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Logistics leads business resumption: nearly 20% freight transport activities have been restored in Hubei Province

2020/03/13

Reposted from: 21st Century Business Herald

"This curve represents the national (freight traffic) which has now been restored to nearly 80%, and this curve represents that in Hubei Province, merely 18% at the highest," said G7 CFO Zhang Jielong to the 21st Century Business Herald, pointing to the latest freight statistics chart. Located at the center of the pandemic outbreak, the Hubei Province has placed all in-province "traffic elements", namely people, vehicles and roads, under tight control since the lockdown, and the logistics market there has remained sluggish ever since. The resumption rate of full truckload (FTL) freight traffic between Wuhan and other main cities in Hubei Province hovered at 8%-10% throughout February. The rate began to rise in March, reaching 18% on March 9. The resumption rate of long-haul FTL freight traffic from other places in China to Hubei Province has remained around merely 6%.

As a leading Internet of Things (IoT) freight service platform in China, G7 bridges providers of every aspect of logistics and production, in the service of more than 500 major cargo owners and logistics companies, more than 70,000 growth truck fleets, and more than 1 million truckers in China. As of the end of 2019, G7 registered connections with more than 1.4 million vehicles and 7,000 filling stations, tracking more than 130 million kilometers of truck mileage according to G7's average daily statistics. Therefore, G7's data boasts a high reference value for accurate reflection of the current status of the logistics industry.

Despite the lower traffic, signs of recovery have been sparkling across the province. Logistics and express companies such as Deppon Express, SF Express and China Post have all started to prepare for taking delivery orders and normalizing operations. Deppon announced on March 10 that it would promote full business resumption in Hubei. However, express companies such as STO Express and ZTO Express are still waiting for approval of their applications for business resumption in Hubei Province.

Logistics Goes First for Business Resumption

Logistics Goes First for Business Resumption

Resumption of economic activities relies on the "blood supply" enabled by logistics. Gao Gao, deputy secretary-general of the National Development and Reform Commission of China, is clearly aware of this. He pointed out, at the press conference of the Joint Prevention and Control Mechanism of the State Council on March 6, that sluggish logistics operations are not conducive to the orderly resumption of business and production of other industries in both the current and the next stages. For this reason, various national ministries and departments have been taking measures to normalize transportation and logistics in the past month in parallel while sustaining strict prevention and control of COVID-19.

G7's data is also directly reported to the National Development and Reform Commission and the Ministry of Transport for reference. According to G7's latest logistics resumption data, as of 23:00 on March 11, the national long-haul FTL freight traffic has been restored to 77.2% of that in the peak season of November last year (hereinafter referred to as "last year"), a rise of 5.6% over that on the previous day. The national less-than-load (LTL) logistics traffic was 69.5% of that last year, a rise of 2.6% over that on the previous day. 344 large public logistics parks in China registered a throughput of over 30% of that last year, accounting for 93% of all large public parks nationwide, while 336 registered a throughput of more than 50% of that last year, accounting for 90%, and 284 recorded a throughput of more than 70% of that last year, accounting for 76%. The freight traffic of transit stations run by major express companies in the nation was 64% of that in the same period last year, and that of transit stations run by large-scale express companies was 69% of that in the same period last year.

Although light dawns on business and production resumption, "we have also noticed that logistics companies, facing challenges of varying degrees, have yet to recover to their designed capacities after the resumption, and that the actual operation rates of some companies are even less than half of their fully-operational levels," said Gao, admitting that on the one hand, some places introduced regulations to quarantine returning non-local employees of companies including logistics ones for further observations, which has led to a shortage of human resources in the short term, and on the other hand, the entire logistics market is also in recovery as other sectors resume their business and production.

Hubei province showed the worst recovery of the logistics sector nationwide due to its rigid pandemic lockdown. The long-haul FTL freight traffic to Hubei Province from other places in China was merely 7% of that last year, and the vehicle freight traffic from other main cities in the province to Wuhan was merely 17% of that last year. Specifically, only four major public logistics parks in Hubei have been restored to 10% of their throughput last year.

