2020 in Review: 11 Game-changing Effects on Logistics

One word sums up 2020 for the logistics industry. PANDEMIC. Or, if you prefer, Covid-19.

The pandemic, a once-in-a-century event, shook the logistics industry to its foundations.

Covid-19 exposed weaknesses with reckless abandon. Neither governments, the logistics industry, nor individual businesses were ready for the unprecedented disruptions.

This once-in-a-century event caught the entire industry by surprise. To put the effects into perspective, we need only look at survey results from Adelante, Blue Jay Solutions and CSCMP (Jun 2020).

According to the survey, 75% of supply chain professionals plan to make changes to their supply chains based on lessons learned. That’s a startling statistic for an industry that routinely deals with change.

As we look back on what happened in 2020, we will see that many of the adverse effects were already evident. Others were lying buried beneath the surface.

In this post, we will review 11 ways the pandemic disrupted the supply chain industry. Understanding these events will help us grasp how they will shape logistics in 2021.

But that’s a topic of another blog post in which we’ll preview what to expect in 2021.

With that, let’s review how the pandemic upended the logistics industry.

 

Covid-19’s Negative Impacts

1) Employee Health & Safety.  When Covid-19 reared its ugly head, one of the first things everyone grappled with was employee health and safety. The scale, scope, and severity of the pandemic made itself felt worldwide in short order.

Almost immediately, businesses began taking precautionary measures to keep their workforces healthy and safe. They implemented social distancing from office settings to the shop floor.

Workers needed time to adapt to what seemed unnatural and draconian measures. As time when on, employees on the frontlines, adapted and became a model of resilience.

Nonetheless, health and safety will remain a top priority for the foreseeable future.

 

2) Unemployment. Almost overnight, starting with China, governments shutdown their societies. Business shut down, and trade came to a halt. That resulted in an immediate and dramatic rise in unemployment.

At its peak, unemployment in the United States reached 14.7% in April 2020. This exceeded the unemployment rate experienced during the Great Recession. Equally shocking was how fast unemployment rose.

Unemployment rose higher during the first three months of COVID-19 than it did in two years of the Great Recession. Unemployment dramatically increased by more than 14 million. It rose from 6.2 million in February to 20.5 million in May 2020 (Pew Research Center).

The sharp and massive rise in unemployment was unparalleled. It became clear unemployment further strained supply chains’ ability to cope with Covid-19.

 

3)Blank Sailings. As economies shut down one after another, that led to a ripple effect of cancelled sailings. Cancellations came wave after wave by large and small container lines alike.

Container lines blanked sailings out of necessity to shore up rates. As container lines had to deal with excess capacity, blanketing sailings was the logical method. Again, these cancellations spread over time with worldwide effects.

Most troubling is that blank sailings will likely continue into 2021 and beyond. You can expect blank sailings to shape the New Normal.

Another byproduct of blanked sailings is increased demurrage and detention. That, too, was a prior existing issue. As shippers blanked sailings, empty containers remained at U.S. ports awaiting return to China. This led to excessive congestion.

We also saw delays in loaded containers. Contributing to this backlog was the reduction of work shifts at ports. Many ports introduced reduced shifts with little or no notice. This led to increased demurrage and detention charges.

It is clear wholesale blank sailings had an adverse effect on port operations. While the worst appears to be behind us, volatility remains, nonetheless. And that will provide an impetus for coming to grips with this knotty issue in 2021.

 

4) Port Congestion. Covid-19 also disrupted import and export. Port congestion proved to be a thorn in the side of every supply chain stakeholder. Like some of these other issues, port congestion was not new. As expected, the smooth flow of cargo through ports became problematic during Covid-19.

Ports had fewer workers to handle cargo, and many ports limited operations. Also, many retailers delayed picking up their cargo due to their own worker shortages. Many retailers also shut down their warehouses further adding to port congestion.

This issue became a prominent issue during Covid-19. That said, it won’t be easy to resolve and will likely dominate the foreseeable future.

 

5) Supply Chain Concentration. As Covid-19 dragged on, its effects became more noticeable. A major weakness of global supply chains was the concentration of sourcing in China. This proved critical as China shut down its manufacturing facilities.

When manufacturing shut down in China it had a ripple effect. That led to unprecedented inventory shortages, sparing no industry sector. We saw shortages in autos, electronics, consumer goods, pharmaceuticals, and medical supplies, to name a few.

In hindsight, these dramatic effects were not inevitable.

Businesses could have avoided these negative effects. One way to do that was with diversification of sourcing. That is, diversifying sources among many countries would have alleviated the related shortages. In any case, for various reasons, business did just the opposite.

At the macro level, lack of diversification led to a supply-induced recession. At the micro level, it had a detrimental effect on company sales. Unsurprisingly, large firms sustained these supply shortages better than small- and mid-sized firms.

In fact, some small- and mid-size firms declared bankruptcy. And even some large companies weren’t spared. Here’s a partial list of companies that a declared bankruptcy during Covid-19: Pier1 Imports, Modell’s Sporting Goods, Nieman Marcus, J.C. Penny GNC Holdings, Lucky Brand, Brooks Brothers, J. Crew, and Steinmart.

These bankruptcies also hit consumers (at the end of the supply chain) hard.

 

6) Inventory Shortages. One of the most obvious impacts of the pandemic was manifested by wholesale inventory shortages. We saw shortages of food items, cleaning supplies, and personal protective equipment.

Critical medical supplies were also in severe shortage. Supply and demand were grossly out of sync. The “whiplash” effect was in full display. Supply chains weren’t up to the task of matching supply and demand. Making matters worse, a hyperbolic press manufactured many of the issues.

As time went by, many businesses adapted to the New Normal. Driven by a sense of urgency, businesses applied lessons learned at a rapid pace. But making these adjustments were costly. Businesses re-sized inventories. Many streamlined business processes. And many workers worked overtime to meet unprecedented demand for critical items.

By taking expedient measures under duress, many supply chains began to rebound. But a return to business as usual was still out of reach.

 

7) Spot Rates. Covid-19’s impacts affected different sectors of the economy in different ways. Spot rates experienced highs and lows that fluctuated according to demand.

For example, consumer goods enjoyed rising demand. So spot rates for transporting consumer goods were high. Pent-up demand continued to put pressure on keeping spot rates high. But freight rates for industrial and manufacturing tell a different story.

According to FTR Transportation Intelligence, freight rates for industrial production and durable goods dropped 8% and 6%, respectively. The data show the rebound in industrial goods lagged that of consumer goods.

Spot rates are higher now because capacity remains tight, as all the drivers have yet to go back to work. Also, Covid-19 restrictions in some states resulted in a 40% decline in the issue of driver’s licenses. Retirements also affected driver availability, which also affected spot rates.

Until the mass distribution of a vaccine in 2021 occurs, wild fluctuations of spot rates will continue. Rising demand will further exacerbate capacity constraints caused by rising demand. Hence, you can expect upward pressure on prices.

 

8) eCommerce Overwhelm. Although the pandemic had deleterious effects, eCommerce prospered and grew. We saw consumers move in droves to online shopping, as businesses closed their stores.

On the surface, we may see that as a good thing. Yet, the expansion of eCommerce came with growing pains. The rapid move to online shopping was so great it overwhelmed the eCommerce channel. Even Amazon, which pioneered two-day shipping and then one-day shipping, couldn’t keep up with the demand.

Other businesses, not as prepared as Amazon, found it even tougher to keep up with demand. On the whole, eCommerce grew dramatically but overwhelmed supply chains. That further strained supply chains’ ability to cope.

 

9) Long-term Forecasting. When Covid-19 hit, consumers panicked. So, they made a run on what they deemed to be critical supplies. As a result, we saw empty store shelves. Shortages resulted in toilet paper, cleaning supplies, and face masks, to name a few. As demand skyrocketed, companies couldn’t keep supplies on the shelves.

Most of this was irrational. Thus, it was difficult if not impossible to forecast. Accustomed to steady-state operations, many supply chains couldn’t adapt to this volatility. Rather, companies built supply chains on long-term forecasts. Doing so tended to smooth out outlier events – until Covid-19 struck. Covid-19 broke the mold.

