The Supply Chain and You – Rich Paschall
This is about more than the amount of toilet paper you can get the next time you go shopping if you can get any at all. This is about all the other stuff. We all have a lot of stuff. Some of the stuff is made up of lots of stuff from various places. No manufacturer actually makes all the items they use when they assemble stuff for you. Cars, radios, televisions, stoves, washing machines…well you name it. They were probably made with items that came from various sources. This means the shipping and receiving of goods play an important role in all the things you buy.
Even the simplest of goods rely on an efficient means of transportation. People have gotten so used to getting things quickly, that people are actually lodging complaints with Amazon for not delivering their groceries, widgets, or whatever on the same day, or even a two-hour window where they offer it. Transportation companies are down-sizing. Airlines are grounded. People are sick. Stuff is not moving like it used to move. It’s not going to recover overnight, even if some politician says it should.
For example, POTUS has ordered meatpacking plants to remain open and ship to stores. Despite his “executive order,” plants are closing around the country. In fact, seven more have closed since he ordered them to stay open on April 28. One hundred sixty-seven plants have had coronavirus outbreaks and over 9400 people were stricken. At least 45 have died. Sorry, but the bacon order is going to be delayed.
While a lot of these companies use their own trucks to get food from point A to your grocery store, others rely on other truckers and the airlines to move their product around, but what if the trucks are not trucking?
You see trucks of all sizes all over the road. If you live near an airport you likely see quite a few due to the practice of locating truck terminals near airports, seaports, and rail yards. Like every industry, trucking has been hit by illness. So have warehouse workers, ground handlers at the ports, trucker loaders, document checkers, security guards, and a variety of people who are part of the transportation chain. One COVID-19 outbreak at a truck terminal can shut it down for a day or more while the area is sanitized. After that, you can understand a reluctance by others to return to the scene.
If goods are traveling across the country by rail or plane, then you have to rely on a trucker to pick up the goods and deliver to the destination. But that might actually be several truckers. One picks it up and takes to his terminal. Someone unloads the goods and then loads to another truck with other items going across the country or to the airport or wherever. There are many people handling goods in the supply chain and for some industries, the chain is just broken.
With many factories and warehouses shut, some truckers have stopped working on the weekends. Some have far fewer truck runs and it is not economical for an over the road trucker to go with a half-empty truck. His company may have him wait until the truck will be full, at least in one direction. Hence, YOUR goods are delayed.
Sometimes your goods are moving around by more than the freighter airplanes. Widebody aircraft usually fill up to two-thirds of the belly space with cargo. Even those small planes might be moving small packages along with the people. Air Canada for example, was moving one to one and a half million metric tons of cargo a day systemwide prior to an almost complete halt of shipping due to COVID-19. Every airline is in the same situation.
If many millions of tons of cargo a day can not move, how do things get from place to place? From mid-March to until now, the demand has been down, but there is still some demand. As a point of full disclosure, as they say, I work for Air Canada. I have worked in transportation for over 35 years. In the last six weeks, I have probably said no to more requests for bookings than I have taken.
The skies are starting to open up as more places are allowing flights, but there is one big problem for passenger airlines like Air Canda, United, American, Delta, and so on. How can you fly those big passenger planes without passengers? An orange politician may tell us that everything is OK and we can all go back to normal but are you going to go to a crowded airport and take a flight anywhere in the next few months? No, I didn’t think so.
By the end of March, the airline industry had felt that they could get back to 90 percent of the business they were doing at the beginning of the year by this December. The prediction now is 50 percent. Air Canada said this week that they are currently operating at 5 percent of capacity. For your stuff to move, there are fewer flights on all airlines, and the cost can be as much as six times higher than it used to be to move your stuff from here to there. How long can that go on?
So what do you do with an airline that has most of its fleet parked and a slow recovery ahead? You know you have to bring the cost of transportation down, even if you can not bring it to pre-COVID-19 levels. So, you have to reinvent yourself. Survival depends on it. Air Canada will retire 79 aircraft this year, roughly 1/3 of its fleet. It will become much smaller in the hopes of building back up. And what about all those large airplanes? Increase cargo capacity.
Air Canada has removed 442 seats from 4 of their 777 passenger flights and will do the same with another one as well as three Airbus 333. The seat tracks on the floor work well to secure cargo netting and the main deck can be loaded with cargo. There is no cargo door, and loading equipment can not be used. But the short term solution, although labor-intensive, is to replace passengers with cargo so your stuff can get here.
Sources include: “Trump executive order didn’t stop meat plant closures. Seven more shut in the past week,” By Kyle Bagenstose and Sky Chadde, USA TODAY, May 5, 2020.
See also: The Global Supply Chain Disruption, The Pandemic Problem, SERENDIPITY, April 15, 2020.