That pressure stems from ARG’s role as a light custom-manufacturer as well as a distributor of more than 25,000 SKUs for  industrial hoses, fittings and related products for such industrial uses as oil rigs and fuel-delivery trucks. Most of its business involves replacing broken industrial hoses, and ARG’s sales and product teams often work with customers to assemble customized hose products and systems.

Mike Powers, director, ecommerce and digital, ARG Industrial

“You have to make sure that you’re getting the right data from your suppliers, and also that you’re presenting the right data on these assemblies to your customers,” says Mike Powers, ARG’s director of ecommerce and digital. Ship a hose assembly with the wrong specifications, and the customer could experience severe problems, he adds.

ARG B2B digital commerce sales

ARG is working with the the Industrial Distributor Cooperative (IDCO) buying group and product information management (PIM) and other software from digital commerce technology vendor Unilog to expedite how it receives product data from Midland and other critical suppliers.

Ross Baker, director of product strategy, Midland Industries

“It’s the way of the future,” says Ross Baker, Midland’s director of product strategy. “The more distributors that are pulling this data we’re putting into the PIM, the more chances there are for sales to increase on both sides.”

Powers asserts that companies involved in ecommerce face challenges in pulling data from legacy enterprise resource planning systems and integrating that data with a customer-facing ecommerce site.

“They’re realizing that the complexity of integrating legacy ERP and B2B ecommerce is very, very tough,” Powers says. He adds that companies then often find it difficult to find the people with the necessary expertise to work with legacy ERP systems.”

Working with Unilog and IDCO, ARG receives more consistent and helpful product information from Midland and other suppliers.

Midland is now pushing new product updates quickly to ARG, “instead of us waiting 12 months to get a new catalog,” Powers says. “All we need to do is log in.”

Data collaboration results

He says the much-improved product data flow is producing several results, including:

• Increased web traffic through improved keywords and search engine optimization.
• A more useful site search tool and increased sales of newly released products.
• ARG’s enhanced ability to develop a new configurator that lets customers who want to build their own hose assemblies to order an accurate product set.
• ARG’s enhanced ability to provide punchout catalogs that let buyers punch out from their procurement software to an ARG product catalog.

Baker adds that Midland expects to extend the level of product data-sharing it does with ARG to more companies to foster increased revenue for both Midland and its channel partners.

The Cashing in with Digital Channel Partners report is available for a free download.

Paul Demery is a Digital Commerce 360 contributing editor covering B2B digital commerce technology and strategy. paul@digitalcommerce360.com.

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Dan Lewis, CEO, Convoy Inc.

“We are in the middle of a massive freight recession and a contraction in the capital markets,” Lewis said in a memo to employees, whose ranks had been slashed to about 500 from a peak of 1,500 a year ago.

Launched in 2015 under the leadership of Lewis, a former Amazon.com Inc. executive — and operating with financial backing from such investor as Amazon founder Jeff Bezos and Microsoft co-founder Bill Gates — Convoy racked up a client base including such companies as The Home Depot, Unilever, Procter & Gamble and Anheuser-Busch.

But largely because of post-pandemic drop in demand and a challenging investment market, Lewis said Convoy had spent the last several months exploring alternatives, including possible acquirers to maintain its operations.

“Alongside this unprecedent freight market collapse, the dramatic monetary tightening we’ve seen over the past 18 months has dramatically dampened investment appetite,” he said, adding: “M&A activity has shrunk substantially, and most logical strategic acquirers of Convoy are also suffering from the freight market collapse, making the deal that much harder. The perfect storm.”

Mike Brown, general partner of investment firm Bowery Capital, commented in an email to DC360 that Bowery’s  tracking of fundraising data for B2B marketplaces, in general, shows the quantity and monetary value of financings is down significantly.

He suggested that “a macro takeaway” regarding investments in B2B marketplaces “is the cyclicity of the business and difficulty of the business model (including low take rates, high servicing costs, and tough multiples) which we think will scare a lot of venture dollars away.”