These forecasts were no match for the extreme disruption that resulted. Even companies with highly-regarded supply chains, like Amazon and Walmart, weren’t prepared.

 

10) Lack of Infrastructure Investment.  Another adverse effect of the pandemic was the inadequacy of infrastructure funding. As employment dropped and widespread disruption took hold, infrastructure investment took a bigger hit.

Covid-19 further affected revenue shortfalls by state and local governments. That in itself had a ripple effect. For one, employment suffered as federal, state, and local governments delayed infrastructure projects. And implementation of social distancing further slowed down funded projects.

Also, with the economy partially shutdown, governments collected fewer road and highway tolls. Reduced tax collection adversely affected current as well as future construction projects.

Fortunately, the government acted and provided some relief with the C.A.R.E.S Act. The passage of the C.A.R.E.S Act abated some of the effects, but only for the short run. As a result, infrastructure will loom large in 2021.

 

11) Continuity of Operations Planning (COOP) and Risk Management.  The lack of preparedness manifested itself in record disruptions, dislocations, and delays. That indicated businesses gave COOP planning short shrift.

It also highlighted the importance of supply chain risk management. In particular, it revealed the lack of integration with suppliers at lower level tiers. Tier-2 and Tier-3 and lower-level tiers did not have the necessary integration to withstand the pandemic’s effects. Coordination and collaboration below Tier-1 were severely lacking.

Covid-19 forced closer engagement with lower level suppliers. That had the unintended yet favorable effect of enabling supply chains to rebound. As a result, COOP planning and risk management are two areas that will shape the New Normal.

 

Conclusion

The pandemic shone a spotlight on supply chains. Before the pandemic, supply chain management was unfamiliar to the general public.

Now, everyone knows what supply chain management is. More important, the public understands the importance of supply chain management.

That said, the pandemic resulted in widespread disruptions, dislocations, and delays. The effects were unprecedented in their scope, scale, and speed. They ushered in a new way of thinking about supply chains. That thinking has translated into what we now call the New Normal.

That in a nutshell sums up 2020.

The New Normal will shape next generation supply chains. Rigid rules and standards are out-of-date. Rigidity imposed by long planning cycles will give way to responsive supply chains.

Resilience will become a supply chain imperative. Agility and flexibility will underpin tomorrow’s supply chains.

As a 3PL provider, American Global Logistics can help you meet the future’s challenges. We can help you transition and adapt to the New Normal without wrenching changes.

If you’re resetting your supply chain to recover from weaknesses exposed by Covid-19, we can help you. Contact  American Global Logistics  now to start transforming your supply chain.

We can help you with current operations as well as with once-in-a-lifetime events.

 

Trucking Industry Insights: Roadblocks and Opportunities (Part 2)

A previous blog post (Nov. 11, 2020), featured roadblocks facing the trucking industry. Today’s blog post focuses on key opportunities.

In particular, this post delves into the following areas of opportunity:

  • Improving customer service
  • Creating shareholder value
  • Creating new services
  • Improving cost containment
  • Leveraging emergent technologies

Challenged by Covid-19, the trucking industry has not stood still. It has and is changing… for the better. That’s because the status quo is no longer acceptable. To paraphrase a well-known quote, “we must be ready to change… or risk being left behind”.

With that let’s review five keys areas of opportunity for the trucking industry.

 

Opportunities Facing the Trucking Industry

The road ahead is not hassle-free, but it also offers benefits. Trucking companies taking a proactive approach to the New Normal can thrive by exploiting the obstacles.

Here are five ways trucking companies can convert obstacles into competitive advantage.

Improving customer service.  Improving customer service was always a hallmark of trucking. But now, customer service is a market differentiator. Trucking companies that provide customer-centric services will thrive. Those that don’t may not survive.

As mentioned above, closer communications with the customer strengthens relationships that increase trust. And that feeds the ability to develop customized and innovative solutions. Improved customer service results from closer, more frequent communications.

Creating shareholder value.  To stay competitive truckers will have to add value to their basic services. That will prevent the commoditization of their service offerings. Taking a lesson learned from the pandemic suggests businesses require never-failing service.

Trucking companies that can deliver during times of upheaval will stand out. So, truckers that increase resilience and reliability while keeping costs down will create value. Thus, executing effective CONOPS will help contribute to the customer’s bottom line.

Creating New Services.  Also, successful trucking companies will constantly strive to introduce new services. For example, offering backhaul operations as a prime service provides an opportunity for growth. It can also open up a new revenue stream.

Further driving the growth of reverse logistics is ecommerce. For trucking companies, it provides a way to maximize capacity. Returning goods also helps reduce expenses for tucking companies and their clients. Reverse logistics as a service will likely grow and has the potential for increasing value and profitability.

Improving cost containment.  The Coronacrisis has taught us the necessity of agility. Lack of agility led to increased costs or loss of market share. Thus, trucking companies that embrace agility have a chance to become leaner yet stronger. Becoming flexible ensures improved service through greater efficiency and effectiveness.

Reverse logistics helps maximize capacity along with integrated networks and streamlined distribution operations. Those efficiencies will help trucking companies keep costs low.

In one case, Penske logistics backhauls scrap from Ford for recycling by its aluminum manufacturer, Novelis. The amount of scrap backhauled supports the manufacture of 34,000 F-150s per month. (inbound Logistics, Sep 2020). That increases competitive advantage and could be a potential game changer.

Leveraging emergent technologies. As mentioned in the blog post on obstacles facing the trucking industry, autonomous vehicles won’t be ready for decades. But, over time, artificial intelligence (AI) will mature making it useful to scale. So, too, will the Internet of Things or IoT.

So the future of trucking will experience an evolution – not a revolution – of  technologies.

As AI matures, it will help relieve the perennial driver shortage. IoT, meanwhile, will lead to efficiencies in preventive maintenance. As these emerging technologies evolve over time, they will improve operations and help cut or contain costs.

 

The Future of Trucking and Next Steps

As you can see the future holds promise for the trucking industry. The promising future stems from becoming more customer-centric. In focusing on customers, benefits will accrue to customers and trucking companies alike.

Shareholder value will also improve as trucking companies strive to provide continuous service. Plus, the creation of new services will mutually benefit customers and trucking companies.

Furthermore, cost will likely be more important, although it won’t only be about the bottom line. Remember, customer service is the dominant concern. Finally, trucking companies will seek new technologies to deliver cost-effective/efficient solutions.

This means, we can expect to see more agile, responsive, and customer-centered trucking companies. Flexible and resilient firms will separate themselves from those that fail to adapt.

As a 3PL whose cornerstone is customer service, American Global Logistics is well-positioned to help you navigate the future of the industry.

We pride ourselves on providing customer service that’s second to none. In providing matchless service, we get to know our customers intimately.

That allows us to learn about your needs and challenges in depth. That’s why we can offer you tailored and innovative solutions. Our customer-centered approach is our competitive advantage.

The next steps depend on you. You can continue to operate as you do now. Or you can adapt by working with a customer-oriented 3PL.

The decision is yours. It depends on whether you’re prepared to compete in the New Normal.

Trucking Industry Insights: Roadblocks and Opportunities (Part 1)

As the trucking industry emerges from Covid-19, the future reveals roadblocks and opportunities.

Disruptions from Covid-19 have changed the way the industry operates. And a reversion to pre-pandemic operations is unlikely.

Priorities have changed. Operations have changed. And a new business model is emerging.

The trucking industry has always faced many challenges. However, post-Covid-19 the industry faces some new obstacles as well as some old ones.

Without further ado, let’s see what roadblocks hinder the trucking industry.

 

Roadblocks Facing the Trucking Industry

The uncompromising need for (available) trained and healthy drivers. Before the pandemic,

the driver shortage affected the trucking industry. In the post-pandemic world, the driver shortage will continue to hamper the industry.

That only adds to the new concern of driver health and safety.