The reporter also learned that since the lockdown of Wuhan on January 23, the freight traffic in Hubei Province has plummeted to as low as merely 3% of that last year. Except medical supplies and living necessities, the logistics activities of almost all other cargoes were suspended. However, the national logistics activities regained vitality in March, and those in Hubei also started to show signs of recovery.

Changes in the Supplies Transported

This change is a slow and gradual process.

Previously, most of the supplies transported to Hubei Province from across China and those within the province were medical supplies and living necessities. According to the latest statistics of the transportation authority, 18,600 tons of anti-pandemic materials and living necessities, as well as 24,000 tons of production materials such as thermal coal and fuel oil were transported to Hubei by railway, highway, waterway, civil aviation, postal express and other methods on March 10. From January 27 to March 10, a total of 753,000 tons of anti-pandemic materials and living necessities, as well as 1.303 million tons of production materials such as thermal coal and fuel oil were delivered to Hubei Province.

Full Truck Alliance (FTA)'s Freight Big Data shows that from December 13, 2019, to January 12, 2020, the cargoes into Hubei were primarily building materials, food and beverages, coal and minerals, timber, and express parcels. However, the cargoes into Hubei from January 13 to February 12, 2020, changed significantly, with vegetables, agricultural materials, fruits, food and beverages, and express parcels ranking the top five. Specifically, vegetables accounted for 10.4% of all the cargoes transported into Hubei, taking the first place on the list of essential supplies. Meanwhile, fast moving consumer goods (FMCG) and medicines also accounted for high proportions.

However, the rankings have changed since March. According to Full Truck Alliance (FTA)'s Freight Big Data for the period from March 1 to March 6, the top five types of supplies transported into Hubei province were still vegetables (24.27%), food and beverages (9.90%), fruits (7.28%), agricultural materials (4.53%), and express parcels (4.27%), and the share of the top-ranking vegetables on the essential supplies list doubled again. This demonstrates that vegetables, food and other materials remain the major supplies transported into Wuhan.

Wang Cuiyi, senior manager of public affairs in SF Express, told the 21st Century Business Herald that SF Express launched a rush-aid transport campaign on January 23 and has been working on it continuously for more than 40 days ever since. The company pooled together its resources for quick responses, augmented its air capacity and resources, opened air channels for drones and optimized its front-end operation models. During this period, SF Express has operated more than 170 aid flights, carrying cumulatively more than 4,000 tons of anti-pandemic supplies. It has also operated nearly 1,600 trains to transport a total of more than 8,000 tons of cargoes. In total, SF Express has transported more than 100 million parcels to Hubei Province through its airway and land transport network. In this extraordinary period, SF Express focused on the delivery of medical and anti-pandemic supplies to improve the transport efficiency, according to Wang. "We made some statistics during the pandemic period. Among supplies transported to Hubei, living necessities and anti-pandemic materials accounted for nearly 80%," said Wang Cuiyi, "The remaining 20% included store distribution of hospital materials, medicines, and food, as well as collective deliveries of aid supplies from other provinces to Hubei."

China Post's missions in Hubei Province, especially in Wuhan, were more challenging, because it was responsible for transporting the medical supplies and other materials donated by Red Cross Society of China Hubei Branch and Hubei Charity Federation to a dozen of hospitals including Wuhan Tongji Hospital, Huoshenshan Hospital, Leishenshan Hospital, Hubei General Hospital, Wuhan Asia Heart Hospital, and Fangcang shelter hospitals. According to a briefing, as of March 5, the logistics department of China Post has organized a total of 256 trains and processed 74,540 pieces of medical supplies, totaling 1,713 tons. In addition, China Post provided logistics and transportation services to medical material suppliers including Jointown Pharmaceutical Group, Sinopharm Group, China Resources Group, Hubei Pharmaceutical Group, Shanghai Pharmaceuticals Group, Humanwell Healthcare (Group), and Jianmin Pharmaceutical Group. In March 5 alone, the logistics department of China Post has organized 38 trains and processed 7,580 pieces of medical supplies, totaling 259 tons. The company was also responsible for intra-city transfers of daily necessities sent to Wuhan from across the nation, such as Nanfeng tangerines, Deqingyuan eggs, Hedian selenium-rich mineral water, and Baiwei vegetable packages.

