Reuters Events | Supply Chain & Logistics Business Intelligence

The eyefortransport team take the pulse of the industry

Some segments of the market have slowed, others are booming. E-commerce business, F&B and domestic trucking are up but passenger airlines are grounded, ports are snarled up and shipping routes are being curtailed at short notice, so buyers are having to an extra hard look at how they transport goods.

There is significant uncertainty on both the supply and the demand side, with both constantly shifting in rapid time. Supply is at risk as factories are forced to shut down from quarantine measures, causing others further downstream to seize up as components are no longer available. Even when they are restarted, often transportation systems are not ready to support them. On the demand side, consumer requirements are changing rapidly and purchasing orders are shifting at a dramatic rate.

While some are dealing with a tsunami of orders, others are hearing crickets chirp

"Every business is experiencing massive demand fluctuations in their supply chains.  While some are dealing with a tsunami of orders, others are hearing crickets chirp," says Clifford Lee, Vice President of Octagon Value Chain. "Most economists predict that the ripples from this bullwhipping will not subside for quite some time, certainly not for the next 18-24 months, and may permanently change the global economic landscape."

The consequence is that greater transparency and collaboration with mutual counterparties is required and is sucking up a huge amount of human and technology resources.

Harshad Kavinde, Practice Leader, Strategy and Supply Chain at Slalom Consulting sees that “The current situation is exposing the need for more granular visibility in the end-to-end supply chains to improve its responsiveness to disruptions.

Over next 18-24 months, I expect to see a renewed push for digital transformations that are focused on improving the visibility into consumer demand

“Over next 18-24 months, I expect to see a renewed push for digital transformations that are focused on improving the visibility into consumer demand, tier-1 and sub-tier supplier performance & risk, inventories, and forward/reverse logistics. The increased visibility will also make the supply chains nimble to enable faster business innovation,” so that when we emerge from this crisis the upside will be “new customer experiences, faster channel shift, faster product launches, faster supplier/vendor shifts.”

Achieving visibility is so key as the current interconnectedness of the supply chain runs so deep, meaning  that disruption of one node will have significant downstream effect. Ultimately, the question is: Can the logistics infrastructure hold up? Concern is compounded by the ‘Just-in-Time’ supply chain processes that the supply chain relies upon. Just-In-Time relates to a supply chain which optimizes for efficiency, but doesn’t bake in the redundancy or risk tolerance to absorb significant disruption.

In this light, words such as supply chain risk management, sustainability, collaboration, resilience, agility and visibility have been used consistently over recent times – and now more than ever.

The resilience of the supply chain is reflected in having different options available to keep the flow of goods going and to make sure that goods arrive in the needed quantity and quality on time

“One of the most important things during these challenging COVID-19 times is to be flexible and adapt to the changing supply chain reality,” explains Johan Elzes, Business Unit Manager Trade Facilitation & After Sales Service at Ahlers. “For us this means that the resilience of the supply chain is reflected in having different options available to keep the flow of goods going and to make sure that goods arrive in the needed quantity and quality on time.”

Equally, budgets are being unlocked to re-invest into supply chain risk mitigation in the medium-term.

“The mandate to improve the agility of an enterprise; one that can quickly adjust to changes, both catastrophic as we see today as well as normal times, will be at the top of C-Level meeting agendas for years to come,” notes Lee. “Value chain partners now have a dire and immediate need to collaborate on jointly beneficial solutions and think flexibly and creatively where before there may have been reticence to have these discussions. Technologies to enable this collaboration will see higher interest and demand and suppliers of these should be ready for their own crush of orders"

Value chain partners now have a dire and immediate need to collaborate on jointly beneficial solutions and think flexibly and creatively where before there may have been reticence to have these discussions

Investing in technology to aid and deliver these initiatives, was previously on the radar, toes had been dipped in the pool, but few had made steps to truly invest to the extent where they could see and benefit from the investment. Others were cautious and struggled to get investment from procurement and finance teams, and the ability to get proof of concept was tough. Like any industry that is going digital – it was slow to start and many needed to see results from elsewhere to be convinced. 

The market has split in two even further: Those with a risk appetite and those without. Those without are ‘sitting on their hands’ to see how this plays out, others are taking the opportunity to use this time to invest in all the projects they didn’t have time or resource to before. This includes, implementing operations and tech that achieve supply chain risk management, sustainability, resilience, agility and visibility. These companies are using this time to focus on projects such as these.

Amid everything there remains significant opportunity and threat for all players in the supply chain

Opportunities

• Carriers have opportunity to win business from competitors who are operational
• Increasing competition between modes with rail networks absorbing truckload freight and even seeing upticks in intercontinental demand, such as from China to the EU
• Shippers and 3PLs pivot to become more e-commerce friendly as consumers stay home
• B2B shippers transition to an e-commerce model as salesforces work remotely

Threats

• Importers face loss of margins on goods as supply outstrips demand as Chinese producers get back up and running
• Rolling peak in supply will see inflation in shipping rates
• Grounded passenger planes – which carry significant freight volumes – mean importers must pivot to alternative carriers or ‘inshore’
• Fluctuating supply and demand makes planning impossible and leaves companies vulnerable to changeable spot rates on freight

Buyers and 3PL’s are looking for technology that will offer then a quick fix right now – as they know that a fully digital solution, whilst on the horizon being higher up the priority list, will take years to implement. And they want answers now. The vendor landscape is trying to push their technologies, as they know buyers are looking at them more – but this is causing more distrust in the two sides.

There has also been a spotlight shone on global supply chains. Should products be made and sourced more locally – this is likely to provide a short, and long-term shift in how the industry functions.