the oil is running out of space to be stored

As a habitant of this world, one can recognize that the Coronavirus is affecting the world’s economies, however this is not the unique crisis that nowadays threats the global economy. Before the boom of the pandemic there were clues which indicated that the oil was about to suffer a price crisis due to the disagreements between the producer countries members of the Organization of the Petroleum Exporting Countries (OPEC) and Russia.

Then, at the begging of the Covid-19 juncture the prices of the hydrocarbon started to drop also, so, these crises mixed and created an atmosphere of economic uncertainty for developing and developed countries. But how these crises interact one each other? Well the answer relies in the fact that both Russia and Saudi Arabia “opened the tap” in the production and started a price-war in a moment where the world is not demanding such amount of petroleum due to the coronavirus disease.

Oil prices

A long-lasting war is not affordable for small producers or high-cost producers like the United States. Additionally, the oil-based developing economies are facing challenges because with the current prices and lack of demand there is not enough money neither to cover the demands of a confined population nor paying the international debt. The analysts consider that in April some 6 million barrels per day might literally have nowhere to go.   

However, the countries do not want to be the first ones in turning off the production even when they are having loses, that could mean a supply glut so overwhelming that the world won’t have enough space to store it. Since the warehousing systems are designed to move the merchandise rather than store it for a long time; Goldman Sachs says that “the facilities, terminals, ships and pipelines could reach the capacity for the first time since 1998”.

Bulk oil storage tanks

This represents a challenge to the international logistic, which is trying to find ways to storage the oil which is not being sold in the market but that stills coming like if it was. For that purpose, the option of using the crude carrier vessels as floating storage, although these ones will not cover all the space needed to keep the potential surplus. The market recovery seems to be far, but the reality is that while the world fights back the Covid-19, there are other crisis that also threat the economy.

the importance of the rivers in the transportation

When we talk about the transportation through water in the logistics of the world we immediately think about the maritime carriage. However, before the development of this industry there was another way of moving merchandise which was developed even in the ancient Egypt when the Nile river was a crucial part of the economics of the empire and its later development around it.

Nile River

But the Egyptians were not the only civilization which used the rivers for logistic purposes. The romans used the Tiber to carry merchandise from Aventine or Umbria to Rome, although nowadays the river is no longer navigable, and it is mainly used for touristic purposes.

The Spanish empire also used the rivers across its territory in south America as well as in the Iberic peninsula. The conquerors used rivers like the Magdalena, located in the former viceroyalty of Nueva Granada (Ecuador, Colombia and Venezuela), to take out gold and other goods towards Caribbean see to then be transported to Europe; once in the peninsula, the Spanish used the Guadalquivir river to transport the goods inside the territory.

Guadalquivir river in XVIII century

The nowadays’ importance of the river transportation relies on the fact that it combines the advantages of the maritime transportation compared to other means of transport. If the river is navigable, it can transport huge amounts of merchandise with a lower cost than trucks. For example, the port of Rotterdam’s inland navigation connections can transport merchandise to Germany, France, Poland and even the Black see, by using waterways such as the Danubio river.   

Another example of inland navigation in Europe are the waterways developed by Germany, they use their principal rivers such as the Rhin or Elbe to transport merchandise in ships within the country, they have even developed infrastructure to improve the perform of the logistic in inner waterways. Germany has created a network of water channels that even have special bridges for the ships to better navigate (Kanalbrücken). The video posted below show the most important water bridge in Magdeburg.  

In the Americas rivers are also an important part of the logistic. Rivers such as the  Mississippi and Missouri in the United states, The Amazonas in Brazil, Colombia and Peru, The Plata in Argentina and Uruguay and the Magdalena in Colombia are important and growing transportation means for logistic operations in the continent.

Merchandise in Magdalena River (Colombia) and Mississippi river (USA)

El corte inglés distribution

This is a private video, just the ones with the link can see it.

The transportation during the Covid-19 crisis.

In these days of confinement, the uncertainty is the only thing which the people are thinking in, the time which this emergency is going to take to be solved is not clear and both the investors and the people are getting panicked, as a citizen myself I have seen and heard so many of my friends telling me that they need to get stocked. More than a hundred countries the shelves are being empty due to the panic shopping, people are taking all the goods like if this situation was the end of the world. The truth is that neither the coronavirus is the apocalypse, nor the supermarkets are going to get out of stock, they are well prepared with lots of inventory and safety stock.

Personal conversation with a friend of mine, few hours after the announcement of the emergency state in Colombia

But the investors seem to be as shocked as the natural people, all over the world the economies are suffering a new crisis, the stock markets are falling, and the companies are losing either money or value. This scenario is hitting the global commerce as well, and by doing so, the transportation and logistics industry is getting affected too. At the beginning of the illness the situation seemed to be under control and the commerce continued working as usual, however once the pandemic moved the epicentre to Europe, the fallout started.

