The COVID-19 coronavirus situation is evolving rapidly, creating considerable challenges for the logistics, supply chain, shipping and maritime sectors. According to insurers, the ripple effect of shutdown, triggered by the pandemic, will have a key impact on claims and compensation around the globe.
Sea News (SN) engaged in a discussion with Lina Jasutiene (LJ), Managing Director of Recoupex on supply chain woes, insurance claims, cargo abandonment and the way forward for managing business operations in a post COVID-19 scenario.The excerpts…
SN: Covid-19 has shook economies. What experiences do you have to share as a company?
LJ: No business has been immune to the crisis – with a profound impact on the freight and logistics industry. All indications point to a major reduction in economic activity will likely be a significant negative impact on the sector long beyond the current health crisis. It is great to note, that despite economic downturn leaders in the industry make highly-informed decisions to protect and support their employees and ensure that critical business operations are running to sustain the immediate and longer-term needs. The trend of restructuring business operations, making it more streamlined, and more cost-effective, we notice globally.
Recoupex is at the front line to help exporters, importers, freight forwarders inject at least some liquidity to their businesses by accelerating cargo claim compensation process and collecting due payments for the incidents that mainly took place before the pandemic.
When the economy slows down, logistic companies and even marine insurers look for ways to recoup losses which otherwise, due to high paced business environment would have been forgotten or offset. That’s why being purely digital, today Recoupex is more busy serving customers than before the pandemic.
SN: International supply chain grapples and undelivered goods piles at various ports around the world. Would speculating insurance avalanche be an over-estimation?
LJ: The global economic shock has erased consumer demand and stopped manufacturing in many parts of the world. But cargo has been steadily building up in warehouses, port terminals, and inland depots during the lockdown which result in a sharp increase in the number of abandoned containers as many consignees become unwilling or unable to take delivery of the cargo. We do not expect an increase in cargo insurance payments due to cargo abandonment. However, it is highly likely that Freight forwarders’ liability insurance will be affected when shippers and receivers abandon cargo, and Freight forwarders have to absorb all related costs.
SN: If we ask for a number, even approximately, how much cargo awaits reaching its destination? Which are the top 5 ports that have been impacted the most?
LJ: We have to remember, that shipments of urgent goods prioritizing food, medical, or pharmaceutical products are being transported. While temperature-sensitive cargo is moving, exporters have complained that exports of raw materials and non-essential goods are getting adversely impacted and are lying at ports. It is still difficult to estimate exact volumes of the cargo stuck at the transshipment ports or at the discharge. Ports do best they can to control the congestion.
China hosts two-thirds of the top 10 busiest ports in the world and meets more than 40% of the world maritime trade. Global ports show different degrees of vulnerability to the effects of the Coronavirus. However, ports that are highly dependent on Chinese imports are seeing sharp falls in activity. Outside of Chinese ports, Hamburg with a throughput of 30 % of cargo from China, Rotterdam – Europe’s largest port, Long Beach, LA, and Singapore.
The current decline in demand in Europe and North America will put downward pressure on port volumes also in the coming months, despite the fact that almost all ports have resumed activities recently.
SN: If you can share statistics on the rise in number of claims in last 5 months. Your thoughts on this?
LJ: Claims for losses related to abandoned cargo increased 50%, delayed payment collections from the overseas buyers increased 78% in comparison to the cargo claim levels we witnessed before the covid-19. The accumulation of unattended cargo in ports increases the threat of cargo pilferage cases. Non-critical perishables will be subject to increased transit time as temperature-controlled capacity is stretched, which might lead to cargo damage and an increase in claim numbers in the near future.
SN: How do you plan to deal with the losses arising out of the present scenario? What would be the major correctives/measures in this direction?
LJ: At Recoupex we are working towards acceleration, automation, and optimization of the processes. Companies should look for ways to simplify existing processes and adapt quickly to the new business environment.
SN: Among freight forwarders, Insurers and cargo owners, who is the worst hit and why?
LJ: All three are impacted separately and all together as highly linked to the global trade.
Freight forwarders have been operating on a paper-thin margin already before the pandemic. Impact on freight forwarders we will see through potential consolidation, with larger forwarders possibly buying up weakened smaller to mid-size forwarders facing bankruptcy in this economy.
Cargo owners, retailers, manufacturers are fighting to survive, forcing some to cut staff and break equipment leases and seek additional financing.
For marine insurers, a decline in trade and transportation volumes generally means less business. Uncertainty and interruptions in the supply chain may lead to a claim number increase. Warehouse overflow and congestion in port areas may cause additional losses e.g. pilferage.
SN: What can be damage control measure for the worse-hit and also the others?
LJ: There are a number of speculations- some say it would be far worse than what happened in 2009 crisis, some say it would be short-lived while there are some that claim that it would continue to cripple the world economies for years to come. Which one do you believe is right or if you have any other take of this?
I think it’s very difficult to really draw from any historical experience in this situation because it’s such a global impact and it is different. However, witnessing governments’ strong stance to revive economies and businesses’ focus on to what’s next, I am confident that the current crisis will be short-lived, but the lessons far-reaching.
SN: Uncertain are the times today, in this situation what is that one thing you would want to tell the industry people?
LJ: Do not underestimate the importance of dual sourcing. Whether it may require two different ocean-going logistics companies, two or more different manufacturers or two different carriers or transportation companies, several preferred vendors, employees with more than 1 skill. Logistics/supply chain industries have an intrinsic habit to adapt quickly, dual sourcing approach will enable them to adjust the business processes faster.
SN: Any other detail you wish to share with our readers?
LJ: No-one can say how quickly shipping activity will return to normal. While everyone in the industry is preparing to blast away with new offers, take this time to patch money leaking holes: claim compensation for cargo damages, uncollected payments, renegotiate prices, shift more employees to sales and automate or outsource tedious tasks, so you can continue to deliver value to your customers.
Brief Bio of Lina and Recoupex
Lina Jasutiene is an entrepreneur, international shipping Attorney, expert in marine insurance and cargo transportation with strong business acumen. Prior to founding Recoupex to fix cargo claims refund experience in global trade, Lina worked with one of the biggest shipping lines, where she witnessed first-hand the implications of unrecovered claims for cargo owners, traders and insurers.
Lina is passionate about merging technology and industry expertise to create a radically better customer experience and to substantially reduce losses for traders, cargo owners and insurers. Recoupex is a technology company helping customers globally to obtain the the compensation they are entitled to when cargo is lost or damaged in transit.
Sea News Feature, May 14