What is the impact of Covid-19 at Jost Group?
(To see our report online, click -> here)
Barely a quarter ago the first containment measures were imposed by the various governments, Belgian and European. We are about to enter into a more restrictive phase again.
If the road transportation sector, which alone accounts for 75% of all goods transportation in Europe, has been resilient since the beginning of the crisis, what will it be like tomorrow? What lessons can we learn from the initial containment measures and slowdown in global economies?
So many questions that most companies in the transportation and logistics sector have to answer.
In this article, Jost Group highlights how this crisis has been for us and is being experienced within the Group as well as the post Covid-19 outlook.
The covid-19 pandemic makes it necessary to rethink the carrier's operational system
The health crisis, with its multiple consequences, evolves according to a timeline whose outcome is still uncertain.
Seven months ago, businesses big and small, whatever their sector, had to adapt their functioning and modus operandi to ensure business continuity.
These economic stakeholders have to juggle with the recommendations and directives of their respective governments, which has a considerable impact on the management of the order management and the planning of day-to-day activities. This commercial instability is linked to many factors:
Changing and varying decisions based on individual national policies in Europe, with lockdowns and border closures that have involved significant adaptations in order to continue to move and deliver our customers' goods on time.
Movement of goods and people in the European Union subject to constantly changing regulations, depending on varying requirements on health conditions
Temporary standstill of almost all air traffic
Multiple modifications or cancellations of certain road traffic
Trade weakened by the fall in imports/export volumes
Shortages at points of origin of certain goods
Urgent and priority transportation for medical supplies
Absolute need to supply the mass distribution chains
Companies who have found themselves in difficult financial conditions
Unemployment and slowdown in operations
As soon as the initial lockdown was announced, the entire transportation sector was affected by upward or downward fluctuations in the volume of activity in different industries.
Generally speaking, the volumes transported by road have fallen considerably, with the exception of the food distribution sector, which has seen growth due to the massive purchase of food products to overcome the confinement. In March 2020 alone, this growth was 30% to 50% higher than the average volume for the Jost Group's Retail division. [Transportmedia, Jost Group: « De 30 à 50 % de demande en plus »].
Another impact on the operations is at the supply chain level: the drop in productivity due, in particular, to longer loading and unloading times. [Press release, FNRT, CORONAVIRUS: Impact de la crise sur les entreprises du Transport routier de marchandises Troisième enquête: Un secteur fragilisé en attente de réponses claires de l’État]
Added to this is the problem of “empty kilometres” (lack of return freight on the trips), which are also 21% higher than the usual average, generating an additional cost of 15.3% for each kilometre covered compared to the situation before the health crisis. [CNR study, Covid-19 - Impact de la crise et coût des mesures sanitaires pour les entreprises de TRM]
The process of groupage of goods had to be incredibly flexible to ensure transportation.
Despite the increase in volume in the distribution sector, transportation companies suffered an average loss of 48% in turnover in the first few months of the lockdowns being implemented. [Press release, FNRT, Crise du Covid19 - Impact sur les entreprises de transport routier de marchandises – 2ième enquête]
The post-lockdown recovery did not ensure resumption to the pre-Covid-19 activity levels. What about now? Will the new precautionary measures once again put the brakes on the economy? Will a compromise be found between health and the economy?
But concretely, what has changed for transportation infrastructure?
The drop in activity cannot be solely attributed to the Covid-19 crisis. It is of course accompanied by changes in variable costs and/or fixed charges on the rise, changes in labour costs, ...
Operational management, the allocation of vehicle and personnel resources and the nature of the work to be carried out to serve our clients have undergone significant changes, due to a series of external factors that appear to be additional constraints in managing increasing complexity. The most relevant element has been the significant variations in volumes; from one sector to another, forcing us to increase our capacity and reactivity/proactivity to manage rapid change, as explained in the first part of this article.
From an economic point of view, measures to ensure compliance with European and government directives on the protection of employees have resulted in additional direct and indirect costs, which were previously non-existent.
Controlled access to buildings, well-demarcated traffic routes, restricting access to certain amenities to respect social distancing, ...
Fitting out of all premises and sites with relevant signage.
Installation of plexiglass panels, airy spaces to accommodate workers with social distancing, and carrying out other works to guarantee health safety.
More frequent cleaning and disinfection of the premises as well as the drivers' cabins.
Supply of hydro-alcoholic gel, gloves, masks, wipes, disinfectant spray, etc. for all drivers and employees.
Temporary separation of teams working in a confined space
Temporary abolition of professional driver support training courses
Inability to follow group training courses
Closure of examination centres for licensing and renewal of licences
Closing of the technical check-up
An entire organisation has been set up to ensure the protection of our employees. Stocks of surgical masks and gloves, which were non-existent at the beginning, had to be created, despite the initial shortage, to ensure that drivers and employees could work in the best possible conditions with disinfected protective equipment.
From the beginning of March, our hygiene and safety services have been working hard to:
To set up and continuously supply all the group's sites with basic protective items.
Continuous message reinforcement to staff of the rules to be followed.
Supervise the teams and assist them in urging compliance with all the rules.
Check the application of these rules by frequent audits, debriefing immediately on the measures to be specified or corrected.
Raise awareness, accompany, answer the many questions and reassure all the staff.
Our advisers and internal auditors have been mobilised to think about the best layout of our premises at each site. To this day, they still travel continuously to ensure that the directives are followed and that social distancing rules are respected.
We are in the process of finalising the report of all the actions implemented in order to achieve Covid-19 certification.