Bloomberg News reported yesterday that Convoy is one of many logistics startups hurt by falling prices and demand for shipping along with a downturn in venture capital fundraising. Bloomberg noted that Flexport Inc. and Seattle-based warehousing startup Flexe Inc. have had to lay off workers as demand fell from pandemic highs.

Paul Demery is a Digital Commerce 360 contributing editor covering B2B digital commerce technology and strategy. paul@digitalcommerce360.com.

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SmartEquip recently released the SmartEquip e-Commerce 2.0 as a technology platform, on which authorized distributors, dealers and fleet managers can operate their own branded self-service commerce store for selling construction parts from SmartEquip’s parts catalog network of more than 700 original equipment manufacturers. The company is a subsidiary of B2B marketplace company RB Global Inc., which also owns such organizations as construction equipment marketplace operator Ritchie Bros.

SmartEquip B2B ecommerce platform

Andrew Malion, president of braking equipment supplier Spectra Products Inc., says the SmartEquip product catalog helps his customers view descriptions and images of Spectra’s Brake Safe  products to ensure they order the correct parts for truck air brake diagnostic systems. Spectra Products recently joined the SmartEquip Network.

“Joining their network of suppliers and manufacturers is the ideal way to offer equipment owners our Brake Safe diagnostics tool,” he says.

Ron Piccolo, senior vice president of operations at Smart Equip, says Spectra Products is an example of the growth in the variety of suppliers in the SmartEquip Network.

In addition to several hundred OEM brands, the SmartEquip Network has over 95,000 users across more than 42,000 equipment locations globally, SmartEquip says.

The upgraded SmartEquip ecommerce store supports a mobile channel.

RB Global’s operations also include:

• Ritchie Bros., a global online auctioneer of commercial assets and construction vehicles.
• IAA, a global digital marketplace for motor vehicle buyers and sellers.
• Rouse Services, an asset management and performance benchmarking system.
• Xcirca, a live simulcast auction technology provider.
• Veritread, an online marketplace for heavy haul transport services.

RB Global took its current corporate name earlier this year, when it changed it from Ritchie Bros. Auctioneers Inc. For the year ended Dec. 31, 2022, the company reported $1.7 billion in total revenue. It also reported marketplace gross transaction value of $6.0 billion.

Paul Demery is a Digital Commerce 360 contributing editor covering B2B digital commerce technology and strategy. paul@digitalcommerce360.com.

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But the short version of where Caterpillar, with 2022 sales and revenue of $59.4 billion, is digitally headed these days is connectivity across all aspects of its business — including ecommerce.

Brent Steffen, director of ecommerce, Caterpillar Inc.

“Everything we are doing with digital is about creating integrated and seamless experiences for our customers that help them be more efficient ,” says Brent Steffen,  Caterpillar’s director of ecommerce.

At the company’s May 2022 Investor Day, Caterpillar said its goal was to grow dealer parts sales to users through ecommerce by another 50% from where it was then within the next three years.

“We’ve also invested significantly in our ecommerce capability, and we’re seeing good progress there,” CEO Jim Umpleby told analysts on a 2022 earnings call. “A whole range of digital investments that we’re making are really starting to produce results, and we’re very bullish on that. Utilization is up, but also, we’re seeing positive results from all the hard work of our teams over the last few years.”

Caterpillar invests heavily in digital technology

Overall ecommerce is growing because Caterpillar is investing heavily in digital technology and the user experience of its websites, including Parts.cat.com. Specifically, to boost ecommerce sales and enable customers to make faster and easier transactions online, Caterpillar has been taking these steps:

• Building omnichannel experiences through deeper ecommerce integration with its 156 dealers and their 2,700 branch locations;
• Upgrading its ecommerce platforms with the latest cloud technology;
• Launching personalized ecommerce capabilities for customers of any size or industry;
• Developing a new mobile app, making it easier for retail customers to buy online;
• Expanding services and offering 24/7 customer support for repairs and ordering parts.

“Customers want more options across all our digital channels,” Steffen says.

With the introduction of a new mobile app that the company is calling Cat Central, Caterpillar is helping its customers to find, research and buy parts directly from the job site or any location.

