The effects of Covid-19 on trade

Posted by Peter Baloyi & Mervyn Timothy on 30 Apr 2021 3:13:05 PM
Peter Baloyi & Mervyn Timothy

Effects of Covid-19 on cross border travel

Cross border freight and logistics have undergone dramatic changes over the past year due to the global pandemic. While there have been many challenges, those in the game have adapted and are determined to keep things moving.

Peter Baloyi, Cross Border Road Freight Manager at Barloworld Logistics.

In the current environment, cross border road freight is unpredictable, and we have to communicate with clients at every step. Not only are we dealing with border delays due to Covid-19 regulations, but we also deal with more regular delays from flooded roads or road repairs. A core part of my job is to keep our clients informed.

Despite all the challenges, I love working in road freight. It certainly keeps you on your toes and we have to adapt constantly to ensure we’re offering our clients the best possible service.

With road freight, I’m dealing with all borders along the route, so if we have trucks going through Zambia and Malawi, and everywhere that we operate, I am literally ‘following’ each truck and staying in communication with drivers and clients to help ensure everything runs as smoothly as possible. No day is the same.

You have to understand the economies and practices of all the countries we travel through, you are always learning. This job requires you to understand the nuances across the southern African region.

Some of the main challenges resulting from Covid-19:

  • Short notice changes in duties and taxes. Over the past year, we have often had to pay this on behalf of our clients, simply because there was no warning when these changed. Not wanting to cause further delays, Barloworld Logistics then pays these and invoices clients later. That was quite a big operating change when you consider the number of vehicles we have on the road. We had to adapt our operations very quickly in order to keep things running.

  • With our drivers essentially travelling all the time, we have had to work out a regular Covid-19 testing programme internally. Naturally, all drivers are encouraged to isolate should they feel ill, which means our driver scheduling has been thrown for a loop. This has obviously led to increased costs on our side, but also frustration for drivers who simply want to get on with the work. We have had to carefully manage all schedules to ensure the safety of our staff and clients.

  • Border operation times have also had a big impact. Some borders that used to close at 22h00 now close at 18h00 - that means we have to either re-route or extend delivery times as quite often trucks have to wait at the border overnight and then there can be a very long queue to get through the next morning. Again, this is where constant communication with drivers and clients is crucial.

  • Curfews have also come into play. Thankfully in many cases, the curfews were either communicated in advance, or we were able to ‘predict’ when curfews would be put in place across various countries. In some ways, this was one of the easier ones, as we could schedule our vehicles to be at certain places at a certain time. Yes, it added another level of planning, but managing logistics is what we’re good at, so set curfews haven’t been as difficult to manage as all the unforeseen delays.

  • Then we still have our ‘normal’ challenges. A few months ago, for example, the Beit Bridge border crossing was closed due to flooding. There was also no cellular reception, which means communication suddenly became a big challenge.  When you throw these delays in along with Covid-19 related delays it can become a nightmare.

In these cases we are proactive, and immediately communicate delays, alternatives, solutions, or simply the reality with our clients. This allows them to make adjustments on their side, which they need to be able to do.

Mervyn Timothy Trade Lane and Business Development Manager at Barloworld Logistics. 

Mervyn Timothy is responsible for trade lanes which are essentially broad trade routes such as America to South Africa, or China to South Africa and vice versa.

It’s important for us, as Barloworld Logistics, to develop trade lanes because this allows us to focus on specific trade lanes and to grow the amount of business we can do across these.

When you ‘develop’ a trade lane, you zero in on that specific route and start working on efficiencies, collaborations where needed, and all the details to make this a successful trade lane. It’s all about enhancing your forwarding capability in specific areas.

Establishing a solid trade lane means working closely with different agencies who all play a role in ensuring these trade lanes run smoothly. As an independent logistics company based in SA, Barloworld Logistics relies on a global network of forwarding agencies.