One of the major challenges for Jost Group is obviously the good health of its employees!
Financially, what does this represent?
In its survey, the FNTR announces a 7.2% increase in the company's charges linked to direct costs. The CNR, for its part, estimates that compulsory health measures represent a cost of 0.5% to 6% of the standard cost price depending on the type of activity. [CNR study, Covid-19 - Impact de la crise et coût des mesures sanitaires pour les entreprises de TRM]
In a sector where margins are already extremely low, an increase of even 1% has considerable impact.
All these new costs faced by transportation companies have not been accompanied by an increase in sales prices.
Faced with the drop in the volume to be transported, the sector has seen pressure on the selling price imposed on it by the principals. Economic sciences explain it by themselves, the increase in supply and the drop in demand imply a drop in prices in the short term.
How does the Jost Group deal with Covid-19?
The company's organisation has been reviewed and adapted in line with all these parameters. A number of reflections have been carried out in order to best organise our work and activities to maintain our operational excellence during this unprecedented period. Extreme flexibility is a decisive element to the balance we need to maintain: both to respond to our customers' needs as well as simultaneously ensuring that we remain economically sound, safeguarding the company's long-term interests.
In order to stay on course in the face of declining activity, we have adjusted our workforce in all our companies in Europe by resorting to economic unemployment. We have also eliminated all non-essential purchases in order to get through this particularly difficult economic period. Sharp cost management is extremely important in order to focus all human and financial resources on core activities.
In addition, following government guidelines, we very quickly implemented teleworking for all employees whose work scope allowed it. Jost Group is proud to see that trust has been further strengthened within the teams, seeing how well our company functions despite the distances that separated our colleagues.
Our employees have quickly become accustomed to managing their tasks remotely while maintaining the proactivity, communication and efficiency that are the hallmarks of the solid Group that we are. Digital technology has become firmly rooted in our communication and work methodology. Thanks to increased digitalisation we have been able to communicate, whether with our employees, drivers, customers or any other stakeholders, at a distance and with ease.
We therefore favoured, in parallel with partial economic unemployment, teleworking, clearance of annual leave days, such as to look after children due to school closures, etc. Increased agility in personnel management, even for a large number of employees, combined with the good will of all staff, is a guarantee of sustainability for our company!
We would like to take this opportunity to thank each and every member of our teams!
And what about road heroes?
Our drivers acted towards the population with great responsibility and efficiency. During this health crisis, it goes without saying that shops had to be restocked with food products and daily utilities as a matter of priority, hospitals with medical supplies, vehicles with diesel, etc. In addition, the confined people made massive online purchases and were able to see the importance of drivers who ensure the delivery of the items ordered to their homes.
E-commerce increased by almost 10% over the period of containment. [Nielsen, COVID-19 : UN NOUVEAU PALIER ATTEINT EN FRANCE PAR LE E-COMMERCE].
Faced with these changes in consumption, everyone was able to appreciate the importance of the transportation sector.
The drivers have shown dedication, sometimes at the expense of their comfort. They encountered difficult situations because some rest areas were inaccessible, the shops in the service stations were closed and leaving them without access to running water, showers or simple morning coffee. They were even refused access to toilets at some customers' homes for reasons of sanitary precaution. For our part, we have done everything possible to make our sanitary facilities and rest rooms not only accessible 24 hours a day, 7 days a week, but also safe, with marked access paths, cleaning and disinfection several times a day, hydro-alcoholic gels at all counters and staff at each one, stocked with masks and gloves.
We praised their professionalism and personal involvement and supported them on all fronts!
It is no longer a secret that truck drivers are indispensable to our economy! They contribute to the growth of the gross domestic product (GDP) and job creation and they prevent shortages in our shops.
What are the future prospects?
The IRU (International Road and Transport Union) recently published: "Freight transport companies worldwide are expecting an average 18% drop in turnover in 2020, for a total of €551 billion". [IRU, Global recovery on the line as road transport losses escalate]
While certain sectors such as distribution and e-commerce are doing well, the coronavirus pandemic is having a major impact on our transport systems, given the close interdependence between European supply chains, supported by a network of multimodal freight services, well established at Jost Group!
Although the situation has evolved positively compared to March-April, the transportation sector continues to suffer from the pandemic. The period ahead suggests that we will again have to incorporate new changes. We are strong from a first experience, we have capitalised on new behaviours, new ways of working and we are ready to face what we will be given to live in this new Society.
It is also thanks to government support that transportation companies, large and small, can hope to stay the course and provide future stability for all their employees.
By moving the sector forward, we will be able to maintain a prosperous vision of investment in the environment, people, digital and technology. A transition to greener and digital road transport, supported by the increased competence of human actors, is a key to the future.
Jost Group understands this ecological transition and has incorporated it into its vision for the foreseeable future! We continually invest in greener transportation. This goal is being achieved by purchasing 500 LNG trucks, an operational LNG station at our Herstal site, with 3 other stations in the pipeline, but also by upgrading our infrastructure to be more environmentally-friendly and sustainable. At the same time as this environmental transition, we are persevering with a digital transformation of our services, to remain at the forefront of the sector!
In conclusion, this health crisis has many negative impacts, both on the economic, financial and social aspects. But this crisis has nonetheless shown us the flexibility and agility of our company to ensure excellence at all levels in our work. It implies an increased digitization of our services and of our way of supporting road transportation in Europe, also thanks to our subsidiaries throughout Europe and to the competence of our staff.