The new app gives customers easier ordering of genuine Cat parts, a QR code to instantly access verified-to-fit parts, save their equipment for faster shopping, and real-time access to parts support specialists.

Caterpillar’s Cat Central also gives customers multiple payment and delivery options

• Free and flexible in-store pickup
• Support resources, including manuals and fault code descriptions
• Features for equipment management, financing, and customer loyalty rewards

“Cat Central offers do-it-myself customers one central place for easy access to ordering parts and general support resources, while providing a faster shopping and purchasing experience,” Caterpillar says. “This app enables customers to order on the go anywhere — freeing up the time to focus on the job at hand.”

As a major manufacturer, Caterpillar is, of course, big, international, and diversified. The company has about 20 brands, employs about 109,000 workers at more than 150 primary locations, does business on every continent, and has more than 4 million Cat products at work around the world.

But a big driver for Caterpillar’s digital strategy — Cat Digital — is an inventory of more than 1.4 million connected assets.

“Virtually all assets are now connected when delivered to customers, so this number grows every day. More connected assets mean more data,” the company says. “And more data allows us to become even more customer-centric, helping customers improve safety and productivity, minimize downtime, and maximize asset utilization.”

Cat Digital alerts customers when to schedule maintenance

Cat Digital has multiple moving parts, including making it easier to do business online, building data infrastructure in the cloud, and using data to help predict issues before they occur, the company says.

For example, Caterpillar’s latest equipment management application, VisionLink, allows customers to access all their asset information for both Caterpillar and other owned, leased or rented equipment in one centralized place. Dashboards allow customers to track by projects, groups, and geofences, and “Needs Review” is a new feature that brings focus to instances that need action, creates workflows to schedule tasks, and provides links to buy parts or request services.  A task management feature creates and assigns tasks to ensure maintenance or service completion, and an app keeps customers updated with key metrics, asset locations, fuel levels, idle time, among other metrics.

Ogi Redzic, chief digital officer, Caterpillar Inc.

“Three years ago, Caterpillar’s equipment management portfolio was split across three different digital products, Chief Digital Officer Ogi Redzic said in a recent LinkedIn post. “Although they were good products, we knew we had an opportunity to create an even better customer experience by streamlining these solutions into a single offering, delivering a premium and consistent customer experience. Our vision was to create an integrated, OEM-agnostic tool that makes it easy to do business with Caterpillar – whether that’s buying parts, arranging services, or resolving maintenance issues.”

Caterpillar implementing levels of digital integration

Going forward, Caterpillar is implementing three levels of digital integration, Redzic says.

“It begins with the physical layer — working to fit all our machines with the best connectivity possible going forward, whether 4G cellular, satellite, WiFi, or Bluetooth. Then we have the platform layer, where we ingest data, process it, and make it available for consumption,” he wrote in a recent company post. “And finally, we have an application layer where we build applications for a particular segment or need. Throughout the process, we apply machine learning to improve our products and services. We’re engaging with some of the best companies in the world to advance our machine-learning capabilities, and I think we’re making incredible progress. We can process large amounts of data in real time and validate and improve our machine learning models quickly.”

Caterpillar’s next task in ecommerce, Steffen says, is developing additional features that ease researching and purchasing online to ensure customers find the right parts and services for the job. By expanding the digital integration with the dealer network through new APIs, or application programming interfaces, Caterpillar is focused on creating more visibility and options for last mile delivery, he says.

“We know where the customers’ pain points are,” Steffen says. “Our job is to eliminate them and make it even easier for our customers to use ecommerce when doing business with Cat and our dealers.”

EnvisionB2B 2023 keynote

Brent Steffen will give a keynote address on June 21 on innovation in B2B ecommerce at the EnvisionB2B 2023 Conference & Exhibition in Chicago.

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New developments include expanded free-shipping deals and artificial intelligence and machine learning applications to better match customer demand with available products from suppliers, says Todd Heimes, director and general manager, Amazon Business Worldwide. An inside look at the Amazon Business growth strategy is one of several articles on B2B marketplaces in the just-released Building Better B2B Marketplaces report.

