Wed, Apr 20, 2022 page11

• China’s closed-loop plan not the panacea it seems

  ‘FACING CHALLENGES’: A German trade delegation said that companies might be forced to shut, as supply of raw materials has been compromised due to logistics snarls

  • Bloomberg
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  Even those companies in China whose factories are operating under so-called closed-loop systems could be forced to stop work due to parts shortages or logistical challenges that make moving people and goods around the country nearly impossible, a European chamber of commerce has said.

  “A few companies are running in closed-loop production now. Those companies are facing challenges and may shut down very soon due to lack of logistics and workers,” Maximilian Butek, chief representative at the Delegation of German Industry & Commerce in Shanghai said in a LinkedIn post on Monday.

  “Their workers for closed-loop production have been working for more than three weeks and need to be replaced,” Butek asid.

  

  Trucks pass through a checkpoint on a highway leading from Shanghai on March 30.

  Photo: Bloomberg

  Butek added that most of his association’s members cannot “have production sites running, as they cannot get raw materials delivered and cannot deliver their products to their customers. The logistics in Shanghai is not working.”

  Officials in China’s financial hub have been encouraging companies to restart output that was halted due to the city’s strict COVID-19 lockdowns by using closed-loop systems in which workers live on site at their factories.

  While some, such as Tesla Inc and Quanta Computer Inc (廣達電腦), which makes laptops for Apple Inc, have restarted operations, the experience has not been all smooth.

  Tesla only has inventory for just more than two weeks based on its new closed-loop schedule, a person familiar with the matter said, while workers locked in Volkswagen AG’s Shanghai factory do not have sufficient supply of the auto parts needed to make vehicles.

  Meanwhile, cargo deliveries into Shanghai Pudong International Airport are becoming backed up, Taipei-based air and ocean freight forwarder and logistics specialist Dimerco Express Corp (中菲行) said.

  Prior to the city’s lockdown, about 1,000 shipments could arrive per day and about 80 percent would be picked up by truck, said Kathy Liu (劉辰), Dimerco’s director of global sales and marketing.

  However, because there are not enough trucks to fetch goods, that pick-up rate has slumped to just 10 percent, she said.

  “There are more and more shipments accumulating at the warehouse or at the freight forwarders’ bonded warehouse,” Liu said. “So that’s caused a lot of problems, because we don’t have enough space to store all those pending shipments, but they keep arriving.”

  The pain point remains cross-provincial road transportation and the different locally imposed restrictions and health requirements, requiring truck drivers to manage an array of policies.

  Truckers wanting to move between Shanghai and Jiangsu Province to the north were typically having to wait two eo three hours each time to take COVID-19 tests, Dimerco said.

  Earlier this month, Beijing required that highways be kept open and unobstructed.

  The Chinese Ministry of Transport ordered that no COVID-19 testing checkpoints be set up so that traffic on the main lanes of highways remained smooth.

  Other logistical problems still exist causing delays, Dimerco said.

  “A lot of truck drivers see the potential risk, so they’re not willing to take the orders for these routes,” Liu said. “This is a very challenging period, not only for us, but also for those like couriers or online e-commerce companies.”

  Dimerco has only managed to keep its Shanghai warehouse open by allowing staff to sleep in the facility since March 28.

  The supply and logistics problems are not contained to Shanghai.

  Butek said the delegation’s companies in the Yangtze River Delta had found that logistics are not working there either, “since different cities have different rules.”

  “For technical staff, which need to execute quality assessments or maintenance of machines in other parts of China, it is almost impossible to commute or travel,” he said.

  “Customers might turn to other sources in China if the situation doesn’t change soon,” he added.
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