Something that is unanimous, for all sectors, is that the year 2020 was by far one of the most challenging in global trade and supply chain management.
Virtually all sectors of industry have been shaken by disruptions. And while the year began with uncertainties around IMO 2020, trade wars and Brexit, the rise of Covid-19 was, and still is, a factor of uncertainty no one could have imagined.
The great lesson learned in 2020 was that making predictions - or at least developing plausible contingent scenarios - is critical to success in volatile times. Check out the top five forecasts in this post to help shape the outlook for a hopefully easier 2021 for Foreign Trade.
Covid-19 has shaken almost every aspect of the supply chain industry. The indirect effect has caused many physical companies to close, reopen and close again, bringing more consumers to e-commerce.
With pandemic-related factors accelerating the shift to e-commerce within 5 years, retailers struggled to survive amid a new intense set of distribution demands. And for those in the logistics area, it has been one challenge after another.
When the pandemic swept the globe for the first time, there was hope of a recovery in a few months, in which the malignant effects would quickly pass. As the pandemic persisted, business leaders had to face a relentless reality: not all businesses would survive.
Companies are facing great challenges.
The issues to be considered now revolve around consumption patterns and the economic viability of an emerging pattern:
Analysis: companies will have to compete for relationships with suppliers and compete for exceptionally limited space with carriers. With a tight market, especially in hard-hit sectors such as fashion, finding more economical sources of manufacturing, transportation and storage - or other storage space - will be crucial.
Contingency plans and solid partnerships will be key. If one supplier falls short, another may save the supply chain from stagnating and thus causing lost sales opportunities. The key will be speed. In logistics and transportation, the post-COVID winners will be companies that:
They remain in touch with customer demand during a period of rapid change;
Reinvent business models with robust e-commerce strategies;
They invest in technology and market intelligence;
They are agile to overcome obstacles and find new competitive advantages.
After two years of trade war between the United States and China, a series of tariffs, retaliations and threats of retaliation are still bouncing back and forth. The "Phase 1" trade agreement reached in January 2020 was shaken by Covid-19; and current indications show that China will not have met the numerical targets for U.S. exports by the time President-elect Joseph Biden takes office on January 20, 2021.
It is not yet known how the President-elect will administer the trade agreements with China, the EU and other trading partners, so companies must make plans for this uncertainty.
In addition, with the news that U.S. Customs and Border Protection issued a Release Hold Order for cotton products from the Xinjiang region of China on December 2, unexpected customs concerns may arise. One possible consequence could be an increase in inspections of shipments of cotton products to determine their place of origin.
In the midst of all strategic reconfiguration, shippers turned to maritime options, guaranteed delivery and other premium services to keep the supply chain as agile as possible. In some markets, they had to pay a high premium just to get an empty container.
In 2020, the ocean market was marked by blank voyages since the beginning of the pandemic, continuing throughout the year, operating under the premise of low demand.
In most years, when demand is expected to be weak, shipping companies reduce fees to gain or maintain market share.
In 2020, however, operators showed remarkable discipline in capacity management, with availability falling by up to 40%. Still, surprisingly, demand recovered quickly, creating a friction that resulted in record rates. Despite the adverse conditions, the high season showed no signs of deceleration. As we mentioned earlier in the post: The container crisis.
Analysis: The high spot rates now in place will infiltrate fixed rates and affect contract negotiations in 2021. Overall, supply and demand have shifted to the advantage of carriers.
In addition, a well-publicized equipment shortage that is affecting the industry is also likely to continue, possibly during the first half of 2021. Overall, the industry has enough containers. But they are in the wrong places - and it will take months to solve the problem.
Some companies may be required to pass on additional shipping costs, direct or indirect, to consumers. Others may seek greater savings on the supply side.
In both cases, capacity management is here to stay, even if demand falls, because operators will adjust supply if necessary. In addition, global competition in trade routes will increase. Consignees should feel comfortable paying a premium price if goods need to be moved - at least until the balance between supply and demand is restored.
