Member News: Published by Border States
Over the past several weeks, we have provided multiple updates focused on known and potential supply chain impacts due to the coronavirus (COVID-19). We expect that this information will continue to develop in the coming days and weeks, and we will continue to work diligently to provide our customers, vendors, and employee-owners with the most current and accurate information available. While the situation is fluid and continues to evolve more and more quickly, below is an update based on the latest information we have today.
The supply chain risks due to COVID-19 have evolved from Chinese manufacturing shutdowns and freight restrictions due to mandated quarantines, to a now global focus on supply chain impacts and concerns over business continuity in the United States. As states and counties in the United States further implement shelter-in-place mandates, more of our branch locations are being impacted by these directives. As of this update (March 26, 2020), 18 states,?31 counties?and?13 cities?are under some state or local mandate — these mandates affect half the population of the United States.
Based on the Presidential Policy Directive 21 (PPD-21), our company is defined as essential, being a critical infrastructure supplier to utilities, large contractors and industrial manufacturers producing critical supplies for our country. Many of our vendors also qualify as essential under PPD-21, but we are seeing some suppliers choosing to close their operations and abide by state mandates.
COVID-19 continues to have a major impact on the markets and commodities that affect our business. A few important updates we are watching closely:
- The markets saw one of the largest single day rebounds on Wednesday this week with the government agreeing in principle to a $2 trillion stimulus package to combat economic pressures driven by COVID–19.
- Copper pricing remains soft, down over 20% from the beginning of the year as global demand has softened.
- Crude oil pricing has seen some gains this week due to the expectation of the stimulus package and a push to end the oil war between Saudi Arabia and Russia, but is hovering at $25/barrel, still down from $65/barrel at the beginning of this year.
Chinese manufacturing continues to ramp up to near normal capacity as the country reduces travel restrictions within its borders and employees return to work. Hubei province, where the COVID-19 pandemic was first diagnosed, has resumed public transit systems and will allow its residents to start to travel outside the region over the next one–two weeks. Logistics remains a major concern as many countries have implemented port restrictions or due to COVID-19 outbreaks in their countries, which is expected to continue to impact sea cargo globally short term. Air cargo remains even more challenging, with the majority of international air cargo capacity occurring on commercial airliners. With the international travel restrictions implemented in the United States over the past few weeks, it is estimated that international air cargo capacity into the United States has been reduced by 85%. Globally, transport across land borders using ground freight is slowed, especially to and from European countries.
We continue to stay in close contact with major third-party carriers on their impacts. On March 13, a national emergency declaration was issued to provide hours of service relief to carriers transporting emergency relief products including medical supplies, PPE equipment, food and beverage items and emergency services materials. Due to the emergency declaration and response, there has been a significant increased demand for drivers and trucking capacity. This will not impact our Border States fleet but could potentially impact lead times on shipments from our vendors. Freight carriers are considered an essential service, so they will — in most cases — continue to operate under PPD-21.
Personal Protective Equipment (PPE) and safety products continue to be where the largest supply disruption is occurring in our business. Specific examples of products impacted include:
- Nitrile and disposable gloves
- Sanitizing wipes and gels
- Goggles and protective eyewear
- Protective coveralls
We are in escalated operations mode on these categories, with the expectation of maintaining supply flow for our customers while supporting the Centers for Disease Control and Prevention (CDC) directives around supply of emergency materials. Filtering Facepiece Respirators (FFR) are one of the most significant constraints, where most of the world supply is needed for medical and emergency services. We are working closely with our suppliers on allocation for our critical industry customers and identifying potential alternates and substitutes, but maintaining supply flow is a significant concern.
Border States continues to monitor the CDC for additional information and around safety, social distancing guidance and travel restrictions that will continue to create some impacts on the supply chain.
The number one priority remains the health and safety of our customers, vendors and employee owners. We have business continuity plans in place to maintain operations for our customers for branches be impacted by mandates or ordinances in their communities. We have closed our counter operations and are asking our customer to order material ahead of time for Will Call or curbside pickup. We have also implemented a no contact delivery policy for all drivers. Additional information is available on our website regarding these measures and plans focused on health and safety in our operations.
For further supply chain questions, please contact a Border States Account Manager