In addition, Amazon Business has increased its sales and account services with large enterprises, including the procurement of direct goods used as components in manufacturing as well as the more common indirect goods like office supplies companies purchase for their internal operations.

The companies that use Amazon Business, meanwhile, are leaning more toward new ways of connecting with the marketplace that include using an application programming interface and avoiding its dot-com interface altogether.

“That’s exciting — and that’s where we’re headed,” says Chris Costello, executive vice president of worldwide strategic accounts.

Among the other marketplaces trends in the report:

• Industrial products distributor Bay Fastening Systems’ BaySupply.com has developing purchasing features designed to help its customers work for efficiently, including with new online payment options;
• Germany-based apparel marketplace Fashion Cloud is entering the U.S. market with plenty of venture capital;
• The trucking industry is driving ahead with marketplaces like Convoy;
• Steer Technologies has a marketplace recipe for helping the restaurant industry;

• AVIA Marketplace is bringing a fresh face to B2B commerce in healthcare.

The Building Better B2B Marketplaces report is available as a free download.

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Ann Fandozzi, CEO, Ritchie Bros. Auctioneers

In addition to record gross transaction volume on their online B2B marketplace, Ritchie Bros Auctioneers Inc. also made a key acquisition. For the year ended Dec. 31, gross transaction value (GTV) for its online auction and “buy-now” marketplace sites grew to $6.025 billion. That’s up 9% from $5.533 billion in 2021. In comparison, total revenue, which includes inventory sales and services, increased 22% to $1.7 billion. Net income for the year increased 110% to $319.8 million.

“We delivered record financial results and made significant progress in continuing to build our marketplace technology and advancing our growth initiative, despite operating in a challenging environment of continued tight supply, inflationary headwinds, aggressive competition, and foreign exchange volatility,” says CEO Ann Fandozzi.

Ritchie Bros. Auctioneers is also rethinking how it will expand it its B2B marketplace and digital footprint, Fandozzi says.

“We are transforming Ritchie Brothers from a traditional auction business to a trusted global marketplace for insight services and transaction solutions. And we continued our journey by taking several important steps in 2022,” she says. “Ritchie Brothers 2.0, our marketplace technology platform, is in the process of piloting an all new digital check-out experience with self-serve invoices and settlements.”

Acquiring IAA to accelerate growth

Vancouver, Canada-based Ritchie Bros. said in November that it would acquire Westchester, Illinois-based IAA, which facilitates the marketing and sale of total-loss, damaged and low-value vehicles, in a $7.3 billion cash-and-stock deal.

“We identified IAA as a potential combination for Ritchie Brothers back in 2020, and together with our board of directors have evaluated a possible acquisition of IAA for more than a year,” Fandozzi says. “The strategic logic of this combination is clear. With IAA, we believe we can accelerate growth for Ritchie Brothers, drive margin expansion and expand our reach into an attractive adjacent vertical.”

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Carriers on the new exchange can now move vehicles for large-scale shippers they would not previously have had the opportunity to serve. Carriers can pick and choose which opportunities fit their routing on a day-by-day basis to maximize their capacity and eliminate empty miles, while allowing them to plan their backhauls in advance. The marketplace also says it pays the carrier on their terms, enabling them to receive payments in as little as 48 hours after all documents have been uploaded into the system.

Testing the Auto Hauler Exchange

During beta testing of the new exchange, Auto Hauler Exchange moved vehicles for more than 20 dealership groups and remarketers throughout the United States and signed up approximately 200 carriers with over 700 assets, the marketplace says.

“Vehicle logistics processes are very dated and fragmented, and this has impacted the entire vehicle supply chain with a considerable loss of vehicle carriers actively hauling,” says Royce Neubauer, founder and CEO of Auto Hauler Exchange. “We enable shippers to market their opportunities directly to carriers, so there is no middleman pulling revenue away from the transaction and we also enable carriers to embrace opportunities directly from large-scale shippers that they would not normally see.”

The B2B marketplace platform was built on applications and services from Nautical Commerce.