Our main forwarding agent partners include:

  • Scan Global
  • Branco Logistics
  • Global Link
  • FFSI (Feta Freight Works International)

Advantages of working with an Independent Freight supplier

A trade lane is not a fixed product - it’s a constantly evolving service with many moving parts that require oversight, flexibility and negotiations in order to keep a route functioning effectively for all parties.

The biggest benefit for our clients, therefore, is that they don’t need to do any of the groundwork to establish their own trade lanes, and can make use of the ones we have in place. And Barloworld Logistics will develop new trade lanes should these be needed.

Independent freight forwarders have the ability to offer competitive or lower costs on freight because of their leaner operational models and more extensive carrier options. They may not necessarily be tied into long term (volume committed) contracts with a few carriers, so the independent forwarder can also test the “spot rate” market more often.  The independent freight forwarders have many more choices on selecting the best routing, carrier and price combinations.

The spread of service offerings and different type of expertise, some very specialized, have expanded and enhanced through an independent forwarder being part of a forwarding network.  A network may have one, two and sometimes even more agents in one area, depending on the size of that area (US / China / India). The expertise could range from agent to agent and some agents would specialize in certain verticals, such as automotive.

In terms of Covid-19, the challenges experienced in creating and maintaining trade lanes include:

Although crisis management is a daily part of logistics, we have had to up our game and creativity with the onset of Covid-19. We have had to come up with solutions for things that used to be ‘automatic’, and we have certainly been pushed to reinvent the way we approach the movement of freight overall.

The biggest impact has, however, been with Sea and Air Freight. Our international trade lanes rely heavily on these channels, and over the past year, we have faced many obstacles.

Sea Freight:

The pandemic has had a direct and significant impact on Sea Freight. As we are aware, China is a major trading partner with every corner of the globe. The outbreak of the virus in China has had severe implications on supply chains in its entirety.

Several manufacturers and suppliers had to shut down operations which created a shortage in products and a resultant export volume reduction.

The main affected areas were the American trades, followed by Europe. The effect however has and is now being felt globally as, with the disruption in normal trade, the situation of equipment imbalances has become a reality and an absolute logistics nightmare. Coupled with congestion at several ports and carrier capacity constraints, the result is that the supply chain efficiencies and, specifically pricing, have been negatively affected.

For the South African route out of Asia, there are several cases of bookings being rolled over or carriers suspending bookings due to shortages in equipment. However, the biggest factor that has been affected is cost. The cost of ocean freight has spiralled in recent months, and in some cases are 200% to 300% more than the equivalent levels last year.

As one can appreciate, the resultant effect on the landed cost is making it extremely difficult for importers, and, the public (consumers) in general are facing the brunt of the higher costs. There’s also uncertainty as to when this pandemic may end, and when this situation may return to normality (as we know it).

Airfreight:

The situation in respect of market conditions is pretty much the same. Moreover, the passenger flights were of huge significance in respect of the cargo-carrying capacity it presented to the market. With carriers suspending passenger flights generally, the ripple effect in terms of capacity to the market was affected.

The resultant cost factor had a huge and negative impact on the market. Carriers also had to convert passenger aircraft to cargo aircraft to try and balance the situation as well as keep their heads above water with no passenger movement. 
Whilst there may have been a decline in general cargo, carriers were involved in the movement of PPE, demand for which escalated with the outbreak of the pandemic.

Capacity is still not at optimum levels yet as most carriers have retired some types of aircraft and have reduced services to some areas, with no services to other areas. The rates remain relatively high though, and similar to the sea freight situation, there’s also uncertainty on airfreight as no one is certain as to when this situation will end (normalize).

The bottom line here is capacity and cost, and with the current capacity constraints, the costs have increased dramatically and it is creating a negative result to consumers, together with a stretch on availability of certain items.

Summary

At the end of the day, there is no avoiding the challenges currently facing the freight industry, but there are many solutions to help companies navigate these obstacles. 

Barloworld Logistics is able to manage the entire cross-border clearing and forwarding process in-house. This not only ensures a seamless process but also allows for pre-clearance of each load, leading to faster transit times across borders.

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