A New World Order!
The world has changed at an unprecedented rate over the past few months as a new world order sets in a post the spread of Covid-19! At the time of publishing this document, there are 256,000+ deaths reported out of an estimated 3.65 million confirmed cases worldwide. The impact of this pandemic will have long term implications on many aspects of business, trade, well-being, and human consumption behavior.
Impact on regional Supply Chain & Road Freight Supply chain and logistics are in the center of this new world order as social distancing, quarantine measures and hygiene have impacts on various industries, economies, and communities. The supply chains in a globalized world are uniquely interdependent. At TruKKer, we have witnessed evolving challenges as the SARS-CoV-2 has spread from China to the rest of the world. During February and March, as the Gulf region was witnessing a few cases of infections, we had clients in Saudi Arabia and UAE complain about delayed imports of raw material from China. The situation changed rapidly by the start of the second quarter as regional supply chains got affected by severe lockdowns being imposed in all major cities across the two largest Gulf Arab economies. The problem was no longer the delays of supplies from China & Europe but the ability to deliver finished goods and products within the region due to impacts on production and mobility restrictions. The last mile supply witnessed severe stress due to the sudden rise in e-commerce consumption, as malls were shut down and consumption went to online stores.
There is no doubt that demand destruction due to the lockdowns has impacted the region with the Purchasing Managers’ Index reading below threshold of 50, indication contraction, for both KSA and UAE.
The Batha – Ghweifat road border
In early April, Saudi Arabia and the United Arab Emirates shut down the movement of cargo across the road border except for essential commodities, primarily food, pharmaceuticals, and humanitarian cargo. This has caused huge impacts on manufacturing, trade, and infrastructure sectors given the land border between the two countries witness daily traffic of estimated 1500+ trailer trucks. Jebel Ali, one of the largest ports in the region, could not be used for imports by Saudi industries, and shifts in the shipping industry to adapt to such changes are slow.
TruKKer continued to service all its 300+ clients and supported process shifts where cargo started moving from road freight to sea-freight, especially for end markets like FMCG and commodities. However, transportation rates have spiked, impacting costs at a time when consumption has been eroding for most discretionary products. Freight cost of moving twenty-six pallets from Jebel Ali to Jeddah via sea vs road has seen an average increase of approximately 46% in transportation costs.
We estimate buildup of a massive stockpile of general cargo including construction materials, project cargo, oil & gas equipment, metals, and patches due to higher transportation costs through alternate means like sea or air. Uncertainty continues as the authorities do their best to prevent the spread of the virus. TruKKer has been working closely with the regulators and has started trials to facilitate road freight across the Batha-Ghweifat border, while complying with the quarantine regulations. We anticipate a solution for palletized cargo within the next few days, followed by other general cargo moving between UAE & KSA.
There are further delays anticipated in normalization of UAE to Kuwait, Bahrain and Jordan lanes. The UAE & Oman border has remained operational most of this time, with ad-hoc restrictions in the Saudi to Bahrain, Kuwait and Jordan lanes.
In our last-mile product, we have witnessed increased consumption during March and then a distinct shift towards online consumption from physical retail stores in April. TruKKer’s last mile delivery of big & bulky has continued to grow with highly digitized solutions and multiple integration features being the key differentiator.
Domestic Cargo Movements
The domestic road freight market in GCC including port traffic has witnessed some slow down due to the mobility restrictions and impact from reduced global trade and consumption. We expect this to recover moderately as the economies take gradual steps towards easing the lockdowns. TruKKer’s Egypt business has continued to show bumper growth month on month with expansion across five locations within the first quarter and targeted a hundred percent growth per quarter. Domestic distribution demand from our food, perishables, FMCG, and hygiene product clients spiked in March as households attempted to stock up and then normalized in April with ongoing consistent demands. The slowdown of demand is being witnessed in petchem, hard commodities, consumer durables, and large CAPEX products.
Opportunity in Distress!
TruKKer senior management and account managers has been engaging with most of our clients to understand their challenges and work with them to create solutions. One consistent feedback from majority of the clients have been the sudden rise in digital transformation ambitions.
The adoption of TruKKer Pulse, the industry’s most advanced digital freight interface, and MIS has increased significantly, and our product teams are working on multiple ERP integration projects where we connect with clients for automated dispatch, monitoring, and fulfillment records along with advanced analytics. Even medium-sized clients that resisted change are welcoming rapid digitization towards 100% paperless transactions. TruKKer will be announcing a few strategic collaborations over the summer to further improve on our product offerings and convenience-driven solutions for our users. Our suppliers will soon benefit from an advanced but simple asset management solution, focused on increased utilization and reduced operating costs. Small transporters are also benefitting from paperless registrations, multiple electronic communication channels in addition to our driver app. Soon, our regular drivers will benefit from instant electronic payments.
We feel that digital freight platforms like TruKKer will have an advantage over traditional road freight companies, as clients face increased pressure to lower costs without compromising reliability.
Tomorrow, Next week and Next Month
Out of all the uncertainties, one fact is certain is that no one can predict what lies ahead tomorrow in the short and medium term. There is no precedence or standard operating procedure for the current state of the world. However, with easing lockdowns there are signs of stabilization after rapid declines.
The GCC region is going to combat a double whammy due to record low oil prices and the resultant impact on public sector spending and budget cuts.
We anticipate a faster recovery in the logistics and supply chain sector as lock-downs ease across the world. If the trends from China are indicative of what lies ahead for other parts of the global economy, supply chain and related logistics sectors will lead the economic recovery.
TruKKer is optimistic of the ability of the region’s leadership and its citizens to survive this challenge and come out stronger like we have in the past.
TruKKer’s teams and all its twelve offices have been operational throughout the crisis and we thank the courage of our teams and drivers for their constant resilience during these testing times.
Like all bad times, this too shall pass!