For the moment, the health and safety of drivers take top priority. So, trucking companies must pay special attention their employees. The challenges are to maximize employment of a scarce workforce and to keep them working.

What about autonomous vehicles (AVs)? Some tout AVs as a panacea. According to some reports, they won’t be ready for decades. AI research is still in the early stages before deployment of AVs can make a material difference.

These concerns will likely continue at least until we have vaccine. Several cures appear to be on the horizon. According to a report in the NY Times, Pfizer and BIONTECH have one now that’s 90% effective. But having the necessary quantities available is the next concern.

For the short-term, expect to see health and safety of drivers remain a top concern. Without a healthy workforce, the trucking industry can’t meet customer demands. And customer demands are increasing, not decreasing.

The continuous need for speed. As stated above, customer demands are increasing. One of them is the need for instant gratification. We need only look to e-commerce as an illustrative example.

Amazon worked to meet this demand. First, it achieved that with two-day shipping. Then it further fueled customers’ expectations with one-day delivery. Other retailers have jumped into the fray, scurrying to meet this new standard.

Walmart, Best Buy, and Kroger’s have also risen to the challenge, not willing to cede any market share to Amazon.

As a result, the need for speed is here to stay. But there’s a twist to this.

The persistent need for agility.  Besides expediting delivery, companies found new ways to deliver products to customers. In many cases, businesses treated retail stores as distribution centers. Businesses bypassed their retail stores and shipped directly to customers.

That helped move products to customers more effectively and efficiently. And they accomplished this under challenging conditions imposed by the pandemic.

Responsiveness to customer needs was important before the pandemic. As we emerge from the pandemic, it’s even more important. That makes agility even more important. That’s true as customers expect businesses to continue providing services during disruptions.

As a result reliability has become essential.

The constant need for reliability.  Disruption, dislocation, and delay characterized global supply chains. Covid-19 exposed supply chain weaknesses worldwide. Recall critical shortages in basic supplies: toilet paper, hand sanitizer, and protective masks.

Predictability gave way to unpredictability and instability. For example, the pandemic skewed demand cycles, rendering planning ineffective. Even retailers like Walmart and Amazon were unable to meet customers’ basic demands. Reliability suffered across the board.

As a critical link in supply chains, trucking companies strive daily to ensure safe, on-time deliveries. To assure that, information flow has become a critical enabler in attaining reliability.

That entails better internal communication as well as closer communication with customers. Keeping customers informed helps set expectations. Closer communication also helps to identify and resolve issues before they become problems.

Constant communications enable truckers to operate with greater precision and intensity. That will help to boost reliability. While important before Covid-19, reliability’s prominence has risen to a new level. To stay competitive, reliability must continuously improve.

The growing need for sustainability.  With the onset of Covid-19, we saw a reduction in CO2 emissions as trade came to a virtual halt. Yet the acute need to maintain profitability sparked a renewed interest in sustainability. For example, balancing truckload capacity and driver availability arose out of austerity.

That included smarter use of trucks and more efficient network and route planning. That influenced better fuel management and an increase in back hauling. The benefits of improved trucking operations enhanced sustainability.

Covid-19 showed that sustainability goes beyond regulatory compliance. To stay competitive, trends indicate tucking companies will likely make sustainability a strategic goal (ATRI).

Expect this to strain resources in the short-term. Meanwhile, benefits may not materialize until the long-term. Failure to adapt to this new operational environment may disadvantage truckers.

The unending need for containing costs.  There’s no disagreement that maintaining cost control during the pandemic was crucial. Maintaining ongoing operations under extreme conditions challenged the best trucking companies. Lacking stability and predictability, truckers had to find new ways to contain costs.

New costs came in the form of prepping trucks and work sites for daily use. It also included containing costs associated with hiring, training, and retaining truck drivers. That placed a premium on virtual operations. That, in turn, dictated investments in relevant technologies.

Once the CDC approves a vaccine (Pfizer and BIONTECH are close now), some of these costs will diminish. Until then, investment in workarounds will continue. As businesses return to pre-Coronacrisis conditions, companies must manage new costs with care.

Despite the challenges facing the trucking industry, opportunities also present themselves.

 

Navigating the Road Ahead with Confidence

The trucking industry’s roadblocks have been outlined above. Some things have changed, and others remain the same. Regardless, challenges persist as truckers navigate uncertainty and volatility.

A few things are clear. We’ve seen noticeable change in priorities. Health and safety of drivers is a top priority now. It’s always been important, but now, due to health concerns, it’s critical.

Also, the former business model is no longer competitive. Instead, adding value through delivery of relevant services is the new mandate.

You may be struggling with how to tackle uncertainty and volatility head-on, even as you’re reading this post now.

If so, contact American Global Logistics to help you get ready for the next generation of trucking.

We’ll help you navigate the roadblocks with peace of mind in good times and bad. More important, we’ll help you convert those roadblocks into opportunities. (See Part 2 of this blog post that focuses on opportunities facing the trucking).

If you’re looking for a partner that can deliver resilient, reliable, and innovative services check out American Global Logistics.

Simply fill out the form here to start the conversation.

Tomorrow’s 3PLs: A Promising Future for 3PLs (and their Partners)

What will 3PLs look like in the future? What capabilities will 3PLs have? How will they change?

To divine the future, we can get some help from, Wayne Gretsky, “The Great One”. In revealing the secret to his success, Wayne Gretsky stated: “… you need to go where the puck is going to be.”

Likewise, we’ll follow his advice in this blog post by looking at where the industry will be.

We won’t focus on where the industry is or where it had been.

We already did that in the blog post: “The Evolution of 3PLs: From Their Humble Beginnings To Becoming Critical Industry Partners”.

That post looked into the past. This post will look to the future.

There are four major trends shaping the future of the industry:

  • The rise risk management
  • The move to specialization
  • The growth of innovation
  • The increase of competition

Starting with the rise of risk management, we’ll drill down into each one of these major trends.

 

The Rise of Risk Management in the Face of Increasing Uncertainty, Volatility, and Complexity

Tomorrow, as well as today, businesses must address known and unknown risks.

So what’s the difference?

In the future the frequency and impact of risks will increase. That’s already showing up in data we track today. As industry turmoil increases, businesses must treat risk management as a core competency. Likewise, businesses must also treat supply chain risk management as a core competency.

Companies that integrate them have the opportunity to make competitive gains. Integration is necessary as each plan affects the other. Integration will show its value both during and after crises.

Integration will help identify gaps in operations and supporting supply chain processes. As a result, continuity of operations (CONOPS) will grow in importance. Rather than shunting CONOPS to the side, it will increase in strategic significance.

These trends will take hold because they will move beyond containing costs alone. Tomorrow, risk management and CONOPs will contribute to profits. As businesses learn to capitalize on risk events, we may see CONOPS as a potential profit centers.

3PLs will also help generate new growth. 3PLs will grow while competitors struggle to survive as they fail to tackle risks in a strategic manner.

3PLs, work with uncertainty, volatility, and complexity daily. Hence, they are naturally-suited to address risks in a strategic manner. Consequently, 3PLs will likely adapt to this trend better than most businesses.

 

The Emergence of Increasing Specialization

As risks are on the rise, so too are 3PLs’ capabilities. It should be no surprise, advances in technology are contributing to specialization. Some examples affecting supply chains are drones, electronic vehicles, online retail sales, among others.

Along with new technology adoption, comes the need to train personnel on how to use them. The learning curve for some technologies will be steep, making development of in-house capabilities unrealistic.

Besides training time, rate of adoption, and maintenance, new technologies may be cost prohibitive. Given these barriers, it only makes sense to outsource to more technically savvy 3PLs. Hence the mere advancement of technology fosters specialization in the 3PL industry.

Another factor contributing to outsourcing to 3PLs is the need for operational efficiency. Technology will pave the way for precise execution and waste reduction. The drive to achieve end-to-end visibility and a no-waste mentality will continue to pervade business. In fact, technology will make waste reduction easier.

Yet mastery of the enabling technologies will likely require a steep learning curve. Again this may make outsourcing a popular option. Thus, 3PLs that master new technologies will add value to their services.

