Status and prospects of the global logistics crisis
Before the pandemic outbreak of last 2020, generated firstly in Wuhan-China, the country had already been fulfilling for the last decade, the role of global power and one of the main actors in the planetary logistics chain; however, with the deployment of its "Zero Covid" policy, it began the path of closure of its economic activities evidenced in the process of retention of goods in its ports. The delay in delivery times, the impact on the final cost of the products offered, the collapse of storage and distribution centers, the generalized operational difficulties at the level of means of transport, added to the absence of containers, have been the breeding ground for the current world logistics crisis.
The crisis in the logistics sector and the delay in its recovery, reflected in the shortage of containers and delays in global cargo transportation, generate an increase in the price of goods, which also reduces their availability in the market. The persistent increase in maritime freight rates (a means of transport that represents more than 80% of global trade), significantly affects the interests of the end consumer, and in view of this reality, many companies are moving their maritime cargo by plane to streamline their processes against the backdrop of the difficulties that have arisen with the moratorium on deliveries. Beyond the good intentions of exporters and importers to alleviate the effects of the crisis, and that this does not have a significant impact on demand, the trend is towards higher prices and a possible sustained shortage of products, especially due to factors that have been affecting the situation even more. Such is the case of the Russia-Ukraine conflict, the growing inflation in the United States and Europe, the aforementioned increase in shipping rates and the absence of heavy transport drivers.
Other aspects deserve consideration: the increase of traffic in the main ports of the planet, as is the case of the closure of the Port of Shanghai, which promotes the slowdown of global exchange, causing delays in the processes of loading and unloading of ships, the changes in the routes undertaken by delegation of representatives of shipping and airline companies and the uncertainty on the part of consumers, who with some desperation, have been increasing the pace of their purchases, accelerating the import volumes. In view of this situation, part of the logistics activity has also been oriented to strengthen customs and port actions, as a whole, to make the process as efficient as possible, always remembering that the simplification of processes and procedures, which are necessary to undertake the exchange of products between countries, is the fundamental task of these governmental public entities or offices. In this regard, it is pertinent to note that, in the current situation of logistics crisis, customs have a permanent challenge to incorporate the use of new technologies in their work, with the same speed with which new business models are appearing on the fly. In short, it is a matter of transcending the mere role of inspection agency to become a key element in the process of streamlining international trade, especially in a context in which, thanks to e-commerce, the culture of immediacy among consumers and the shortening of production chains, making them simpler and with fewer intermediaries, is being strongly accentuated.
In the current crisis scenario, the restructuring of logistics processes implies the reinvention of supply chains, focused on the effectiveness of the flow of goods and services and on matching the dynamics of production, distribution and sales processes. Aspects such as: the redesign of logistics processes, even seeking the help of specialized consultants in the development of strategic plans, the establishment of better safety and health protocols for workers and goods, cost optimization, reduction of the number of urgent deliveries and the streamlining of the entire chain to meet the objective of satisfying the needs of consumers, reflect the efforts being made to accelerate the recovery from the current situation. However, the discouraging increase in fuel prices across the board is jeopardizing the profits of logistics companies, which are beginning to modify their cost-saving policy, which is about 30% less than what they have been doing (figure provided by the Spanish logistics consulting firm, Dspartner).
As a complement to the above, a statistical chart prepared by the Cyprus broker Capital.com is shown, which reflects the increase in the price of crude oil, with a current trend above 90 dollars and with a view to reach 100 dollars per barrel.
Chart prepared by Cyprus CFD broker Capital.com
Contrary to the data offered in various statistics, which refer to a sustained increase in the price of crude oil, the Energy Information Administration of the United States (EIA) has been forecasting that oil prices will fall to the levels observed at the end of 2021, a little more than 70 dollars per barrel. In this sense, they argue that the change that inventories will experience, towards their decrease, will be possible, since the trend will be marked by a decrease in consumption that will contrast with the increase in production.
On the demand side of goods and services, it could be observed that, in the short term, the inflationary trend of the economies could generate a strong contraction in the consumption capacity of households, which no longer have the saving capacity they had in the context of the pandemic outbreak. This, as can be understood, could strongly affect the logistics sector, decreasing its rate of investment and operability, which is why the management of logistics companies is insisting on re-powering business supply strategies, reducing the number of participants in the supply chain, increasing the levels of digitalization and insisting that governments make an effort to temporarily reduce both energy taxes and those related to other consumer goods, in order to contribute to the recovery of the purchasing potential of the world's population.