Growing Transportation Demand for Production Materials

As the pandemic gradually comes under control, business and production resumption has been brought onto the agenda of companies in Hubei Province, driving up the logistics demand for production materials. However, Hubei Province has not fully lifted its ban due to multiple concerns, thus general public transport and resources cannot be restored in a quick and all-round manner, making it impossible to resolve resource shortage in a short term.

Located in Xiaogan, Hubei, Hanchuan county is a well-known production base of baby strollers. Hubei Belecoo Children's Products, a mother & baby e-commerce market player, was faced with the express delivery constraints after its recent resumption. It had thousands of strollers to deliver on the very first day of business reopening, but many express couriers hadn't resumed operations yet. Despite the great number of orders, Belecoo was unable to fulfill them.

It was not unusual to notice similar cases since March. An insider of logistics sector in Wuhan said that the accumulated production and consumption demands in the industry will soon be fully unleashed in the form of backlog of orders in urgent need for prompt delivery, highlighting the contradiction between the explosive demand and transportation undercapacity.

Gao also admitted that production logistics features wide coverage and high throughput, and may require coordination between industries and between upstream and downstream sectors. In view of this, the recovery of production logistics is weaker than that of living supplies logistics. Moreover, cross-regional mobility is an inherent characteristic of the logistics industry, but transport and mobility control measures are vital for pandemic prevention and control, which explains the large impact of the pandemic on the logistic industry from an objective perspective.

Given this, "the focus in the next step is to promote the business and production resumption in various industries on the industrial chains and in upstream and downstream sectors, as well as inter-regional coordination, as many industrial chains are located in different regions," said Gao, proposing the principle of zoning and grading for accurate and orderly resumption.

The logistics companies in Hubei Province are mostly direct-sales units, such as China Post, SF Express, Suning, JD.com and Deppon Express. Deppon Express was recently authorized to carry out logistics services in Hubei province, while the applications by other companies, such as STO Express, YTO Express, ZTO Express, and Yunda Express, are still pending for approval.

Deppon Express announced on March 10 that it will promote a full resumption of business in Hubei province, and start to take delivery and transfer orders in various cities at all levels. It is reported that Deppon Express has reopened more than 100 express delivery points in Hubei Province for normal operations, recording a resumption rate of 50% in the local area.

Peng Sheng, Xiaogan regional manager of Deppon, said that Hubei province has a high demand for logistics services, especially from e-commerce sellers who can resume operations easily but lack express delivery services. In view of this, Deppon contacted Belecoo in the first time when it initiated business resumption in Hubei and nationwide as well, and sent out 1,900 strollers within one day. This is a great example showing Deppon Express's solid resumption support to e-commerce companies in Hubei.

SF Express is also actively coordinating vehicle accessibility and personnel returning to work. According to Wang Cuiyi, as of now, more than 90% of SF Express' outlets in Hubei has resumed services, except in some areas where resumption is not feasible due to regulatory restrictions. However, there are still problems remaining unsolved, such as some employees outside the city were still unable to return to work due to the traffic control, and the end distribution and traffic limitations brought by enclosed residential communities. China Post regards the crisis as an opportunity. According to an insider in China Post, the logistics department assigns dedicated personnel to regularly collect and summarize the data on the timing of upstream and downstream resumption and capacity requirements to learn customer needs and downstream capacities in real time. Targeting the downstream transportation undercapacity in some areas, China Post arranges its own vehicles to bridge the capacity gap and ensure normal operations of its upstream customers after the resumption. Meanwhile, China Post also made targeted efforts with a clear focus to support the booming industries and markets such as the third-party medicine logistics.

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