The extent of the staggering blow that Covid-19 has dealt the global economy has yet to be fully realised. But the trickle-down effects of nearly two months with little to no manufacturing across most sectors of the European economy is being felt hard by the logistics and supply industry.
The Purchasing Managers Index (PMI), which reports on the economic health of the manufacturing sector, has plummeted to an eight-year low in the eurozone, dating back to the last economic crisis. The PMI dropped to 13.5 last month, following its most significant single monthly drop to 29.7 in March. A contraction in PMI numbers — especially to a figure below 50 — indicates a likely fall in overall economic growth.
“April saw unprecedented damage to the eurozone economy amid virus lockdown measures coupled with slumping global demand and shortages of both staff and inputs,” said Chris Williamson, a chief business economist at IHS Markit.
Plummeting Supply and Demand
While ferries have remained operational and trucks are still on the road, the effect of dwindling supply from manufacturers and demand from consumers has hit cargo volumes hard. The International Road Transport Union (IRU) said in March that they anticipate a more than 20 per cent decline in global road transport in 2020, which could cost the world’s economy more than 800 billion dollars. And with the pandemic having not hit its peak in Europe and abroad until last month, that figure is almost certainly higher now.
With aviation currently on life support, governments throughout Europe – from Spain, Portugal, and Italy to Norway, Germany, and Switzerland – have sought funding and support to survive. Meanwhile, the International Maritime Organization is working with authorities to ensure that ports can remain open so the supply chain can continue to move. But there is much more to the sector than just its moving parts on land, sea, and air. Warehousing, distribution, and logistics centres now face the challenge of staying in business while also adhering to national and EU public health guidelines, as well as social distancing measures. These methods include segregated shift schedules for workers, safe distancing protocols, and sanitation measures for packaging and handling operations.
In Spain, staff at the logistics centres of fashion giant Inditex returned to work in mid-April but at reduced schedules, with employees either working half-days or just two or three shifts a week in an attempt to decrease contact. Rather than entering the facilities all at once, shift workers had staggered entries and exits and wore masks and gloves while maintaining a two-metre distance from colleagues, according to employee reports. The return to work focused on the maintenance of machines, but during the height of the pandemic the firm repurposed some of its manufacturing capabilities to produce medical scrubs and masks for frontline health workers. Just three of the firm’s 13 Spanish factories have resumed production, but at massively decreased levels.
In Italy, tentative steps have been taken to open the country’s manufacturing network, with operators in the fashion and interiors sectors resuming work in vastly changed conditions. It remains to be seen what effects social distancing measures and public health guidelines will have when these businesses eventually return to production at previous levels. Italian design brands including B&B Italia, Moroso, and Minotti, revived factory operations at the end of April as lockdown restrictions in the country eased. Workers equipped with temperature scanners and personal protective equipment also returned to work after the Italian government allowed factories that produce export goods to reopen.
“Finally, the situation in Italy is improving and we are ready to start again with more enthusiasm and determination than ever,” said furniture maker Moroso.
Strain on the Sector
While manufacturing around Europe begins to tread slowly back into the light, the logistics sector is feeling the incredible strain of having to keep delivering through some of the worst periods of this pandemic. Business difficulties have been exacerbated by border controls across much of mainland Europe, which have ruptured the Schengen zone and caused delays at many crossings – issues which could endure long into the summer.
The landscape of a post-pandemic EU is still forming. While the temporarily reinstated borders will likely not endure, the effects of hamstrung supply lines and very low consumer demand could. For those on the front line, truckers have had to deal with delays and paranoia in addition to health threats. While these workers are being hailed as “heroes” by many for keeping the wheels of supply moving, these sentiments are not always reflected in the realities of what workers have to deal with behind the wheel or when making deliveries. Some French haulage companies have complained that their drivers – often unable to obtain protective medical equipment – are sometimes ostracised at the places they deliver to, having to deal with closed bathrooms and shower facilities at rest areas.
“It’s becoming very difficult to maintain a basic level of hygiene, to eat,” said one 32-year-old driver based in France’s north eastern department of Haute-Marne. In Germany, the Logistics Alliance has reported similar issues. “It would be good if the public’s gratitude were reflected in the daily treatment of the drivers,” the organisation’s spokesman said.
The shape of the EU’s pandemic relief fund remains to be seen in its entirety. But with support to business being one of the fund’s primary functions, the cost of maintaining European logistics on land, sea, and air, both during and after this pandemic, is likely to be high.