Corona impact on European logistics

By: Holland International Distribution Council

In unprecedented times, there is still positivity in the Dutch logistics sector

In the fifth week of physical distancing in Europe and most of the world, shippers, freight forwarders and logistics companies are trying to bring order to the chaos. Although logistics continuity in Europe has not been threatened, supply chain managers are faced with daily challenges in their European distribution. Logistics companies are providing much needed assistance, both practical and forward-thinking. The Holland International Distribution Council has done research among its 300 members who are active in logistics and supply chain and this update shares the findings, as of April 15th.

This is the fifth weekly Corona update of HIDC (previous four updates can be found here) on the continuity of European logistics.

European Distribution Centers have weathered the storm
As a crucial node in the European distribution networks of overseas companies, European Distribution Centers (EDCs) in the Netherlands have been able to continue operations despite physical distancing measures. Third party logistics companies (3PLs), most of which are HIDC members, often operate the EDC on behalf of an overseas company and remained in close contact with their clients. There have been delays, increased transport costs and delivery issues but no serious supply chain interruptions. Some 3PLs even report an increase in service inquiries as shippers are investigating risk mitigation strategies by outsourcing parts of their supply chain or diversifying their supply base.

Intercontinental flows of goods enter the EU smoothly through the Dutch logistics backbone
Where capacity in air cargo is constrained and capacity in ocean freight being limited by carriers to cut costs (more in our previous update), the actual handling and forwarding at the Dutch ports is uninterrupted. The number of vessel calls in Rotterdam is still on par with last year and the Ministry of Infrastructure is allowing more cargo flights into Schiphol to facilitate increased demand. Inland shipping and rail to the 35 inland terminals in the Netherlands continues and there is no capacity issue in road freight. Good news indeed, as volumes are now pushed by the post-shut down production peak in China where 98% of factories is back in operation.

On the other hand, due to a decrease in demand, European businesses are cancelling orders, causing volumes to dip significantly in the coming weeks. 3PLs are requested to store merchandise and components that can’t be delivered to retail and factories till further notice. The Netherlands now benefits from the healthy growth in warehouse space in recent years allowing this peak to be absorbed. Multiple HIDC members have indicated that they have space available and we can help connect to the right partner, for automotive, cold storage, consumer products or other categories that see stock levels increase.

Diversification pays off as consequences vary widely per vertical and sales channel
In the fifth week of physical distancing, most logistics companies are relatively positive about their status. They have grown the relationship with their clients by being accommodating and hands-on. Having learned from the financial crisis, 3PLs have adopted a diversification strategy that now pays off. Where some verticals are suffering, such as automotive, lifestyle retail and furniture, others are doing relatively well, such as e-commerce, agro food, healthcare, chemicals and IT hardware. Logistics companies that are active in various verticals and/or multiple sales channels are able to move resources around and keep their employees on; others use the NOW-arrangement (Temporary Emergency Bridging Measure for Sustained Employment), providing financial help for employers to pay their employees’ wages.

There is a cautious optimism about the worst hit sectors as automotive plants and shops are re-opening in various EU countries, but their viability will mostly rely on consumer confidence that is currently hard hit. Thankfully, this is not the only potential silver lining …

Mitigate risks by working with supply chain professionals
A pandemic that spreads through countries and continents in waves is a major disruptor for today’s complex, long and just-in-time supply chains. In the conversations with our members, we talked about the bleak situation this has created for manufacturers and how logistics service providers are currently adding huge amounts of value to their clients. Modern logistics service providers can help increase real-time visibility, reduce complexity and risk while increasing control. The Dutch ports, airports, customs authorities and 3PLs are already among the most sophisticated in the world, with fully digital information exchange and real-time visibility being the norm. There is hope that after the dust has settled, more manufacturers, traders and retailers choose to apply best practices in supply chain together with their logistics partners to be ready for the next event. Finding the right partner, that will be crucial and that’s where we can help.

Holland International Distribution Council will point you in the right direction
HIDC consists of 300 logistics companies, ranging from 3rd party logistics companies to all types of professional services to the logistics industry, such as temporary workforce providers, legal providers, VAT/tax specialists, real estate providers and consultants. We are ready to connect supply and demand for logistic services in Europe, free of charge and without any obligations. Please contact us for further information.