want to do at some point later this year.
Air cargo has dropped tremendously and is now mainly engaged in carrying emergency goods like medical supplies and urgent cargo. As mainly cargo planes are flying and some regular passenger planes stripped from seats to carry cargo, the situation is far from normal and belly cargo as part of the normal air cargo flow is mostly missing. Running tenders right now does not make sense and therefore the market is driven by spot buying for which rates run high. We expect that a normal tender process for most companies can only return when aviation, in general, picks up and is able to offer a variety of destinations again at less inflated prices. When that will be is anyone’s guess.
Many blank sailings right now which mean demand is low and this will be for the next couple of weeks but will thereafter soon pick up is our guess as businesses and factories will open again. But with still uncertainty remaining over volumes and sailings, it will become difficult to run ocean tenders in the coming months unless shipping lines are clearly committing to schedules.
E-commerce has gained a lot in popularity due to lockdowns and quarantine in many countries but is also suppressed by lower demand due to lower consumer confidence. At the same time, it is clear that consumer spending will be moving online more than before for health and convenience reasons. The courier networks are the least affected in this crisis but with demand (temporarily) falling and the lowering of fuel prices and new flows and perhaps capacity being created thanks to more cargo flights there may be interesting opportunities right now for shippers to tender their business.
Pieter Kinds is CEO of Freightender, a platform for freight sourcing & procurement.