For example, technology has shown it can reduce planning cycles from 13 weeks to between 10 and 15 days. That’s a reduction of up to 90%! Reducing planning cycles that dramatically will become the norm rather than the exception.

 

Industry Innovation: The New Operating Normal

Innovation will be key to creating of resilient and agile supply chains. (Innovation will play a greater role in how 3PLs operate and deliver services. Innovation will be a built-in a capability among leading edge 3PLs.

Innovation represents the new frontier in delivering competitive advantage. Recall, we viewed supply chains as cost centers. Now they’re seen as profit centers. That change in view is now underway.

Innovation will grow because it offers a way 3PLs can deliver value-added services. Innovation will likely play a major role in achieving supply resiliency and agility. Providing those capabilities will improve both strategic advantage and competitive advantage.

Some other examples of innovative solutions include developing dynamic planning to support real-time operations: data-based decision making to support strategic and operational decisions.

Again, this will foster the no-waste culture that’s with us today. But tomorrow that capability will become sharper and more prevalent.

Finally, innovation will help balance cost and customer service with greater  precision and effect. In the future, shippers will get ever closer to getting what they need, when they need it. And 3PLs will provide those services at industry competitive prices.

This may sound like Nirvana. But innovation will bring 3PLs and shippers closer to that reality.

Also, 3PLs will be able achieve these gains as they work ever more closely with their customers.

 

Increased Competition: The New Industry Standard

Increased competition will pressure 3PLs to focus on improving customer service. Competition will be global. So no business will escape the market’s competitive forces.

That said, 3PLs that treat supply chain risk management strategically will weather these competitive pressures better than most. Also, 3PLs that specialize and innovate will fare better than their competition. These value-added services are a clear departure from providing transactional services.

Nevertheless, all 3PLs will operate in a full-on competitive environment. Increased competition will force companies to become more customer centric. And they will spend more resources on personnel acquisition, retention, and training.

Shippers will find keeping up with changes to supply chain management cost prohibitive. Money saved here will  allow shippers to dedicate resources to their core competencies. So, outsourcing to 3PLs will be the logical course of action.

Lastly, leading 3PLs will move well beyond providing transactional services. As competition increases, 3PLs will leverage their expertise to help shippers penetrate new markets. This will help generate future growth and profits.

 

The Future of 3PLs – The Way Ahead

Looking into the future, 3PLs will look much different than they do today. Our industry has always been rife with change. That will remain the same. But now change is accelerating at a pace never seen before.

The four trends discussed above are massive in scope and scale and powerful in effect.

To survive, businesses must adapt or die. Businesses that fail to do so will falter in the onslaught of these four trends.

To thrive you must get ahead of these major trends.

As a result, we can expect the changed industry to have winners and losers.

Partnering with the right 3PL may make the difference between winning or losing.

As the economy returns to a more normal operating level, now may be the right time to partner with a reliable 3PL that’s prepared to thrive, notwithstanding these trends.

If you’re interested in learning more about why American Global Logistics would make a reliable partner, please fill out the form here.

How 3PLs Achieve Competitive Advantage

Third-party logistics providers (3PLs) don’t look much like they did 40 years ago. They’ve morphed into high-performing, essential, value-added organizations.

3PLs have become strategic-oriented businesses that offer any shipper competitive advantage.

What does that mean?

Here’s a definition from Investopedia:

Competitive advantage refers to factors that allow a company to produce goods or services better or more cheaply than its rivals. These factors allow the productive entity to generate more sales or superior margins compared to its market rivals.

Competitive advantage also implies a future focus. It implies responsiveness as well as efficiency. Put together these advantages will shape what the future will look like.

3PLs that take this approach to logistics services offer competitive advantage. We’ll explain this in more detail below by examining 3PLs’ core capabilities.

Those core capabilities are: (1) Resilience and velocity; (2); Extended Networks; (3) Customized Solutions; (4) Business Intelligence; and (5) Trusted Leadership.

 

Achieve Competitive Advantage with Resilience and Velocity

With the increase in scale and impact of natural disasters of late, resilience has become top of mind. That said, resilience and velocity were key tenets of supply chain management pre-Covid-19.

But the pandemic accelerated interest in and importance of resilience and velocity. With fluctuating and uneven demand, shippers and 3PLs had to pivot on demand. This led to many changes.

First, it changed the way we view supply chains. Covid-19 called into question the hyper efficient, just-in-time mentality. Instead, supply chains demand a better balance between efficiency and responsiveness. That means relooking safety stockage to meet unpredictable demands.

It also called for adapting faster and earlier to changing dynamics on the ground. 3PLs that bounced back and responded in real-time gained competitive advantage.

As a result, we’re seeing supply chains transform from rigid business processes to executing “sense-and-respond “logistics support. 3PLs that provide agility will gain a competitive edge for their customers.

 

Achieve Competitive Advantage with Extended Networks

If we didn’t realize it before, supply chain management is all about people and communication. People must communicate vertically and horizontally – internally and externally. To achieve 360 degree communications, you must network organizations, people, and systems.

In short, tomorrow’s supply chains need extended networks. Networks must connect internal and external communications. For example 3PLs and their customers must communicate openly and transparently. Their communications must extend end-to-end from the top-down to the last-mile.

Also, effective supply chain networks must synchronize communications. Synchronization ensures a single version of the truth. But synchronization is only one criterion. This also entails the configuration of systems to enable secure data flows. With secure networks, reliable data and information result.

Without secure networks, you can’t establish a single point of truth. 3PLs that provide secure, extended networks provide a competitive edge over 3PLs and business that don’t.

 

Achieve Competitive Advantage with Customized Solutions

Customized solutions were growing as a service differentiator before the spread of Covid-19. By that I mean some in the industry considered it a perk of sorts. Many saw customization as a high-end benefit.

But Covid-19 changed that idea of customization.

During the pandemic, customization became a necessity rather than a perk. Covid-19 forced 3PLs to work closer with shippers to set priorities. In doing that, 3PLs became more attentive to customer expectations. That led to improved service. And that led to customized solutions.

At the same time, 3PLs had to grapple with cost containment. In customizing solutions, 3PLs looked for ways to extract efficiencies to manage costs. That is, 3PLs still had to minimize cost while maximizing service.

Shaped by Covid-19, customer expectations are fixed, even as we return to normal operations. Customers expect more and demand more. And they want service at an affordable cost.

In customizing solutions, 3PLs will deliver exactly what their customers need. 3PLs that offer cost-effective, customized solutions will gain competitive advantage.

 

Achieve Competitive Advantage with Business Intelligence

The need for actionable information today is greater than ever. Thus, business intelligence has become indispensable. As with the other capabilities discussed, Covid-19 underscored business intelligence’s significance.

In particular, it helped drive competitive advantage in a variety of ways. All provide actionable information via data-based decision-making.

First, it allowed 3PLs to fine-tune daily operations enabling sense-and-respond capabilities. The use of dashboards with relevant metrics facilitates this. Performance dashboards track operational and financial performance against designated standards. They do so in real-time.

Next, moving on to predictive analytics, 3PLs can mitigate or avoid damaging events. That is, with the use of metrics, 3PLs can reduce friction. They can aid shippers by using metrics to anticipate – and avoid risks.

Finally, data mining can make sense of unnoticed or invisible patterns. It helps reveal new and unique opportunities. With keen insights gained from data mining, 3PLs can offer customers innovative solutions. Without data mining, some of these innovations would not crop up.

In brief, business intelligence provides actionable information. It also fosters data-based decision-making. Reliance on opinion won’t work in today’s fast-paced, dynamic marketplace. With business intelligence, 3PLs offer shippers distinct competitive advantage.

 

Achieve Competitive Advantage with Trusted Leadership

Leadership continues to be a critical core capability that translates into competitive advantage.

Good leaders know how to steer their organizations through expected and unexpected crises. Recognizing the need for agility coming out of the pandemic, good leaders stress the need to be nimble.

