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BIA-Brukerstyrt innovasjonsarena

CONSIGN - Effects of Covid-19 on reliability Of National Supply In a Global Nexus

Alternative title: CONSIGN - Effekter av Covid-19 på nasjonal forsyningssikkerhet i en global sammenheng

Awarded: NOK 4.2 mill.

CONSIGN’s main objective has been to collect real-time experiences from the COVID-19 pandemic’s impact on freight transport and reliability of supply for Norway’s transport-dependent industries, and as a base for developing more robust supply chains. In cooperation with ten industry partners, we studied the pandemic’s effects on security of supply, adaptability, costs, and induced innovation at large national transport buyers and transport firms with global networks. Immediately after the first societal lockdown, and until the first reopening, road traffic was reduced considerably, but not for trucks. Still, truck transport was affected by the pandemic in many ways. The first challenge was related to border-crossings and had to be resolved fast, by defining freight transport as societally critical and exempting drivers from country entrance restrictions. Nevertheless, both transport buyers and transporters experienced much uncertainty in the period after the first lockdown, resulting in temporary layoffs, delivery challenges, payment issues for customers, and extensive fears of bankruptcy. Simultaneously, consumers started hoarding, yielding a short demand boom and sold-out situations. However, this situation stabilized after a while, and bankruptcy levels during the pandemic have not been higher than normal. In-depth analyses of truck movements show that activity remained relatively stable, but with large differences between segments. Data from trucks’ on-board systems show a trend towards more, but shorter stops per vehicle, especially in urban areas. Reduced road traffic after the lockdown improved conditions for delivery. After reopenings in 2021, increased traffic due to reduced public transport use resulted in driving taking more time, requiring better planning, and yielding delivery reliability challenges. Analyses of developments in transport demand were based on 2019/2020 shipment data from the three largest freight forwarders in Norway (ca. 180 mill. shipments): Analyses show temporary reductions in deliveries B2B (business-to-business) immediately after the first lockdown, but increases back to 2019 levels during summer and autumn 2020. Especially parcel volumes B2B fell, and were not compensated for through increases in other segments. Simultaneously, deliveries to consumers (B2C) increased strongly right after the lockdown, especially within the parcel segment, which has maintained high levels since. With new restrictions and lockdowns during autumn 2020, especially around Oslo, the parcel segment increased even more, reaching record volumes around Christmas. Demand for home deliveries increased particularly, not least for groceries. E-commerce continued to increase, reaching record volumes in 2021, followed by a smaller reduction in 2022. Increased e-commerce resulted in increased parcel distribution and more driving with vans, but increases have not been so large that they are visible in national statistics for vans in total. The pandemic has sped-up the need for and implementation of new, more flexible delivery solutions. Transport volumes for industry and wholesale trade were somewhat reduced, while especially retail saw increased volumes, transported by freight forwarders. In total, however, demand for freight transport did not change considerably, and increases have mostly been in the number of shipments. The vulnerability of production and warehouses to infection outbreaks was recognized early-on, and measures introduced accordingly. Internationally, particularly container shipping and airfreight faced challenges, resulting in large rate increases, capacity challenges, and long-term consequences. Container transport challenges started with lockdowns in China and reduced capacity at important global ports. This resulted in imbalances in the entire value chain and large harbor delays, while simultaneously, demand increased globally. The Suez Channel blockage further increased these challenges. For air freight, large passenger route reductions strongly reduced belly capacity, leading to conversions of passenger planes to freight planes. Container and air freight challenges resulted in increased rail transport from China to Europe. For truck transport to/from Norway, consequences were less severe: for border-crossing transport, the largest delays occurred when borders were re-opened for passenger traffic. An increasing lack of both Norwegian and foreign drivers has started to yield structural challenges, especially from late 2021 onwards; International competition for foreign drivers and regularly changing travel restrictions caused uncertainty among foreign drivers doing shifts in Norway. As a result, foreign drivers started focusing more on the European market. Delivery times for new trucks and other transport equipment have increased due to a lack of critical parts. This is again a consequence of pandemic-induced demand changes, but has become more precarious with the war in Ukraine.

Scientifically, CONSIGN has resulted in a published article (and another in review), methodological development, bachelor’s and master’s theses in the field (in collaboration with the project), current and future curriculum in bachelor and master studies at BI Norwegian Business School and, potentially, case content in a learning book. In addition to several methodological developments within the project (hereunder with respect to use of vehicle logging data, shipment data, and supply chain risk modelling), the project has provided inspiration for (scientific) work on the container shipping industry at TØI and has opened up for future (scientific) work on similar themes, with one project on fuel preparedness already ongoing. CONSIGN has resulted in insights into a variety of effects following disruptions. For firms, insights, lessons and, in part, methodology, can contribute to improved future preparedness and contingency planning and lift transport to a higher level. Examples include identified strengths, weaknesses, opportunities, threats and success factors in approaches, both for individual firms and generally. This, in turn, can improve robustness, decrease uncertainty, and help prioritizing. For the public sector, the project provided relevant insights for design/ implementation of policy measures and into weak spots. For civil society, the above can contribute to reducing negative effects, e.g. economically or regarding job security and uncertainty, while allowing for improved robustness of supply chains. Results have also yielded input for the Transport Authorities’ work towards the next National Transport Plan. On the one hand, our research has shown that despite major challenges, many firms have coped relatively well with pandemic disruptions. At the same time, some industries have been hit hard, while others grew during the pandemic, particularly because of changes in consumption patterns in society. CONSIGN has provided a range of insights on what went well during the pandemic and on areas for improvements, and a range of insights that could help achieve such improvements. This goes both for risks and disruptions that have materialized, but perhaps particularly for risks that, had they materialized, would likely have had more pronounced effects (e.g. if an outbreak at a peripheral facility, instead had occurred at a critical central facility). The research also provides concrete risk management steps (a sort of “checklist”) that can help improve risk approaches and contingency plans. However, research has also shown that while contingency plans are important, it is impossible to prepare for the unforeseen. Important lessons among the firms have been that ensuring production has been the most important and that dividing workers into cohorts helped to limit consequences of infection outbreaks.

The COVID-19 pandemic has led to major changes and disruptions for Norwegian business and industry, not in the least for freight transport. With CONSIGN, ramifications of the current crisis will be studied through three veins: 1) analysis of real-time and time-series data from fleet management systems for a large sample of trucks; 2) screening of changes in economic activity in different sectors based on detailed shipment data from the three largest freight forwarders in Norway, and 3) in-depth case studies among important actors within Norwegian transport and supply chains. Combined, this yields insights into economic and cost impacts of disruptions on Norwegian freight transport and transport-dependent industries in the economy as a whole, reliability of supply for the Norwegian society and approaches to tackle transport and supply chain challenges. CONSIGN will also study effects of public support measures, by assessing the timing of changes in activity levels against the timing of policy measures and restrictions. Further, CONSIGN will assess whether changes are characterized by short-term shocks, or stabilize at new levels. The latter can provide insights into response time and adaptability for firms and public authorities. Through collaboration with ten major actors from industry, CONSIGN is strongly anchored with practice. This ensures relevant and real life insights, and facilitates very comprehensive analyses that cover a large share of the Norwegian economy and supply chains across a broad range of industries, all transport modes, and with a high level of detail both in geography and time. Due to the abruptness of disruptions and their nature, the corona situation allows for a unique stress test of the robustness of supply chains for Norwegian society and business, and understanding the veins through which the current situation affects transport and reliability of supply is crucial for the design of effective political responses and policy measures.

Publications from Cristin

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BIA-Brukerstyrt innovasjonsarena