Effects of COVID-19 on Transport and Logistics Industry
COVID-19, which has attracted attention as the most important topic of the global agenda since its emergence, was declared as a pandemic by the World Health Organization on March 11, 2019. With this development, it was once again emphasized that the address of the danger is not just a country, a region or a continent, but the whole world.
Istanbul University Faculty of Transportation and Logistics met with 104 industry experts in order to identify the developments that may most affect the Turkish logistics industry and their degree of impact in the next three months, within the scope of the project "Developing the Logistics Confidence Index for the Turkish Logistics Sector", which was carried out with the support of KPMG and received wide coverage in the national press.
There is also a COVID-19 question in the questionnaire conducted with industry experts.
83% of industry experts stated that COVID-19 will affect the industry very much, 9% will affect the industry, and 3% will affect the industry less. The rate of those who state that it will not be effective is only 5%. According to this information period of forthcoming three months will be significantly affected by the epidemic of covid-19. Accordingly, it is clear that the COVID-19 epidemic will affect the industry very significantly in the next three months. Since its emergence, COVID-19 has had very important consequences in many areas, especially in global politics, economy, trade, transportation and logistics. These results have had many reflections that we can see today, and their reflections that affect tomorrow will come to light in time. It is not possible to evaluate the effects of COVID-19 on the fields of transportation and logistics independently from the economy and trade. In this respect, the issue needs to be addressed in a multidimensional and holistic approach.
The epidemic caused by the virus started in China, then swept the whole world and eventually slowed down in China.
In this respect, it is useful to first understand the situation in China. Many companies around the world buy many products that are manufactured in China or shipped by stopping by this country. In the period when the epidemic peaked in China, production stopped in factories of critical importance for the Chinese economy and industry, and exported products were transported from factories to ports with low capacities and long delays. Disruptions in the supply chain caused the stocks of companies that bought products from China to decrease, and many problems arose in meeting customer demands. These and similar developments have led to the questioning of the balances in the global supply chain and the increase in the sovereignty of certain countries.China has managed to control the epidemic to a large extent and has begun to heal its deep wounds. However, it will not be easy in the near future for China to smoothly supply the critical parts required for production and reach sufficient stock levels. In addition, since it is clear what problems a dependent supply chain causes, where one country is an indispensable link for other countries, countries that read the crisis well and seek solutions will do their best to create a less dependent supply chain.
Turkey has successfully managed the crisis caused by the epidemic with the preventive measures it has implemented and has further strengthened its positive image in the global arena.
Our country can take its position in the global supply chain to a better place in these days when the diversification of supply chain channels is discussed intensively by taking this positive wind behind it. COVID-19 has gradually restricted the movement of passengers and cargoes all over the world and in our country by directly affecting them. Undoubtedly, all types of transportation have been adversely affected by this situation. In the world and in our country, especially air freight and passenger transportation draws attention as one of the most disrupted and damaged transportation types.
Air freight and passenger transport is the most disrupted and most damaged mode of transport.
According to the report of the International Air Transport Association published on February 20, which deals with the impact of COVID-19 on air transport, a 13% decrease is expected in passenger demands for airline companies operating in the Asia Pacific region in 2020. The report also states that the decrease in question may cause a loss of approximately 13 billion dollars in the Chinese market alone. Looking at air freight around the world, it is seen that there are significant capacity constraints, although the existing networks are still partially used.
For this reason, companies engaged in air freight transportation are trying to find alternative routes and make alternative transportation types work. Within the scope of preventive measures against the epidemic in air transport, a flight ban was imposed by our country, first to China, Iran, Iraq, Italy and South Korea, where the epidemic was hit in February, to 9 European countries on March 13, and finally to 68 countries as of March 22.
Considering that THY, the flag carrier airline of our country, has decided to make international flights to only five destinations as of March 27, it is clear that the airline companies of our country will face similar difficulties in terms of finance in the coming period. In this process, THY announced on March 19 that it will increase the frequency of flights with cargo planes and that it will use some of the idle passenger planes, which it cannot use in passenger transportation, for cargo transportation.
The effects of COVID-19 are also clearly seen in maritime transport, which bears the burden of global transport the most.