When the pandemic hit in March, it caught most businesses off-guard. But a few weren’t surprised. Businesses that had astute leaders fared well, despite the economic shocks.

Those that did well had leaders that embraced new technologies. For example, businesses that invested in automation did better than those that didn’t. Also, leaders who were customer-centric weathered Covid-19 better than those who weren’t.

Customer-centricity promoted closer collaboration. Closer collaboration fostered new and deeper insights. That enabled 3PLs and shippers to thrive during the pandemic, as both gained deep insights.

Knowing customers’ deep needs enabled leaders to shift resources as needed. Shifting employees on demand, for instance, helped place resources when and where needed.

Leaders who know customers’ greatest challenges and deepest needs position them for success. At the end of the day, savvy leaders can help deliver competitive advantage.

 

Is Your Business Positioned to Succeed Tomorrow?

The world of business has changed. And it will continue to change. Thus, supply chains must adapt.

They must become more responsive to dynamic situations. The future of business will go to the resilient and responsive.

Furthermore, the pandemic made the value of communications crystal clear. Without extended, ongoing, and transparent communications, you can’t streamline operations. And you can’t optimize business processes.

That’s important because otherwise the top line and bottom line will suffer. Both will suffer because customizing solutions and making data-driven decisions need clear communications. Without extended communications, you’ll be hamstrung in avoiding obstacles and realizing opportunities.

Now, more than ever, is the time to seek a trustworthy 3PL partner. We’re a strategic and customer-oriented 3PL. If you want to succeed in tomorrow’s markets, contact American Global Logistics today.

We look forward to learning about your needs and challenges. If you’re interested thriving tomorrow, contact us today. We can help you gain competitive advantage.

Adapting Your Metrics to the New Normal for Strategic Value

“What gets measured gets done”. That quote, attributed to Peter Drucker, captures a critical management principle. That statement is powerful in what it says.

Likewise, it’s also powerful in what it doesn’t say or in what it implies. For example, what doesn’t get measured doesn’t get done.

Both ideas are useful, as we enter a post-pandemic world.

Why?

They are significant because the world has changed. Thus your business must adapt to the new operating environment.

To change and adapt your business, you must relook the metrics you use to help manage

your business. Changing your metrics will help ensure your business measures what’s relevant.

Doing so will affect your competitive advantage in the short term. Longer term, it can affect your company’s survival in a post-pandemic world.

 

Operating in a World of Increased Uncertainty, Complexity and Volatility

Disruption has become the order of the day. The Coronacrisis, natural disasters, and ecommerce, have accelerated changes to supply chains.

Thus, supply changes must adapt or die. To adapt, you must understand the operating environment before and after Covid-19.

For starters, pre-Covid-19 sourcing was stable. Most trade centered on China and the EU. That simplified planning and execution. But the wholesale renegotiation of international trade agreements invited uncertainty, complexity, and volatility.

Another dominant factor introducing uncertainty, complexity and volatility, of course was Covid-19.

As the U.S. completed trade deals, some uncertainty subsided, but friction with China continued. This global chaos stressed supply chains were stressed. Global supply chains proved to be too rigid and too slow. We built supply chains for stability rather than agility.

To operate in the New Normal, supply chains must change. They needed to pivot, almost overnight. They had to shift from being slow and reactive to being fast and responsive.

Legacy supply chains focused on lean principles and cost efficiency. They had the luxury of long planning cycles. And they limited visibility to Tier 1 suppliers and viewed supply chains in a linear way.

The post-pandemic world looks quite different.

Today’s operating environment calls for agility and velocity in daily operations. During crises, it calls for resilience. Achieving agility, velocity, and resilience requires changes in what you measure.

 

Updating Metrics to Remain Relevant, Competitive, and Profitable

In a fast-paced, dynamic environment, you need to make better and faster decisions. That requires real-time data, relevant metrics, and dynamic reporting. It also calls for a balance between daily operations and long-term strategic goals.

To remain relevant, competitive, and profitable, you must balance immediate and long-term requirements. That places a premium on data and information to make sound, data-based decisions. To succeed, you need a first-rate data and analytics program.

In a post-pandemic world, the value of data and analytics is undisputable. Data-based decision making, by definition, relies on data and analytics. With that in mind, you must develop new metrics that answer new questions. A key question to consider revolves around reducing friction.

This brings us to continuous improvement. The New Normal will likely require continuous improvement efforts focused on dealing with uncertainty. One way to do that is to focus on reducing friction. That’s a shift from a deliberate focus on, say, reducing cycle times, stock-outs, and inventory turns.

Instead, reducing friction will identify new opportunities for improvement. By focusing on reducing friction, you can get at the “root cause” of a problem. In identifying root causes, opportunities for reducing friction will present themselves.

Also, you’ll also find opportunities to reduce costs and increase profits. Questions to ask are: 1) Where is the friction? 2) What should we do about it? 3) Where is it going wrong? 4)  Where is it really going wrong? 5) What is the smallest viable change we can make? (Rethinking Work, Feb. 2017, Eric Termeunde)

This new perspective promotes the building of resilience into your supply chain. It does that by drilling down to the root cause and then resolving it. When you target your efforts to reduce friction, you’ll handle crises more easily.

That’s different from optimizing business processes for stable operations. Businesses that shift their data and analytics to reducing friction will beat their competition. That’s especially true when unexpected, adverse events occur.

 

Measuring What Matters Most by Taking a Customer-centric Approach

Before updating metrics, you should consider the backdrop for your data and analytics. Of course, speed is important, but not for speed’s sake. It’s important in meeting customers’ endless and increasing expectations. That means tailoring of services and products versus one-size-fits-all solutions.

To accommodate customers’ demands, supply chains must adapt. That is, supply chains must provide “always-on” responsive, sustainable, and affordable service. That contributes to the making of agile and resilient supply chains.

Customers want it all. They’re looking for value, which means you get more for your money. “Customer value strategies present products and services in a way that consumers realize they are immediately saving money or will be saving money in the long-term by working with your company.” (Chron, Customer Value Strategies)

Companies that can deliver increased value will see top line growth. So, increasing sales and revenues will depend on meeting customers’ needs. Accordingly, success in uncertain, complex, and volatile times, hinges on satisfying your customer.

Businesses that build data and analytics around the customer will gain strategic advantage. They’ll do so by excelling in any environment. They‘ll achieve that with customer-centric data and analytics that help reduce friction.

If there’s a golden nugget coming out of the pandemic, this is it. It’s the value of relationships. But we don’t have time to discuss that here. We’ll address this topic in depth in a future blog post.

 

Updating Your Metrics Strategically to Thrive in the New Normal

Competition in the world of logistics has always been challenging. Yet, today, competition is more challenging than ever.

Increased risk has made itself a part of daily operations. Risk is no longer an occasional occurrence. We can count on it.

More to the point, we find ourselves dealing with increased uncertainty and volatility. How we deal with that will determine whether our businesses survive or thrive.

By updating your metrics to adjust to performing in the New Normal, you can adapt and thrive. That means changing your focus to measure what matters – meeting your customers’ demands.

A new approach focused on resiliency and agility will help you compete in steady and shaky times. That’s where you’ll gain competitive advantage.

When faced with the increased risks of surviving in the New Normal, it may be better to seek a partner you can trust. There’s strength in numbers, so why go it alone?

Contact American Global Logistics to learn how we can help you. We know and understand the obstacles you’ll face in measuring what needs to get done.

To start a conversation about how we can help you survive and thrive the New Normal, fill out this short form.

Big Data and Analytics: Eight Obstacles You Need to Overcome

Companies that leverage big data and analytics are disrupting the logistics industry.

Companies that make data-based decisions outperform companies that rely on opinion-based decisions – however informed they may be.

Big data and analytics are disrupting the logistics industry. It’s doing so mainly because it’s leveraging new technologies. These technologies offer new ways to store, manage, analyze and exploit, data. They’re moving beyond the pervasive Excel spreadsheet.

Shippers and 3PLs don’t always agree on what’s important. Yet when it comes to big data and analytics, they’re in overwhelming agreement. For example, 93% of shippers and 98%  of 3PLs believe data driven decision-making is essential to supply chain management.

