The value of the commercial shipping industry has been significantly highlighted in the wake of the COVID-19. Under normal circumstances, consumers didn’t think much about the supply chains, shipping containers, or the human resources involved in getting essential and luxury products into markets around the world. And it’s not just consumers feeling the effects of product scarcity. Nearly every sector, both public and private, is under a strain of unavailable resources. From crude oil to hospital PPE to commercial cleaning products and toilet paper, COVID-19 has highlighted the importance of how products are manufactured, the supply chains that move them, and the global network of trade and transportation that fund the world.
“The spread of the virus globally affected both the markets and the vessels operations significantly, said Victor Restis, president, Enterprises Shipping & Trading S.A “The dry bulk sector, which was already experiencing a heavy recession, was affected the worst bringing rates to a historical low. Although the Market was affected, the demand was there, it is suppressed to see what happens next.”
COVID-19 has left no country untouched, no society unscathed, and no industry safe from massive layoffs and lost revenue. Businesses around the world are scrambling to innovate new ways to maintain the delicate supply and demand balance that keeps our global economies fueled. The commercial shipping industry is no different, and its inability to bounce back quickly could be detrimental in recovery efforts around the world. The commercial shipping industry moves approximately 90 percent of global trade. It employs millions of seafarers and maritime personnel in a highly complex network traversing oceans, seas, channels, ports while navigating international laws and geopolitical sensitivities.
Most significant Risk to Commercial Shipping is Human Resources
COVID-19’s most significant toll on commercial shipping is human resources. Much like airline travel, crew members are under strict working guidelines to ensure safety and proper operational equipment. COVID-19 has strained the shipping industry’s ability to properly maintain the safety protocols and standards protected by forcing crew members to stay on board ships much longer when they need to be relieved and repatriated.
To mitigate the fallout out of much-needed supply chains, the International Maritime Employers Council called on all governments to ensure that seafarers are identified as essential personnel and that provisions are in place to facilitate crew exchange and ensure general repatriations. This pandemic has created a dire circumstance that has restricted movement of workers through a lockdown and stay-at-home orders, closed ports and warehouses where products and supplies are processed and constricted the delivery of those products and supplies to areas needed most.
These restrictions have caused port congestion in some of the world’s largest shipping connection points, creating another level of concern. Retailers and manufacturers are failing to retrieve cargo due to the lack of staff or closure of warehouses. Since the product is not moving from warehouses to market, new products arriving from international locations have nowhere to be stored, causing a considerable supply chain clog. Some ports have remained open but with a reduced workforce, which further exacerbates the cargo congestion.
Some suggest that consolidation may be helpful to regain market traction.
“With the exception of the wet market, the other shipping sectors, prior to the virus were not at their best,” said Restis. Therefore, I do believe that there will be a considerable consolidation in the other shipping sectors and the markets will become more robust.”
Some ports have taken the precaution to declare ‘force majeure’ to pre-empt claims and legal liability. The effects caused by the pandemic may be covered through this declaration, but these are not uniform and may not always be available. For example, if the cargo is deemed non-essential cargo, it cannot be moved to the ports during a national lockdown resulting in the inability to off-load cargo from arriving vessels incurring costly demurrage. On the other side, that same vessel cannot re-load with returning products that will ultimately sit in a warehouse, causing further losses. The result will be a legal and contractual conundrum of who ultimately bears responsibility for these losses.
Keeping Supply Chains Strong
The movement of products through global supply chains relies heavily on many moving parts that are all equally important. A significant break anywhere in the chain causes massive logistical nightmares up and down the entire system. COVID-19 has exposed the supply chain’s fragility, and the industry is forced into a position to first adjust to the obstacles caused by the pandemic, and secondly, to look forward as an industry and implement new, innovative solutions to avoid single points of failure and the ripple effect it causes.
How do we re-think commercial shipping’s role in global supply chains post COVID-19? Short term corrections are made daily. Declaring supply chain personnel as “essential workers” while ensuring crew shift changes and repatriation was a robust and collaborative negotiation that kept product moving. But what about the long-term?
IoT and Automation in Commercial Shipping
IoT and shipping automation was a topic of discussion before the pandemic reared its head into the global conscience. In a natural evolution of technology, shipping vessels were consistently being upgraded with components of modern technology to take advantage of cost savings and efficiency. That discussion is now front and center as we search for new ideas to innovate the commercial shipping industry in an attempt to avoid further disruptions to global events.
“New communication technologies have been successful in the development of the shipping industry,” added Restis. “Most associated sectors as well as shipping companies are well equipped with software that is both cyber safe and it facilitates all operational demands of a vessel whether these are regulated by government authorities, port facilities or day to day management needs.”
Networking technologies made available through the internet and GPS have benefited the commercial shipping industry. RFID and other geotag technologies have increased tracking, cut down on loading/unloading times, leading to greater efficiency. Maintenance of ships has improved due to IoT, and block-chain technologies where mechanical components are monitored in real-time data are transmitting critical data to maintenance crews responsible for the vessel’s integrity. Having this information further improves efficient operations and scheduled maintenance planning so that supply chain movements through commercial shipping are avoided.
Though COVID-19 has accelerated the use of remote technologies, increasing the trend toward automation, it is unlikely that the technologies of tomorrow will be implemented in the commercial shipping industry anytime soon. Autonomous shipping is just not an idea the world is ready for, and seafarers are at no risk of going extinct due to automation.