Vehicle shippers can upload details including:

• Make
• Model
• Pick-up location
• Drop-off location
• Cost details.

Carriers can then select to move certain vehicles depending on what’s most convenient and beneficial for them. The AI platform features a drop-down menu, so carriers can select the shippers to review the vehicles they need to ship. The platform also features a cart for checkout, allowing carriers to fill their trucks before heading out.

Carriers can search within mile parameters, city, state and specifications such as single vehicles and truckload.

AHX manages the payment processing for the carriers and shippers. This allows the shippers to receive one invoice from AHX no matter how many different carriers move vehicles for them. It also speeds up the payment for the carriers. AHX has multiple payment options to fit each carrier’s needs.

The U.S. vehicle shipping services industry is projected to generate $10.9 billion in revenue in 2023, says IBISWorld.

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The vote came a day after the House approved the measure on a 290-137 bipartisan vote. The bill would impose a labor agreement hammered out by rail companies, labor leaders and the Biden administration months ago but rejected by workers in four of 12 unions.

An effort by Democrats to amend the deal to include seven days of paid sick leave for workers came up short. It failed to garner the Republican votes needed in the Senate. The House had endorsed the change on 221-207 vote with just three Republicans in support. The sick leave amendment, pushed by independent Senator Bernie Sanders of Vermont, failed on a 52-to-43 vote. It required 60 votes to pass.

“Within this agreement, we’re going to avoid the rail strike, keep the rails running, keep things moving,” Biden said on Thursday. “And I’m gonna go back and we’re gonna get paid leave not just for rail workers, but all workers.”

Congress was able to pass the rail bill with after Biden asked lawmakers to intervene on Monday. A mandated cooling-off period is set to expire on Dec. 9, after which freight workers would be allowed to walk off the job.

“Suppliers and businesses across the nation are going to begin shutting down operations soon if they think a strike is imminent,” Senate Majority Leader Chuck Schumer warned his colleagues Thursday morning. “In that scenario, nobody wins and everybody loses.”

Impact of averting the rail strike on the retail industry

The National Retail Federation released a statement following the resolution’s approval in the House.

“The freight and commuter rail systems are essential partners to America’s retailers, moving goods throughout the country every day. A nationwide rail strike at this juncture would have had devastating consequences for our economy, and exacerbated inflation for American families,” NRF CEO Matthew Shay said in the statement. “We are grateful for the swift action in Congress this week to implement the Tentative Agreement, and we look forward to President Biden’s immediate signature to safeguard smooth and stable rail operations.”

The Retail Industry Leaders Association (RILA) also issued a statement following the Senate passage of legislation to avert a rail worker strike.

“Today, Senate leaders recognized just how vital our nation’s rail system is and voted to keep the country’s supply chains and our economy moving,” said Sarah Gilmore, director of government affairs. “American consumers can rest assured they will have an exceptional shopping experience this holiday season with the threat of a rail strike averted.”

RILA members include more than 200 retailers, product manufacturers, and service suppliers, which together account for more than $1.5 trillion in annual sales, millions of American jobs, and more than 100,000 stores, manufacturing facilities, and distribution centers domestically and abroad.

Rail bill lacked Republican votes

Republicans agreed to quick consideration of the rail bill after being granted a vote on an amendment that would have changed the bill into one requiring a 60-day cooling off period extension. That amendment failed, attracting the support of just 26 senators.

Wyoming Republican Cynthia Lummis and North Dakota Republican Kevin Cramer led the fight to get their Senate colleagues on board with voting for the bill, warning of devastating job losses.

“Congress has been forced into a position to either intervene in labor negotiations or allow a rail strike that will cripple our economy,” the senators wrote in a letter imploring fellow Republicans to vote for the bill. “Our response at this moment will determine whether rail workers receive their next paycheck, whether families can put food on the table this holiday season, and even whether the lights turn on.”

Enough Republicans held their noses and voted for the bill despite concerns about interfering in the labor market.

The administration lobbied Democrats hard for the bill, which risked fraying ties between the party and labor unions.

