27 March 2020
Topics in this article
  • Cost Optimization
  • Supply Chain & Logistics

Building Predictive Success in an Unpredictable World: A Modified Playbook for Supply Chain Stardom

We can all look around and see an unpredictable world. Six months ago, our minds were forward-facing, we were building our budgets, closing out the third quarter, and looking forward to the holiday season with friends and family. Three months ago, when we first watched COVID-19 develop half a world away from us, we weren’t preparing for the wave of uncertainty a virus may bring to our businesses. For most, not even three weeks ago were we thinking about the effects a global disaster could have on the success of our supply chains and companies as a whole.

So, what now? What does success within a business look like when most of us are consumed with personal health, our jobs, the stability of our companies, and likewise for our family and friends? Corona-chaos has taken over our personal and professional worlds. How can we gain some form of control back outside of following the advice our medical leaders have blanketed everywhere? While I am at a loss for medical advice, I can offer you insight into what you should be considering with your supply chains and respective logistics operations.

The answer to your supply chain woes is “predictive success.” Now, what is predictive success? This is a term I often speak about with our clients. In the world of logistics, almost everything has a variable element to it. How you control and deal with these variables will define your ability to execute. This, however, is dependent on the nature of your environment. In today’s world, you will need to challenge your thinking and build a predictive success playbook to ensure stability for your supply chains. But, be wary of anyone who tells you they have the recipe for absolute success in these circumstances.

The playbooks written and implemented through most of our careers did not have this crisis in mind and must be modified to deal with the times we are living through. These new variables and the subsequent unknown future variables will need to be considered. What I look to do is stimulate your thoughts and offer advice around some hot topics within supply chain and logistics in the world around us.

Let’s first discuss international trade and the current Chinese backlog. If you are reading this article, I assume you are interested and/or impacted by Chinese goods within your supply chains. Under normal conditions, for three to four weeks a year, we adapt our supply chains to account for Chinese New Year, which creates usual chaos leading up to, during, and subsequently, after factory workers return from their time off. As highlighted in a recent Journal of Commerce webinar, essentially, what we are experiencing is an extended Chinese New Year with an added massive backlog of supply coming in approximately 30-60 days.

COVID-19 impacted every aspect of Chinese manufacturing and shipping capability. Even now, in the face of recovery, travel between Chinese provinces is still reportedly tricky due to restrictions. When ports and factories closed, it created a demand bubble an ocean away that is inevitably going to burst at some point. How you allow your company to be impacted by this wave of incoming capacity will impact your supply chains significantly.

For shippers that imported through 2015, you will recall the massive influx of containers, dray capacity issues, storage shortages, transload constraints, and significant chasis issues. Think about this from a practical perspective. There are necessary goods that need to be replenished and products that companies won’t need right away due to shifted business priorities. These items will choke up operations, sit somewhere, and as a result, impact key import markets.

Ask yourselves:

  • What is your chasis procurement strategy and contingency plan? Are you confident that you will be able to access chasis as fluidly as your business needs?
  • Will you be able to get your goods where they need to be as fast as possible, while still avoiding any demurrage and costs for companies that will already be struggling?
  • How is your dray network, and have you secured enough capacity to meet your demand? These drivers and companies are dealing with the same personal challenges you are. If they are not working, then they cannot pay their bills. Forward negotiating or renegotiating your agreements for capacity may be a good idea.
  • Do you have enough storage to meet your pending demand? Are you using a shared warehouse with other clients? Your ducks may be in a row, but does one of those other clients have a more significant demand coming? Have you considered alternative storage options if so? How will you be impacted by this, and how will your warehouse provider respond?
  • Is your operation dependent on transloading at or near ports? Have you read reports from Amazon and the like who have hired 150,000+ workers to meet their surging demand? Most transload operations depend traditionally on temp services to meet their staff demands. I would certainly be on the phone with my transload providers to get a pulse on the market.

Now, let’s switch gears to the US. The obvious point is this impending international bubble will 100% impact domestic transportation trade, rates, and network balances.

Ask yourselves:

  • Have you considered your fuel program, and have you noticed the mass drop in the price of oil? Many fuel scales were written at a time that fuel was at a different level.
  • Have you considered your parcel infrastructure and carrier options? Sure, you may have a contract, but have you heard about Amazon and home delivery of groceries? Would it surprise you to learn that some reports suggest E-Commerce grew 5.3% as a percentage of retail sales from 2010-2018 and ended 2018 around an approximate 10% of retail sales respectfully? How long will people continue ordering grocery goods online? How will these supply chain shifts affect their rates and the ability to service you?
  • Have you assessed your domestic carrier and broker networks recently? Are they financially viable, and what markets do they currently serve? There has been a dramatic shift in the type of goods being handled by carriers/brokers. They are responding to this demand in an unprecedented way because of the market shift. Can you rely on the capacity you have traditionally been able to?

I would suggest taking a hard look at these areas, and subsequently recommend you use this time to assess how you interact with companies and drivers. When I worked for a large national carrier, we internally had a saying that “shippers had long memories.” As someone who has sat on multiple sides of the preverbal logistics desk: Carriers, brokers, and drivers all have good memories. How you treat these companies matter, near and long term. Embracing them strategically versus as a tactical resource will impact your availability to deliver capacity. Drivers and carriers are, at a minimum vital vertebra to our economy, if not the whole backbone. Asking yourself these questions will help give you a chance to succeed.

These potential events are currently unpredictable, but being informed and flexible will create a plausible success story for your company. Pete Hixson put out a blog recently about merely being able to accept, adapt, and grow. Our companies, and particularly our supply chains, are living and breathing creatures that change as well. Sustained success is not accidental, and an adaptive playbook is necessary for effective supply chain management. These thoughts will start you down the road of predictive success.

Get in touch and let us know what challenges you’ve been experiencing to see how Proxima can help.

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