Since its emergence, together with the golden age of passenger air travel in the 1970s, air cargo has been the fastest way to transport goods. Now, it's only faster if you get space.
Air freight is experiencing a capacity crisis even greater than the ocean, aggravating supply and demand imbalances on many major global trade routes.
The Covid-19 changed the way people travel, ending flights and then entire fleets of planes, leaving people afraid to return - especially without a vaccine available yet. As companies find easier ways to connect, with remote work, video conferencing and virtual meetings, business travel is less essential. And these changes can cause a difficult road back to full recovery as companies seek to reduce long-term travel budgets.
In fact, the International Air Transport Association (IATA) estimates that passenger travel will not return to pre-Covid levels until at least 2024. A survey by the Boston Consulting Group (BCG) Henderson Institute found that 66% of the more than 300 global companies surveyed expected travel policies to change permanently.
Analysis: capacity will be extremely limited before even accounting for the impact of vaccine distribution. Rates will be consistent with 2020, but have the potential to rise further. Much will depend on the strength of global consumer demand along with vaccine distribution.
Freighters will play a more critical role in the air cargo supply chain, as belly space remains limited, marginalised by the pandemic. Traditional freighters will continue to add capacity to their fleets, accelerating the delivery of new aircraft and converting used aircraft into cargo configurations as quickly as possible.
Passenger airlines will also seek to diversify their revenue streams - adding freighters to their fleet, converting newly redundant passenger aircraft. In addition, airlines are likely to continue to invest in local resources for pharmaceutical distribution. However, overall ground handling capacity will remain a bottleneck for the industry in 2021.
The advent of the vaccine and the establishment of urgent distribution channels make these changes even more likely throughout 2021. Vaccine manufacturers are more concerned with speed than cost, giving priority to these market shipments over any other product.
With unforeseen disruptions in 2020, companies were hit hard at various levels. It was a year of observing dramatic external changes and looking inward. And with all of this, there was an extreme need for analysis and responses to inform the strategy "changing the tire with the car moving".
Analysis: timely data and technology will become more powerful to navigate the changes and uncertainties that should last throughout 2021. For companies to succeed, they will need to seek all the advantages to help mitigate the economic impact of Covid-19. As a result, real-time data analysis, which enables critical decisions to be made in real time, will become increasingly important.
Pinho invests in market intelligence with its own My Shipmentsplatform.
"Our goal is to ensure the monitoring of import and export processes, so that companies can view a range of data and information, status monitoring reports by channel, modal and so on. Customers like Ambev, which has more than 200 CNPJs, can filter the queries, one by one, which facilitates the visualization of data. But they can also manage user access, create groups, segregate internally that user X can access CNPJs 1, 2 and 3, for example. Besides the statuses, the platform allows the visualization of the events already carried out and those foreseen.
The documents related to each process can be seen, as well as the flow accounts, with the possibility of downloading. Data very important especially in the midst of the pandemic," explains Mário Dalla Valle, IT manager at Pinho.
Especially now, December can be a bridge to a new RFP season that tilts the scale to a successful year or another frustrating one. The best course of action: Prepare yourself at all levels of the supply chain with critical trade tools:
Complete dashboards, real-time shipping maps, analysis that reveals trends and patterns, and closer collaboration between senders and suppliers will make 2021 the year of interrupt management.
Customs experience, combined with the data, can reveal exceptional benefits such as substantial drops in customs inspections and reduced fees.
Knowing how to use speed in relation to space and which trade routes make the most sense will help maximize value. Use carrier schedules plus historical data that goes beyond door-to-door times to create a reliable model for traffic weather forecasts.
Other resource tools, such as tariff and carbon calculators, can help keep companies on track to meet financial and sustainability goals.
Within the framework of tools, tips and tracking, an unshakeable truth remains: the Covid-19 pandemic is ultimately what will drive 2021. Even in the best scenarios - widespread vaccinations, a recovery in consumption and trade patterns, and increased shipping capacity - there will be a period of deep adjustment.
Knowing how to keep up with these adjustments will make all the difference.