About 50% of the ships in the Asia-Europe trade area were canceled between the end of January and the beginning of March due to the epidemic. Both container and bulk carriers were adversely affected by the epidemic. The epidemic in China and the devastating disruptions in the production activities in the country as a result have caused many problems such as the late departure of the ships bringing raw materials to China from the ports, the late discharge or inability of some ships moving to the destination port to discharge their cargo.
Difficulties experienced in the transportation of products imported from China limited the circulation of empty containers in the world, and as a result, container freights increased greatly. Freight increases cause an increase in the share of freight in unit costs, especially for countries that export products with low added value, thus negatively affecting the exports of these countries.
COVID-19 has undoubtedly adversely affected rail freight and passenger transport.
It is known that there is a significant decrease in the demand for rail passenger transportation, as in all transportation types. In this process, where the strong impact of the epidemic continues, and in the near future, it is possible that freight transport by rail can be a good alternative to other modes of transport according to the special conditions of the countries. In this context, it is known, for example, that Iran encourages the transporters to use the Türkgözü Border Gate and the Baku-Tbilisi-Kars (BTK) railway due to the long wait at the Sarp Border Gate in its transport operations to Central Asian countries. Another development regarding railway freight transportation was experienced on 18 March. Accordingly, the Ministers of Transport of the European Union countries and the representatives of the European Commission came together and signed an agreement in order to secure the railway supply chain and the mobility of products. In the text of the agreement, it was noted that the number of freight trains operating in member countries is expected to increase due to COVID-19, and the importance of taking the necessary measures to prevent the epidemic from disrupting the efforts to improve the railway infrastructure was especially emphasized.
Considering the effects of the epidemic on road freight transportation, there are increases in vehicle queues and delays in transportation due to the additional controls applied at international border crossings.
These delays cause increases in freight prices. Some countries have closed some border gates due to the epidemic. On the other hand, most countries are making efforts to ensure the continuity of the passage of drivers, who have a key role in the realization of road freight operations, in order to ensure the continuity of the supply chain. Our country is taking initiatives to establish the safe environment needed to remove the 14-day quarantine obligation imposed on our drivers. In this context, a two-stage plan has been created in transportation operations using the Kapıkule Border Gate, and it is aimed to overcome the 14-day quarantine obligation with the driver change to be made at the border. Considering the general situation in the world, it is expected that the increase in vehicle queues and delays in transportation will continue in the upcoming period.
The epidemic that surrounds the whole world negatively affects international passenger and freight transportation as well as transportation activities in settlements.
Encouraging public transportation against the use of personal vehicles in transportation is one of the most important issues for countries recently. However, country governments emphasize that public transportation should be used as little as possible in this period of epidemic. As expected, the epidemic led to a decrease in the demand for public transport. According to the report of Moovit, which produces and develops mobile applications for public transportation, the demand for public transportation in Italy, which could not get rid of the epidemic, decreased by 50% in March 2020 compared to February 2020. It is stated that Istanbul's public transportation demand on March 19, 2020 decreased by approximately 45% compared to March 14, 2020.
In the light of all these developments, it is useful to briefly evaluate what needs to be done so that the transportation and logistics sector can overcome the unfavorable conditions caused by the epidemic with minimum loss and take more solid steps into the future. In this context, there is a need to accelerate the infrastructure works that our country plans to implement for transportation types and to make the necessary arrangements to facilitate the realization of this purpose. The epidemic has restricted many areas of life. In this process, people have difficulty in going out of the house and buying even the basic foods that are essential for their survival. Therefore, the use of mobile services to purchase basic foods and meet other needs worldwide has increased much more than in the past. For the smooth delivery of products purchased from mobile services and e-commerce sites, logistics companies and transport companies need to improve their ability to move faster and more flexibly.
Although it is not possible to remove COVID-19, which suddenly entered our lives, from our lives, the ways to deal with this epidemic and the steps to be taken to cover these paths become clear. It is expected that necessary steps will be taken with the cooperation of the state and private sector in the transportation and logistics sector, which is one of the sectors that our country prioritizes, and that we will come out of this difficult process in a much stronger way by touching the lives of all our citizens.
Prof. Dr. Abdullah Okumuş
İstanbul Üniversitesi Ulaştırma ve Lojistik Fakültesi