Labor Secretary Marty Walsh and Transportation Secretary Pete Buttigieg met with Senate Democrats at lunch on Thursday to urge passage of the legislation. The White House and top Democrats touted that the bill would grant a 24% raise and prevent increased health insurance premiums.

House Speaker Nancy Pelosi told her caucus about 750,000 jobs would be lost in the first two weeks of a rail strike.

Out of the 12 unions representing different types of rail workers, four representing roughly 54,500 workers rejected the contract. The unions that approved it represent about 43,000 workers, according to the National Railway Labor Conference.

Rail operators were set to begin slowing down operations as soon as this week in preparation for a strike, in part to make sure cargo isn’t left stranded.

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Ryder System Inc. — which manages nearly 239,000 commercial vehicles and operates more than 330 warehouses, encompassing more than 80 million square feet — has acquired Dotcom Distribution.

Maria Haggerty, CEO, Dotcom Distribution

Based in Edison, New Jersey, Dotcom Distribution was an early pioneer in U.S. B2B and B2C ecommerce. The company has been in business for 22 years and currently operates 12.8 million square feet of warehouse space. It also ships about 5.3 million ecommerce orders annually and manages more than 100,000 SKUs, the company says.

Terms of the deal were not announced. But Dotcom Distribution founder and CEO Maria Haggerty and the company’s operations team, totaling approximately 100 full-time employees, will join Ryder. Dotcom Distribution’s ecommerce and retail customers include FAO Schwarz, Bliss, and others.

Ryder gains Dotcom’s ecommerce experience

Steve Sensing, president, Supply Chain Solutions and Dedicated Transportation Solutions, Ryder System Inc.

“Dotcom Distribution has been doing e-fulfillment since ecommerce was still in its infancy,” says Ryder president of supply chain solutions Steve Sensing. “Maria and her team bring 22 years of knowledge, expertise, and experience in helping customers weather market fluctuations — that’s a big benefit for Ryder.”

Ryder, an 89-year-old Miami company, provides:

• Full-service truck and vehicle leasing, rental, and maintenance
• Used vehicle sales
• Transportation management
• Professional drivers
• Ecommerce fulfillment
• Last-mile delivery services

The company, which generated 2021 revenue about of about $9.66 billion, is making ecommerce logistics and last-mile delivery a key strategic initiative and growth opportunity. And it’s doing so primarily through acquisition and start-up financing.

In January, to grow and diversify its range of logistics services to ecommerce companies, Ryder acquired Whiplash for approximately $480 million in cash. Whiplash is a national fulfillment and logistics services provider.

Whiplash brings access to ports and gateway markets

Based in City of Industry, California, Whiplash provides ecommerce and fulfillment services to more than 250 brands. Whiplash operates 19 warehouses totaling 7 million square feet. It also provides access to “key port operations and gateway markets,” the company says.

In November 2021, Ryder also acquired Midwest Warehouse and Distribution, a warehousing, distribution, and transportation company based in Woodbridge, Illinois, for $284 million.

“Our two recent supply chain acquisitions, Whiplash and Midwest Warehouse and Distribution System, continue to perform well and were accretive to earnings. These acquisitions support our strategy to accelerate growth in our asset-light supply chain business,” says Ryder CEO Robert Sanchez. “Whiplash significantly grows our fulfillment network with scalable ecommerce and omnichannel fulfillment solutions, and Midwest expands our multi-client warehousing offering.”

The company’s investment arm corporate venture capital fund, Ryder Ventures, is investing $50 million over five years in companies creating solutions in ecommerce fulfillment, asset sharing, next generation vehicles, supply chain automation, and data analytics.

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iPhone maker Foxconn Technology Group is the most prominent, allowed to partially resume its operations in Shenzhen on Wednesday by deploying a so-called closed-loop system. Workers are ferried from their company-run dormitory to the factory and back, subject to regular COVID testing and checks. Zhen Ding Technology Holding Ltd., a Taiwanese maker of printed circuit boards, is also operating a closed loop at its plant, along with a medical device company manufacturing essential goods that didn’t want to be named.