To make big data and analytics work for you, you must be aware of the obstacles. But, if you’re unaware of the obstacles, they can disrupt your supply chain.

What you don’t know can hurt you.

In the case of big data and analytics, ignorance is not bliss.

They’re not insurmountable, but you must address them. It will make the difference between a successful or unsuccessful implementation.

In developing a big data and analytics program it’s important to know what not to do as well as what to do. Then you can avoid the obstacles that can disrupt your supply chain.

Awareness of these eight obstacles will help you in designing a big data and analytics program.

 

#1: Collecting Huge Amounts of Data

To make a big data and analytics program work you need to have huge amounts of data. The more data the better. (But the data must be useful – more on that later.) Big data can help you achieve better outcomes when data is plentiful. Plentiful data smooths out aberrations, outliers, and one-off events. It gives you a better version of the truth to inform your decisions.

Thus, it’s important to identify all the sources of data you’ll need for analysis. Moreover, having huge amounts of data can help in identifying trends not seen before. It enables data mining, a potentially powerful element of big data and analytics. That leads to the next obstacle.

 

#2: Collecting Data from Multiple Sources

As you map out your data needs, you’ll find that all the data you need is not centralized. It won’t be in one database, data warehouse or data lake. That means you will likely have varying types of data. You will have structured and unstructured data.

Putting them in a system to make use of different data types presents a challenge. Some data will be real-time, and some will be near-real-time. Both will likely be transaction data. You’ll also find aggregated, historical data. That brings us to ensuring the data you collect is, well, useful.

 

#3: Collecting Useful Data

You don’t want to collect data for data’s sake. The data you collect must have a purpose. It must relate directly to issues that impact your supply chain. One example is performance. You can use big data and analytics to streamline your supply chain. You can leverage it to increase visibility. Or you can apply big data to improving cycle time.

Another example is financial: improving ROI and reducing distribution and warehousing costs. So, it’s imperative you identify why you need the data. That will inform what data you collect. It also helps identify where you’ll obtain the data. Finally, it will ensure you collect useful data. To ensure usefulness your data must align with your business goals.

 

#4:  Ensuring Data Quality

With those obstacles out of the way, you now need to focus on achieving data quality. If you don’t have good data, your decisions will reflect that. It’s the familiar GIGO or Garbage In, -Garbage Out.

There is no substitute for clean data. Back in 2014, target Canada experienced a significant data disconnect. The barcodes on items shipped to warehouses came in faster than they were going out for delivery. This happened with the opening up of new distribution centers and 124 stores.

The data disconnect was detrimental. Its scale was damaging.

Bad data not only affects operations, it can also affect your brand.

Without clean data you won’t have the confidence of the decisions you make. The underlying data must support the decisions you’re looking for. So, you must ensure data is in the right format, is consistent, is not duplicated, or incomplete.

With data coming from multiples sources, you’ll find a single data standard is missing. Data formats will vary. Omissions of data will show up. And currency/latency issues will appear.

 

#5:  Presenting Data Visually

The obstacles discussed this far are familiar. This next one is too, but it’s often overlooked. Yes, you need huge amounts of data. You need a variety of data. Your data must have purpose, and it must be clean. That said, you also need to ensure your data lends itself to visual presentation.

There are many presentation tools on the market to choose from. Some are better than others. The key is to find a presentation tool that meets your needs, your purpose. Senior executives will want to see the big picture. They don’t want to get lost in the details. Additionally, analysts will need dashboards to visually present critical information in real-time.

Seeing data, especially large amounts of data will help expedite decision-making.  It may also facilitate early warning notifications. That allows analysts to head off issues before becoming problems. That’s the power of data visualization. Finally, data visualization helps make data more accessible.

 

#6: Ensuring Data Accessibility

Data accessibility is a crucial component of big data and analytics. As mentioned above data visualization promotes data accessibility. That means you increase accessibility as more users access data to find meaning. The more common aspect we all think of, however, is being able to physically access data.

Accessing huge amounts of data isn’t easy. Should you centralize or decentralize data? That depends on your particular needs. Regardless, you need to ensure those who need the data have physical access, so they can put the relevant data to use.

In short, you must ensure your data is accessible when  and where it’s needed. Whether users need access to real-time data to make dynamic decisions or to access to historical data to identify trends, ease of accessibility is crucial.

 

# 7: Ensuring Data Security

Data must be accessible, but not to unauthorized outsiders. To make use of big data and analytics you must ensure data security. Once you’ve identified what type of data you need and how you’re going to use it, you must secure it. That’s no easy task. You have to contend with hackers as well as competitors. You also have to combat other ne’er-do-wells that want to access or corrupt your data.

As with presentation software, there are many cyber security solutions on the market. These solutions protect your networks and your data. You need to determine which solution work best for you by assessing your needs. Again it comes down to balancing protection and accessibility.

That said your data security must be robust. It must be comprehensive and powerful enough to withstand all types of data breaches. Data breaches can severely compromise a single operation, or they can bring a business to its knees. It can skew timing, confuse coordination, and hamper supply availability. These are just a few examples.

 

#8: Ensuring Data Talent

Last but not least is data talent. This is a looming obstacle that affects every business. Business

are eager to hire data scientists that can analyze data and provide new insights. Big data and analytics, including AI is fueling the growth of this career field.

Studies reveal a shortage of data scientists exists today and will only worsen. Quanthub cites several reports estimating the shortage at 85 million positions in 2020. That’s huge, and the demand for data scientists is increasing. Data show that more businesses are adopting big data and analytics programs. Gaining competitive advantage is the most cited reason for this growth.

In another LinkedIn report (2015), Austin, TX, had a shortage of 26 data scientists. In 2018, just three years later that shortage ballooned to 5,000.

Complicating the issue of talent is that data scientists do not have a uniform skill set. There is a baseline, but the skills required vary by industry. So finding data scientists specializing in logistics poses a challenge. And that has no immediate solution. That’s why many logistics companies now grow that talent in-house supplementing their new hires.

Finally, turnover tends to be high in this career field. It’s so new companies have ill-defined positions and don’t know how to leverage this talent. As a result, data scientists leave after short stints with their companies.

 

How to Shore Up Your Big Data and Analytics Program

Mastering big data and analytics can give you a competitive advantage. Mastering big data and analytics, however, isn’t simple. But you can ensure a smooth implementation with awareness of these eight obstacles.

There are other issues, to be sure. But addressing this helps avoid the disruption caused by being unaware of what can hurt you.

With the rise of big data and analytics, you need to develop a data program to make sense your data. From developing long-term strategies to monitoring performance to heading off risk, big data looms large.

At the core of any big data and analytics program is using data smartly. To do that you must align your data needs with your business strategy. That may sound simple, but it’s often overlooked.

At American Global Logistics, we’ll work with you to focus on what’s important to you. We take a customer-centric approach, so your data needs will focus on what you want to achieve.

Some of the best ideas come from our clients. That’s why we take a collaborative approach – to avoid overlooking good ideas. In working with American Global Logistics, you’ll get a kick-start as we avoid the eight obstacles discussed in this post.

 

 

Are You Using Big Smart Data and Analytics?

“Any organization without a big data strategy and without plans in place to start using big data to improve performance will be left behind.” (Big Data in Practice, Bernard Marr)

Do you have a big data strategy? If not, you may be putting your business at risk.

Before we go any further, let’s start with a definition of the term. SAS defines big data as:

“…the large volume of data – both structured and unstructured – that inundates a business on a day-to-day basis. But it’s not the amount of data that’s important. It’s what organizations do with the data that matters. Big data can be analyzed for insights that lead to better decisions and strategic business moves.”

The takeaways from that definition are that big data will lead to better decision making. That will result in increased profitability, reduced risk and exposure to risk.

Big data and analytics work well with logistics. With big data and analytics you analyze the past and the present to improve the future. You can focus on performance, cost, or risk. You can also build your brand with big data and analytics.

