eCommerce businesses tended to prefer air freight for their logistics. But does that still hold true during the coronavirus period where air traffic has plunged?
24 March 2020
The coronavirus situation is bringing a devastating blow to the airline industry. With travel restrictions and fears, few people are able or willing to fly, and airlines are losing billions of revenue as the number of flights also taking a nosedive worldwide. While the airline industry is facing an existential crisis, the heat has spilt to the logistics and supply chain sectors. The fewer flights there are, the fewer slots available for air cargo, the less reliable air freights are for businesses and consumers. The decline is due to the lockdown in much of China, impacting impacted Asia Pacific's supply chain infrastructure. In the first two months of 2020, year-to-year air cargo in China and North-East Asia has dropped 7.3% and 7.8% respectively. As travel restrictions continue and more flights cancelled, we expect air frights will keep decreasing in the short run. As a result, companies and eCommerce vendors relying on air freight won't be to deliver goods as quickly as before.
There comes the unlikely winner amid this mess: sea freight.
Sea freight rules the waves
Like air freight, sea freight also took a massive blow from the coronavirus fallout. Freight volume has significantly dropped around the globe, costing millions of dollars. Not too long ago, sea freight operators had to launch blank sailings due to the demand shortage. But it is recovering from the initial coronavirus logistics plunge compared to the air counterpart. As production is picking up again in China, the situation will keep improving.
There's a reason for this gradual recovery: sea freight isn't subject to air travel restrictions. Air and sea freight are indeed subject to the economic and logistic slowdowns. But there is a distinct difference. Despite the presence of air hauliers, air freight mainly relies on passenger jets. On the other hand, sea freight operators have their cargo ships that are independent of passenger travels. So when countries close borders and restrict incoming passengers, air freight will face a more substantial impact than sea freight. Hence, we can expect sea freight to emerge as a preferred choice.
Traffic restrictions don't apply on sea freight
As a means to contain the virus, different countries are imposing travel bans. But these bans don't usually affect shipments. For example, Trump's travel ban on incoming EU passengers doesn't include trade and cargo. So the only hurdle is to shipping - whether sea or air. In this case, although sea freight is slower than air freight, it is more secure and widely available. And in uncertain times like this, reliability is critical. It is always better to be sure that a shipment is on the way than to see it stranded in a forwarding centre due to lack of transport.
After absorbing the initial shock from the logistic turmoil, sea freight is slowly recovering, and we can expect activities to resume normal soon. There have been no significant cancellations of sea freights, which means after the initial demand plunge, supply for sea freight is more or less stable. Consistent service the reason why sea freight is better for eCommerce businesses: it's slower but more reliable. A slower but guaranteed delivery is better than no delivery.
China picking up
Though air cargo services are still available to the market, the surge of demand and lack of supply has shot prices up to the air. The cancellation of flights and lack of cargo planes are driving companies to pay up to three times the regular price by air. As Chinese factories resumed production earlier in March, companies wanting to ship products out of China quickly may need to use air hauliers and endure the high price. Business owners with a smaller budget should consider whether the cost is justifiable.
Logistics infrastructure in China is slowly returning to business as usual. Ports along the Yangtze river are gradually resuming service, with a 91% increase of capacity last week. And as manufacture slowly recovers, demand for cargo-specific freighters will increase progressively. Meanwhile, major industry players are also getting ready for the comeback. DHL is setting in its post-coronavirus measures, which can help the supply chain industry to recover once the crisis is over. Though recovery measures are in place, the full impact of the travel ban is yet to unfold. But in the long run, we can expect business opting for air freight again.
What should eCommerce owners do?
For eCommerce startups and small online stores, the focus tends to be on speed and cost-efficiency. It makes no sense for entrepreneurs with a modest budget to battle for a spot on overpriced air freight spot. In this case, sea freight seems a better choice in maintaining standard delivery and business operations. Depends on the nature of the business, some goods, such as books or garment, can endure a longer lead time without compromising too much of the shopping experience. So sea freight is the ideal choice to address the current situation. Once the air freight infrastructure resumes, the price will go back to normal, and the strains on eCommerce owners will be lower.
As a business owner, if you wish to use sea freight, remember the following:
- Expect a longer lead time and plan accordingly
- Communicate with your partners about the increased lead time
- If no shipment slots are available, have a plan for your inventory
Here are some ways you can do that:
- Be clear on your inventory and know when to send out your goods
- Keep track of each shipment to ensure proper delivery or predict delays
- Be explicit about the increased lead time from the logistic disruption on your company communications, such as website, emails and social media
We expect the price surge on air freight will only be temporary, though the full impact is still unknown. But at Aersure, we're dedicated to assisting fellow entrepreneurs and online store owners to weather the storm. Speak with us and see how we can help.