In an age when supply chains grab the headlines for all the wrong reasons, what are the upsides?
In a online seminar today sponsored by supply chain technology company FourKites, panelists discussed this topic, and there is cause for optimism.
The consensus: Supply chains are receiving more attention than ever before, and with that attention comes a demand for improvement.
Audrey Ross, logistics and customs specialist for Toronto-based cosmetics company Orchard Custom Beauty, said the supply chain crisis had accelerated improvements in her company’s supply chain processes. “When you find yourself in these tense and difficult situations, you can see, ‘This is not working,’ she said.
This phenomenon is not unusual, according to Chris Stauber, vice president of products at FourKites. “The good news is that supply chain and logistics now have their place at the table. The bad news is that you are now under the microscope, ”he said. The inefficient processes that slipped before the pandemic are now in the foreground, and it has become imperative to improve them.
Peter Tirschwell, Trade Review editor, had a similar assessment. “A shock of this magnitude and the kind of existential importance to organizations has drawn top management’s attention to all measures,” he said.
The demand for what the industry calls “end-to-end visibility” has increased dramatically. Much of the logistics industry still operates on legacy technology. Live updates of the location of shipments can often be difficult to obtain. There are many ways to digitize operations so that everyone involved in a shipment can be on the same page throughout the shipment path.
Stauber said the question at the forefront of many leaders’ minds is, “Can you handle this level of complexity with manual processes?” He pointed out that shipping freight by sea is one of the oldest industries in the world and many aspects of it have failed to keep up with new technologies. Ocean shipments, for example, are always normally booked over the phone.
The downsides of manual processes has been a lesson many companies have learned from the pandemic. “COVID taught us this because we couldn’t walk into the office and exchange papers like we did before,” Stauber said.
Ross said that for the first time in his career, customers were constantly asking him where the boat was carrying their products. Often times, she can’t give them a satisfactory answer because the information just isn’t there, she said.
“The demand for real visibility has never been higher,” Tirschwell said. “The market wants it, there’s no doubt about it. “
The question is whether this will happen. With shipping container prices soaring this year, shipping companies (which are usually not very profitable) have reaped windfall profits. Reinvesting these profits in improving visibility would be beneficial for the entire industry. But challenges remain in collecting data and actually making improvements. “I think it’s a big open question right now as to whether this investment is going to happen and whether that real visibility will be achievable,” Tirschwell said.
Ross said companies are asking new questions they haven’t considered before. She said most of the supply chain models are based on Toyota’s just-in-time model. It has proven successful, but companies like his may have different supply chain needs than automakers. “I think people are realizing that the personalization that we have made to our products is now something that we have to do internally in our supply chains,” she said.
Tirschwell said large companies were able to make changes and try new things, but it was more difficult for small companies. “For organizations that have been successful in harnessing scale and creativity, there has been a truly incredible entrepreneurial spirit. . . . For small shippers it has been much, much more difficult, even to the point that business models that depended on the earlier ocean freight economy in recent decades are being challenged, ”he said.
These business models are going to come under scrutiny as supply chain costs have started to account for a greater proportion of the total cost of a product, Stauber said. “There is now an emphasis and a focus that there has never been before,” he said. With this focus comes strong incentives for improvement.
Stauber sees the greatest room for improvement in the area of metrics. Businesses are only as good as the metrics they have to work with, and there aren’t enough of them in the logistics industry right now. FourKites is trying to change that, Stauber said.
He cited as an example a new metric called DOTIF. OTIF stands for “on time and in full” and is the most important metric for many shippers. But it doesn’t provide a lot of specifics as to which parts of the shipping process are causing delays. DOTIF stands for “on-time and complete documentation”, and it lets shippers know if documentation is what is delaying shipments (which it often is). Stauber sees the increase in data as a silver lining.
Tirschwell also sees a lot of fruit at hand for the reforms. He said: “In the year since the start of the pandemic, the amount of work required to move freight through the system has increased astronomically, and in most cases the number of personnel to move freight through the system has increased dramatically, and in most cases the number of personnel to move freight through the system. doing this work has not increased. ” In ordinary times, obstacles like ineffective communication are tolerable annoyances, but now things like emails and spreadsheets are urgent areas for improvement, Tirschwell said.
What is the prognosis for the expedition? Tirschwell said “there are pockets of positive news” but “the fact remains: the whole system is nothing to complain about.” He said that with such a capacity coupled with the extraordinary volume of containers, the “circulatory system required to move containerized cargo” is unable to function properly. On top of that, he said, “There is no significant reduction in the number of ships waiting to dock in LA / Long Beach.”
He said that between the upcoming Chinese New Year in February, consumers are still full of cash and no sign of returning to normal spending habits, “the system has only a few months next year to go. trim properly before another holiday shopping attack. ”He sees the problems lingering until the end of next year.
“The message we have unfortunately is that there isn’t much evidence that this supply chain crisis is about to abate,” Tirschwell said.
While the short-term outlook does not appear optimistic, there is cause for optimism in the long term. The pandemic has shown how inefficient America’s supply chains have always been. Companies are realizing the importance of supply chains and making record investments in new technology to get things back on track.
Like Rich Lowry wrote in October, “It’s beyond one person’s power to change this anytime soon, but trying to remove as much of this congestion as possible should be a national priority.” Private companies got rid of these burdens early on, and to the extent that this crisis has exposed what these burdens are, it can have salutary effects in the long run.