The system — which effectively puts factory workers in a bubble, insulated from outside infection — is also being used in nearby Dongguan, a manufacturing center that pumps out shoes, toys and textiles for export around the globe, but has restrictions in place to quell a virus outbreak, as well. On Thursday, a Shenzhen government official said factories will gradually be able to resume production in an “orderly manner.”

With economists increasingly warning about the hit to the world’s second-largest economy from lockdowns and other aspects of China’s COVID Zero strategy, such systems could help keep the engines of growth running while other curbs remain in place.

Plunged into a snap lockdown on Sunday as infections climbed, Shenzhen’s restaurants and subway are closed. Its 17.5 million residents are unable to leave the city limits for nonessential reasons. Whole neighborhoods are being sent to isolation sites under China’s policy of quarantining every COVID case. By deploying factory bubbles, the economic impact will be “significantly less,” said Paul Donovan, UBS’s global chief economist.

“The problem is that people hear ‘lockdown’ and instinctively think of what happened in 2020,” he said. “That is not what is happening now.”

Like Wuhan

In the early days of the pandemic, China sealed off the original epicenter of Wuhan, with industry and manufacturing in the city shut down for months.

Still, as the outbreak was contained and Wuhan started to cautiously emerge from restrictions, it started to deploy similar moves to those now being rolled out in the south, with computer maker Lenovo Group Ltd. taking factory workers’ temperatures multiple times a day and isolating staff for testing. Such measures enabled China to emerge swiftly from the initial pandemic economic hit, despite fears restarting factories would contribute to the virus’ spread. The theory may be the same now.

As part of a vow to stabilize financial markets and stimulate the economy Wednesday, China also said virus controls should be coordinated with economic development. The comments, made at a meeting of China’s top financial policy committee, reiterated what has been a regular drumbeat from officials the past month: that COVID policy needed to be tweaked to minimize disruption for business.

The closed-loop arrangement for Shenzhen’s factories appears similar to a bubble system China adopted during the Beijing Winter Olympics in February, where athletes and Games-related personnel were kept separate from the general public, only allowed to travel between sporting venues and their hotels via designated transportation. The system was successful in preventing any COVID spread from the Games within China.

There have been discussions about replicating the Olympic bubble for some events, Bloomberg News has reported, particularly as a way to allow foreigners to come into the country without the need for hotel quarantine, which is currently mandatory for all incoming travelers.

Olympic Model

Michael Hart, president of the American Chamber of Commerce in China, said member companies had proposed similar setups to the Olympics model, where technical and training staff from abroad could fly into China and work alongside locals after a period of negative tests.

“I don’t know of any companies that have been able to execute this yet, but we’re hopeful that something like this could be approved on a case-by-case basis as a workaround to the current quarantine restrictions,” Hart said.

China has kept the virus at bay for most of the past two years using a combination of effectively closed borders, mandatory isolation of all virus cases and mass testing to limit outbreaks.

But more contagious variants like omicron are challenging the regime, which is becoming more disruptive as infections flare more regularly and the rest of the world opens up. China has has imposed more lockdowns over the past week than at any point in the pandemic, with Shenzhen, Langfang City near Beijing, the city of Changchun in the northeast and then its surrounding province, Jilin, all put under movement restrictions.

Banks including Nomura Holdings Inc., and Morgan Stanley say China’s resource-intensive approach to containing COVID — a strategy that has delivered one of the lowest death tolls globally — damp the country’s growth outlook.

The closed-loop system may help individual manufacturers keep operating under COVID curbs, but it is unlikely to be a model of where China’s overall approach to the virus may be heading, said Louis Kuijs, Asia Pacific chief economist at S&P Global Ratings. “Most people in China do not work in factories, but in offices, shops, restaurants and the like. In those type of workplaces it is much harder to set up a closed-loop bubble.”

It may also not prove a panacea for factories, if the lockdown has halted logistics and deliveries.

Chinese logistics firm 4PX said on its website Monday that it had stopped picking up parcels from Shenzhen due to the COVID restrictions, while most online retail exporters have been disrupted by the measures, according to Wang Xin, head of the Shenzhen Cross-Border E-Commerce Association.

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