Saint-Gobain glass delivery to EMAVER (83-La Garde France) during Covid-19
Glass hauliers and logisticians in danger!
The glass market is at a standstill. The disorganization, the fall in activity and the consequences are much more serious and deeper than the previous crisis of 2008. The subcontractors in the glass supply chain all run the risk of disappearing.
Last point on the economy
As we said in our previous article, the glass market has completely collapsed. The Coronavirus crisis has hit the two natural markets of the construction and automotive markets hard.
In France, the economic data presented by INSEE on March 26, 2020, informs us that the construction market has fallen by 89% (more than 90% for renovation). This fall is much stronger than the average of other markets (including food) which points to 65%!
Across Europe, auto factories are on short-time work: Mercedes, VW, Scania, Jungheinrich to name a few brands in the automotive, truck and light utility vehicle industries. All announced extensions after Easter.
For this, all resort to partial unemployment and stop their production with the exception of a few rare exceptions for orders which must be fulfilled. For those who have a stock sale, the transport-logistics activities can be maintained but greatly reduced.
With all the customers at a standstill, the players in the glass industry have no choice but to go back and wait for the recovery.
What recovery scenario ?
It is unfortunately obvious that the scenario of a short-term recovery is excluded; the confinement will last a few more weeks and the second half of 2020 seems a fairly probable horizon.
Likewise, the scenario of a strong recovery seems unrealistic. After the end of containment, it will take months or even years to recover supply and demand in line with market standards.
The recovery of glass players in a gloomy market will generate overcapacity which will lower prices. The partial recovery will lead to disorganization and under-productivity players who will increase costs.
Those who have managed to resist the period of confinement will have to face the period of recovery in scissors. The destabilization of the market will be profound.
Update on the situation of glass transporters and logisticians
The same goes for transport and logistics subcontractors. Those who are still working do so in a degraded manner to fulfill the few orders that remain. They cannot cover their fixed costs. They all suffer financial losses whether they are totally arrested or work partially.
Almost all of them resort to the technical unemployment of their employees: truck drivers, or logistics operators. Their customers' payment terms are lengthened because they too face the same late payment problems.
The situation of their cash is therefore very critical because it must absorb the fall in turnover, the advance of wages, current charges and the delay in collecting debts.
This first stage of confinement is therefore extremely perilous for each of them.
What future for logistics sub-contractors?
Returning to business will also be a dangerous period for the cashflow of transport and logistics operators. In addition to the above problems, it will have to absorb the productivity losses and the fall in asset valuation.
The overproduction of glass will lead to a reduction in delivery distances which will have a strong impact on transport optimizations. The resulting increase in non-revenue kilometers will be partially offset by the shippers; but the rest will be borne by the carriers and will increase the cost of driving. The scissors effect (lower turnover and higher costs) will be a crucial problem.
The reduction in the kilometers to be traveled will cause excess transport capacity in the world of glass. This should lead to a collapse in the market for used transport equipment: trucks, trailers and transport equipment should see their selling prices fall. The provisions for asset depreciation will add to the losses recorded in the income statement.
What are the emergencies now?
The disorganization, the fall in activity and the consequences are much more serious and deeper than the previous crisis of 2008. The subcontractors in the glass supply chain all run the risk of disappearing either by leaving the profession as long as it there is still time either by collapsing on themselves because of bloodless cash.
It is urgent because the supply chain collapse will most certainly be systemic. Subcontractors will no longer be able to do it alone; shippers will have to help them by integrating their operational and financial issues into their process.
It is therefore urgent to find new tools to help the sector prepare, store, transport and deliver the glass to the market. These tools should make it possible to reduce the efficiency losses generated by the decrease in volumes, to increase collaboration between partners to speed up payment flows, for example.
There is an urgent need to obtain long-term external support: government aid (national and European) will be essential to ensure the continuity of operations because the lack of liquidity will be crucial throughout the period.
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