The COVID-19 global pandemic transformed life as we knew it and posed enormous challenges for the international community. Most notably, countries closed their borders, causing massive international shipping delays and supply chain disruptions. As many businesses relied heavily on effective logistics and shipping, the global economy faced unprecedented challenges.
How did COVID-19 affect the international supply chain and how did businesses and shipping carriers navigate these challenges? Read on to learn more.
The pandemic’s effect on international trade
The global pandemic’s devastating effects were beyond anything most had imagined. One of its major impacts was a sharp decline in international trade. In fact, lockdowns in a country accounted for up to 60% of the observed decline in imports in the first half of 2020, according to a report by the International Monetary Fund.
The Indonesian government subsequently passed Law No. 11 of 2020 on Jobs Creation, also known as the Omnibus Law, which revises many provisions in the country’s Shipping Law. Licences and certifications related to the carriage of goods and port activities are now issued by the Central Government, which meant lesser costs for applications and reduced time spent on engaging with different institutions.
Foreign-flagged vessels may also be used to conduct special activities in Indonesian waters other than carrying passengers and/or goods, if Indonesian-flagged vessels are unavailable.
However, iInternational shipping services then were dealt a huge blow, with many various challenges brought on by the pandemic. These include:
1. Container shortages and high freight rates
As countries closed their borders and supply chains were disrupted, shipping carriers reduced the number of operating ships to prevent economic losses. As the first COVID-19 wave subsided, economic activities began to grow and export volumes increased.
However, the shipping industry continued to function with a smaller workforce and fewer ships. This led to massive container shortages and delays. Ports also grew congested due to the irregular flow of goods and long queues.
Another related and key impact of COVID-19 on transportation was seen in skyrocketing freight charges. In order to keep up with the increased demand and reduced supply, freight charges soared to an all-time high.
2. Changes in consumer expectations and demands
Another effect of the pandemic on the transportation and shipping sector was the change in consumer demands and expectations. During the pandemic, demand for certain products and services like masks and healthcare equipment increased rapidly. Manufacturing and shipping them internationally proved difficult as countries closed their borders.
Moreover, the majority of customers changed their purchasing habits and took to online shopping for groceries and basic household items. Logistics came under immense pressure as the delivery of products also had to be carried out in a contactless manner, which required extra resources.
3. Changes in demand for healthcare logistics
As the demand for medicine and medical equipment increased during the coronavirus outbreak and after, healthcare logistics underwent changes too. The shipping carriers that survived were those which developed the capacity to provide time-sensitive and temperature-controlled shipping services to move key medical supplies internationally.