Port with stocked Merchandise

Across the world the borders are being closed and although there are certain exceptions for the truck drivers, they don’t really know which documents are going to be asked to them for trespassing the earth borders. They state that the supply is warrantied, but the governments are not clear when talking about the requisites for having free mobility. Internationally speaking, there are merchandises stocked in Chinese ports which were produced before the breakout of the virus, although the situation is getting controlled in the homeland of the pandemic the principal destiny of these ones is Europe, which right now is in maximal alert. There is a 30% decrease in the container’s terminal activities, according to the “Asociación Nacional de Empresas Estibadoras”.

Even though the principal target of the exportations of china are Europe, the third party logistic is being also affected because the scale vessels are not able to stop in the European ports in order to continue to their main destinations. “About 40% of goods from China are in transit to third countries, so the crisis is not only limited to direct trade flows, but also causes the cancellation of stopovers of complete ships, and also reduces trade with other countries” for example, in Barcelona and Valencia 9 scales have been cancelled.

British Airways airplanes in London airport

Another affected industry is the air transportation, most of the flights have been cancelled and both, the cargo and the passengers demand has decreased. The airlines have lost huge amounts of money these days and most of them have cancelled operations while the virus is overcome. They are facing the most challenging situation on his history and are asking for some government help.

Queuing System in the coronavirus crisis.

These days the most important global new is the widespread that the coronavirus has had not only in Europe, but in the rest of the world. The social media right now is full of videos of empty cities due to the measures taken by de government of Spain in order to stop the fast-growing rate of the virus. Yet, there are some people saying that there is a panic state and there is no reason for taking such strict measurements because, in their words, the virus is not lethal, and it has got just a mortality rate of just 3%.

However. How much of truth does those comments have? Well, it certainly can be said that the mortality rate is low, but it is as weak as easy to spread, so the real problem relies on the capacity of the health system of the countries. The explanation of why a queue is created explain the principal issue of this pandemic threat: they appear due to variability and they do not disappear due to the saturation. In the big scale it means that the contagious ease of the virus will create a disruptive increasing demand for healthcare which cannot be handled due to the saturation and reduced capacity. There is no system in the world which can handle such amount of ill people.   

The logistic behind the flowers.

Have you ever thought in how the flowers in the international supermarkets arrive to the showcases? Well, if you don’t but you’d like to research a bit this post could give you some highlights of the awesome logistic chain that these colourful goods follow in the international market.

It is necessary to mention that this post is based on the logistic chain of the flowers produced in Colombia which is the second biggest exporter worldwide. In 2018 this product arrived to more than a hundred countries representing US$1460 million dollars, 260.000 tons spread in 60 different species and 1600 varieties.

The freshness and beauty of the Colombian flowers is wanted all over the world but behind the quality there is a whole machinery based on information and communication technologies, ancestral knowledge, and public policies which together as a gear works to ensure and warrantee the international quality of the product.

There are three different factors which are crucial for the product, these ones are: Technical capabilities maturity, which means the usage of information technologies within the process of the product which allows to have a documental logistic in order to trance the product. The second one is the public policy’s maturity which refers to the creation of clear rules and benefits for the flower’s producers as well as a reduction of the bureaucracy for reducing waste of time which is essential for the freshness of the product. The last one is the maturity of the economic relations.

The process must be fast, and the product can be only transported in plane because of the nature of it. In here there is a video where the process to export roses to USA in Saint Valentine’s day is explained:

https://www.dinero.com/empresas/multimedia/el-proceso-de-exportacion-de-las-flores-colombianas-por-san-valentin/219256

This post was written based on the resport published by Revista Dinero:

https://www.dinero.com/opinion/articulo/eficiencia-de-la-cadena-logistica-un-elemento-clave-y-diferenciador-de-la-marca-flores-de-colombia/280458

How the delivery drones are changing the logistic

8 years ago amazon tried its first delivery system using an automatic drone, the new service was called amazon prime air, from now on, the online marketplaces face a new opportunity and challenge for improving their businesses, the agility, easiness and convenience of using air transport may create new expectations among the customers which choose which website they will use depending on facts like the speed of the delivery.

The drones are cheaper to operate, however the market stills new and there inquiries to solve like the safety of the devices, the visual pollution that a thousand of drones flying around the city may generate, the restriction in terms of weight and size of the cargo, the good and adequate weather dependence and the autonomy of the flights to reduce the amount of proximity warehouses. In terms of warehousing the drones also help, the land drones may help in the management of the warehouses and the problems that their delivery brothers have are reduced due to the fact of being operated and controlled in a smaller and closer spaces which do not affect thirds. The automatization of the warehouses may be a bit expensive but could represent an increase In the logistic performance efficiency of a company.

To ilustrate what I have said, I post a video of a company which nowadays offer the service of air-drone delivery systems.