It’s easy to see why big data and logistics are a good fit.

Big data’s applicability to logistics issues calls in to question the term big data. A more descriptive term is “smart data”. That implies the value of the data you collect lies in how you use it.

This post will further explore how big data and analytics apply usefully to supply chains.

 

Transforming Supply Chain Management with Big Data and Analytics

Big data and analytics have wider application to supply chains. The value of big data and analytics lies not in data collection and data storage.  It lies in how that data is used to either solve problems or to head them off.

Again, big data includes both structured and unstructured data. Big data and analytics makes the data you collect, store and analyze much richer. You’ll maximize structured business data from your daily transactions, monthly reports, etc.

Supplementing and enhancing your structured data, you can also collect, store and analyze data and information from non-traditional sources. They include social media, newspapers, spreadsheets, images, video, audio, emails, surveys, and sensors. Their inclusion in your analysis will offer better, more informed insights.

In short, big data and analytics helps you makes better decisions. Although not an exhaustive list, below are some possibilities for making data-based decisions.

  • Strategic, Tactical, and Granular Planning and Analysis
  • Supply and Demand Forecasting
  • Routing Optimization
  • Capacity Management
  • In-transit Inventory
  • Transportation Management
  • Warehouse Management

Not as obvious is the use of big data and analytics to build your brand. For example, big data and analytics can help you manage changing customer attitudes and expectations. You can explore data focused on your customer in addition to your product or service.

This is especially important as the logistics industry becomes more customer- centric.

 

Evolving Trends of Big Data and Analytics Lead to Competitive Advantage

The mining of big data and analytics can offer powerful information. It can provide timely insights into evolving trends.

For instance, you’ll see subtle changes and evolving trends that may affect your brand. Employing big data and analytics can help you stay ahead of these trends.

Another evolving trend is the shift in focus from the present to the future. In particular, we see a shift from historical analysis to predictive analysis. That shift is underway and growing thanks to the increased capabilities of technology.

We also see an increase in big data and analysis to granular or local analysis. Today’s technology enables the review and analysis of individual customers. Each customer is unique. Thus, 3PLs can tailor logistics solutions to meet customers’ specific needs.

Plus, given the spate of natural disasters and the pandemic, the ability to “sense and respond” has become vital. Predicting outcomes and responding immediately have become essential to meeting customers’ expectations. It’s the New Normal.

Sensing and responding implies the use of real-time data to achieve supply chain agility. Real-time data allows you to pivot as conditions dictate. That helps you to meet customer schedule and expectations with less effort.

With big data and analytics is easier to put your customer at the center of your business.

In brief, trends are moving towards the use of big data and analytics for brand management. Data mining can offer critical insights not obvious with legacy tools. Also, big data and analytics enables an emphasis on predictability of future events.

Moreover, real-time data capture and analysis enables granular analysis enhancing customization. Lastly, real-time data and analysis enhances sense and respond capabilities. Richer data will allow you to arrive at better, more informed solutions.

Leveraging these emerging trends can give you a competitive advantage.

 

The Challenges of Implementing Big Smart Data and Analytics

The power and possibilities of big data and analytics is clear. Now that we’ve explored the possibilities, let’s explore the realities.

Plainly stated, achieving smart data and analytics doesn’t come about easily. It has its challenges.

But in working with a partner, you can put in place a cohesive and coherent program. When you do that, you can bypass or overcome many of the obstacles.

There are two key challenges to implementing a viable big data and analytics program. The first

is the availability of talent. The second is understanding how big data and analytics can benefit you. In addressing these two challenges, you’ll be able to exploit the potential benefits.

At American Global Logistics we can help you with both. We have the talent you need to implement smart supply chain solutions that meet your needs. And we take a customer-focused approach in tackling your supply chain challenges.

Do you want to increase profitability? Do you want to improve supply chain performance? Do you want to reduce supply chain risk?

Whatever your goal, we can assist you in creating customized solutions with data-based decisions.

Contact American Global Logistics to learn how to increase your competitive advantage with smart data and analytics. Working together, we’ll help put smart data to work for you.

How Ocean Carriers Profitably Navigated the Corona-crisis

Resilience in Action: Adapting to the Crisis

In March 2020, everything came to a screeching halt. Worldwide.

The Coronavirus outbreak halted production. It shuttered stores. It led to blanked sailings. It put people out of work. And that led to a supply shock that disrupted supply chains worldwide.

Yet ocean carriers somehow managed to navigate these major disruptions profitably. And the second half of the year looks better than the first half. Though, shippers didn’t fare as well, and many are still struggling.

Let’s look at how carriers thrived while shippers only survived. Then we’ll look at the impacts and what this means for ocean freight carriers as well as shippers.

 

Ocean Carriers Unexpectedly Gain the Upper Hand with Intelligent Capacity Management 

Against the backdrop of the worst economic recession since the Great Depression, carriers did unexpectedly well. Not all profited. But those that didn’t performed better than they did in 2019. Also an amazing fact.

Most carriers improved their performance from 2019. Some, like HMM and Yang Ming, cut their losses compared to performance year-over-year. Remarkably, they each achieved improved performance. Both ocean carriers cut their losses with reduced volumes of 22% and 15%, respectively.

Other carriers did even better.

ONE, Maersk, Hapag-Lloyd, and Cosco increased profits in the second quarter compared to the prior year’s quarter. Profits increased from a low of $167 million (ONE) to a high of $3.4 billion (COSCO).

That’s extraordinary considering the devastating effects of the Coronavirus. Typically, when carriers have excess capacity, they undercut one another by slashing prices. So this rebound is extraordinary.

Let’s look at the measures carriers employed to achieve these unexpected results.

 

How Carriers Thrived in an Uncertain and Volatile World 

As stated above, the economic effects of the Coronavirus stemmed from a supply shock. Production came to a halt, which reduced cargo shipments. That led carriers to manage excess capacity with blank sailings. In fact, they implemented massive blank sailings. JOC.com reports that carriers blanked a record 400 sailings.

Blanking sailings had two positive effects.  First, it led to matching supply or capacity with demand. Second, it put downward pressure of fuel prices. As carriers blanked more and more sailings, prices for bunker fuel declined. So carriers made fewer shipments with lower bunker fuel costs. At the same time carriers increased their rates.

According to JOC.com, Maersk increased its average freight rate by 4.5%. Hapag-Lloyd increased its average rate by 3.1% per TEU. And Zim Integrated Shipping Services increased its average rate by 7.9% per TEU.

These steps combined to enable carriers to improve their financial performance. Again, they did so during one of the worst periods in recent history. As good as this sounds, it also raises a question.

Is this model of capacity management sustainable?

The financial gains weren’t evenly distributed. Consequently, the perception is that carriers won these gains at shippers’ expense.

We’ve seen the benefits reaped by ocean carriers. Now let’s see how the carriers’ gains affected shippers.

 

Carriers’ Positive Steps to Manage Excess Capacity Negatively Affected Shippers

To recap, carriers benefited from reduced shipments, lower fuel prices, and increased rates. But shippers didn’t share in those benefits. Instead, they bore many of the costs expected from the pandemic-induced disruption.

Here’s how the pandemic challenged shippers during the first half of 2020.

  • Lost sales – Retailers’ sales suffered due to the disruption of global supply chains. As manufacturers shut down, that had a ripple effect. Goods failed to reach markets to meet demand on time. That led to supply backups, then a pileup of stocks, and finally a reduction in sales and sales prices.
  • Challenged forecasting – Uncertainty surrounding the recovery from the Coronavirus undermined forecasting. Also not knowing when factories would reopen reduced forecasting to guesswork.
  • Extended delivery times – Shipping performance suffered as fulfillment rates dipped below 80%. Fluctuating fulfillment rates between 64.9% and 77.9 % made reliability elusive.
  • Loss of trust with carriers – as reliability rates declined, trust of carriers eroded.
  • Reduced customer service – Shippers paid increased freight rates. Yet they experienced diminished customer service as fulfillment rates decreased.

