China landside challenges affecting supply chains

The newest wave of Covid-19 in China has had large impacts on supply chains. With China continuing its dynamic zero Covid policy, Shanghai, the world’s largest port and China’s financial hub, has been in lockdown for the past 7 weeks, with 26 million residents sequestered in their homes. However, Shanghai ports, Waigaoqiao and Yangshan, have remained operational with vessel operations, yard handling and gate-in-and-out.

During the month of May, the daily infection rate has slowed, with the city of millions seeing 3 digit new cases daily. Statistically speaking, the virus is under control, but the disruptions felt in from April to May will continue to have an effect all over the world in the coming months. Getting back to “normal” will have to wait.

Keeping the wheels rolling

Trucking, the main component of inland services, accounts for 3/4 of freight transportation. It underpins China’s economic order, but with the newest wave of the virus, is now under pressure.

Not only has the virus affected truckers’ health, it has also affected their economic position. Drivers now face higher costs and more uncertainty than ever. With the concern of virus spreading, negative Covid Test results 48 hours prior to travelling, is a must. Additionally, drivers’ routes must be recorded by the health app and they may experience detention after delivery. As a result of this, many truckers tried to remove themselves from the Yangtze Delta Region, one of the high-risk areas.

Currently, the amount of time truckers have spent on the open road in April 2022 comparatively to that of spent in March 2022, shows a decrease of 70%.

Given the context, customers are having to wait longer lead times, with 3-5 days delay. Factories in the region are affected as well, resulting in further delays down the supply chain.

Weathering the storm

Shanghai, like the rest of the greater China region, has demonstrated it’s quick thinking and resilience by swiftly adapting to the situation. Authorities have implemented initiatives to ensure the smooth restarting of businesses and has done much to try to mitigate impacts to business overall. Through collaboration of the local authorities and Shanghai international Port Group, customer’s import pick-up has been recovered by around 75% since 15 April.

To ensure that the landside service of trucking run as efficiently as possible, the central government has instructed that highways must be kept open and unobstructed, especially ensuring obstacles on the road are cleared immediately between Shanghai and across multiple provinces. Meanwhile, a National Pass was launched on 18 April, helping smooth the way through check points. With the pass, truck drivers just needs to show the health code before immediate being released. Other approaches have also been adopted, including the swapping drivers before the last portion of the journey, to increase efficiency.

Additionally, where possible it the changing from inland services to ocean, has been encouraged and implemented, connecting Yangshan and Waigaoqiao to the Yangzte Delta Region ports, and offering companies that ability to transfer containers by water rather than road. China Railway Shanghai Bureau has had railway services within the Yangtze Delta Region working around the clock to mitigate the impact of the pandemic, and has issued a “Green Pass” to ensure smoother inland logistical services.

Solutions through action

As of April, the government instated a policy that allowed for the creation of more than 20 corridors of “land to water” alternative transportation solutions, covering the hinterland of East China, firming up stability in supply chain. Additionally, cost-saving rail services are another alternative the customers can expect, making transportation capacity in enterprises more reliable whilst infusing agility into supply chains.

With support from the government, Shanghai ports have seen improvement in waiting time, lowering it to 1-2 days (with only several vessels in queue for each terminal). Other ports are also working normally, with little to no impact of the local Covid situation, such as Ningbo, indicating that there is more stability ahead.