Without a doubt, ocean carrier gains came with negative effects for shippers. On the whole, operations during the pandemic skewed performance and tested carrier-shipper relations. Clearly, shippers achieved unbalanced gains.

Nonetheless, carriers did an exceptionally good job in managing excess capacity. Most notable was that they avoided the typical price undercutting that usually comes with excess capacity.

That performance, however, raises a question. It begs the question whether this model in reducing excess capacity is a viable one.

Shippers believe carriers only looked out for themselves. They believe carriers focused only on profits. That perception led shippers to believe they bore the costs of the pandemic alone.

 

A Better Model for Managing the Impacts of Economic and Supply Chain Crises

In fairness to ocean carriers, their gains did not come easy. Carriers achieved these gains during one of most turbulent times in recent history. They were hard won.

So what else could ocean carriers have done? Could they have matched capacity to demand and achieved a more balanced outcome?

As the pandemic took its toll, carriers and shippers could have benefited from strategic relationship-building. That is, they could have worked to improve communications and collaboration.

Carriers entered into relationships with one another to fight the pandemic’s devastation. They could have extended this by building bridges to shippers. Communication and collaboration would have been instrumental.

Direct communication might have made clearer these measures were short-term. That is, they were only temporary measures. Once again, this crisis differs from the Great Recession and the Great Depression. Both were demand shocks, whereas the current recession was a supply shock.

The current economic rebound is showing the negative effects are mainly temporary.

Knowing that carriers and shippers might be more understanding. Communicating that these extraordinary measures were only temporary measures would have helped.

Also, carriers and shipper could have collaborated with one another. Collaboration might have assured a more balanced approach and a more balanced outcome. Both could have worked to achieve a “win-win” solution.

Along with balanced solutions, they might have achieved better solutions. And that would likely have avoided the “winner-take-all” perception.

Pursuing a strategic relationship would have benefited shippers as well as carriers. Logistics is a people business. With that in mind, you can see why strategic relationships matter.

More important, strategic relationships go beyond matching capacity to demand.

Contact us at American Global Logistics today to discuss your logistics needs and challenges. As we get to know you and your needs, we can better partner with you to help you get the results you want.

At American Global Logistics, we believe logistics is a long-term venture. That’s why we seek strategic relationships. Let’s move into the future together.

 

 

 

 

New Ways to Reduce Supply Chain Risk

“The future of business will belong to those companies that not only embrace risk but also understand how to anticipate and prepare for risk.” (Schlegel and Trent, Supply chain Risk Management, p. 283)

Recent events have transformed the approach to supply chain risk management. Trade wars, Covid-19, cyber attacks, and natural disasters have shed light on global supply chains.

These have elevated the importance of supply chain risk management. In turn, these events have exposed the weaknesses of our supply chains.

Lessons learned are transforming ways to reduce supply chain risks.

Today’s supply chains aren’t fit for their purpose. They’re rigid, brittle, and fragile. These traits promote volatility and uncertainty. That makes operating in an increasingly unstable environment untenable.

Instead supply chains need to be agile, resilient, and durable. Supply chains must be able to sense and respond to disruptive events — known and unknown. Even better, supply chains should focus on predicting and preventing disruptive events.

Prediction and prevention of supply chain risks represents the new focus. Let’s explore some of the new ways supply chain risk management is changing.

As Rahm Emmanuel once said: “ You never want a serious crisis to go to waste.” What he meant by that is that crises give you an opportunity to change.

Below are new ways SCRM is changing. These are a few ways you can put lessons learned to work to transform your SCRM.

New Attitudes Toward Risk Are Changing Quickly

Starting off with Rahm Emmanuel’s quote, businesses are beginning to look at the flip side of crises. They are looking for opportunity that comes from a crisis. Companies with changing attitudes will find that embracing risk will lead to new ways of doing business. It will promote innovation.

Businesses now see the folly of maintaining the status quo. Operating on the legacy model of stable and predictable business environment is risky. Digitization and integration of supply chains is the wave of the future. (See report by the World Economic Forum.)

Now businesses are looking at how to function in times of volatility and uncertainty. Legacy supply chains are clearly in transition. Supply chain transition in thought and in deed is becoming the new status quo – or the New Normal.  (See this article at Fortune.)

The shift in attitudes toward embracing risks reflects a momentous change in SCRM. Prodded by disruption, it represents a paradigm shift in the making. Its end state will likely result in reduced supply chain risk.

Leading Edge Businesses Are Fusing Risk Management and SCRM

Traditionally, risk management and SCRM were separate and distinct. However, faced with a future of increasing risk, it makes sense to fuse risk management and SCRM. Just as boundaries between functional silos are falling, boundaries between risk management and SCRM are also falling.

That’s taking a holistic and integrated approach to risk. Moreover, this raises the level of SCRM to the strategic planning level.

That means you should consider risk upfront. You should think about how your supply chain can best support your business. It’s the difference between taking a proactive versus a reactive approach.

Fusing risk management and supply chain management means considering risks early in the planning process. It means taking due diligence in thinking about how best to support a product or service. It also includes considering prediction and prevention of risk (discussed in more detail below).

The catalysts for this business change stem from an increasing risk environment and from new capabilities enabled by emerging technology. Soon we will see supply chain managers become risk managers.

SCRM Will Extend Beyond Tier 1 Suppliers

Supply chain management has been evolving. As supply chains globalized, companies began checking the soundness of their Tier 1 suppliers. They looked for reliability, security, and safety. Now the spate of natural disasters of late has hastened the qualification of suppliers below Tier 1.

Now it is not unusual to verify the qualifications of suppliers below the Tier 1 level. Some companies are mapping their supply chains down to the lowest level supplier. It makes smart business sense to do so. In volatile and uncertain times, it may mean the difference between survival and extinction.

Mapping supply chains to the lowest level ensures partners maintain quality and reliability all along the supply chain. It prevents violation of laws, regulations, and policies on child labor, working conditions, and working hours, to name a few. It also helps ensure quality of manufacturing and services down to the lowest level.

Mapping also helps companies view their sourcing profile. It will reveal whether sources are too concentrated in one country or region. This allows you to make informed decisions about spreading out your risks.

Extending SCRM beyond Tier 1 suppliers improves data transparency and supply chain visibility. More importantly, it will improve operational performance.

Prediction and Prevention are the New Way to Approach SCRM

If there’s one principle that characterizes the changes, we’re seeing in SCRM it’s this one.  Prediction and prevention embody the other changes discussed above.

To survive and prosper, your business must be able to continue operations unabated. Your business must be able to handle volatility and uncertainty without blinking.

Technology will play key a role in aiding you in anticipating events. For example, Big Data and analytics will address the need to predict and prevent supply chain risks. Using previously unseen patterns in data, you can foresee risk events. This will enable you to identify risks before they occur or before they spiral out of control.

To leverage advancements made in Big Data and analytics, you must shift your focus to real-time predicative indicators. That means reliance on scorecards and dashboards will change.

As you’re aware, many of their metrics are historical, making them backward looking.

The shift to real-time data will help you “see” issues before they become problems. SCRM will give purpose to Big data and analytics further facilitating the drive to risk prevention and prediction.

Remember this… “Don’t Waste a Crisis”

Since January 1, 2020, once businesses and their crises wrack their supply chains. As a result, everyone along the supply chain has had to adapt. The alternative is to suffer devastating consequences. That includes everyone from manufacturers to retailers to 3PLs.

We learned our supply chains weren’t as responsive as we thought. That’s’ your opportunity. Your business must change its approach to SCRM – if you want your business to survive.

Tomorrow’s supply chains will rise to the strategic level of planning. They will fuse risk management and SCRM. Finally, SCRM will take a proactive approach. These changes will help reduce volatility and uncertainty.

Supply chains are in transition.  Don’t get left behind. Where there’s crisis, there’s opportunity.

At American Global Logistics, we’re known for working closely with our customers. We take the time to understand your needs and challenges. That means we help identify potential risks as we customize solutions to meet your needs.

To find out more about how we can help you predict and prevent risks to your supply chain, contact us by filling out this simple form here.