The current global trade crisis has highlighted weaknesses within the supply chain and forced the industry to assess, evolve and often transform their operations to meet the needs of today’s marketplace. Many changes are here to stay and should be embraced as the industry plans for the supply chain of the future.
We need to listen to the market to anticipate what will come next. While no one can predict or prevent the next global crisis, we can build stronger, less vulnerable supply chains by learning from past mistakes and adding positive changes into day-to-day operations.
Here are five real-world examples that show how shippers are relying on flexibility, investment and alternative solutions to navigate the current supply chain disruption and why these changes are here to stay.
1. Staying open to new and unconventional ways of doing business.
Pandemic-related disruption forced stakeholders throughout the supply chain to look at alternative ports, non-traditional routes and different processes. Being open to new and unconventional ways of doing business not only served as a solution to an immediate need, but also underscored the importance of having an open mind about alternatives that could potentially save time and money compared to the traditional routes that have been impacted by congestion and capacity constraints.
2. Broadening networks, expanding connections, deepening relationships.
Using alternative ports and considering new routes forced shippers to expand outside their comfort zones, making new contacts and building new relationships. Port congestion and capacity issues also highlighted just how important it is for shippers to have a diversified vendor base for all the links in their supply chain (ocean, air, warehousing and trucking). That way, as roadblocks pop up, they have alternative options and additional capacity they can dip into to keep their freight moving. While sticking with “what has always worked” has its benefits, continuing to build strong connections outside of the traditional process is one way for shippers to build resiliency into their supply chains.
3. Allocating resources to equipment and partnering with asset-based providers.
No one wants to pay for assets that are underutilized, but the weaknesses of the previous model taught us that without building in contingency equipment, capacity and warehouse space, your supply chain may not be strong enough to withstand adverse conditions, which can result in huge financial implications. The pandemic saw many large retailers buying their own equipment to avoid delays and issues caused by container and chassis shortages. The demand for additional warehousing space to hold buffer stock and delayed seasonal merchandise also increased dramatically. For shippers who do not have the means to acquire, manage and maintain their own equipment and distribution space, partnering with an asset-based third-party logistics (3PL) provider can be advantageous.
Looking ahead, expect logistical planning to include managing equipment (containers, chassis, trailers, etc.) as well as warehousing space, and for shippers to select partners who will invest in equipment and space to meet demand.
4. Increasing inventory levels.
While the industry knew the “just-in-time” model was getting too lean and too tight to be sustainable, the realization of its fragility was brought to light in a loud and unmistakable way during the pandemic. This has resulted in what is now considered the “just-in-case” model, whereby shippers build extra inventory into their planning so they have goods on hand when they need them. Increasing inventory levels ensures you have contingency goods available to meet unexpected demand or unexpected delays in your supply chain. The last couple years have shown it is too risky to keep inventory levels low -- you can no longer assume cargo can quickly and smoothly be delivered from a distribution center hundreds of miles away. To meet customers’ needs, it is necessary to invest in solutions that allow you to have inventory on hand where and when you need it.
5. Adding more storage space in multiple markets.
Supporting the strategy of having inventory when and where you need is the movement toward diversified storage solutions, including increasing the number of locations, adding multiple new markets and looking at storage near population centers. Having product or merchandise in multiple locations builds in more agility and flexibility allowing you to get those goods to your customer more quickly. What’s more, being closer to population centers is almost a requirement in today’s “next-day delivery” e-commerce marketplace, which will continue to be a driver for where and when to build warehouses in both the short- and long-term future.
The pandemic affected the global supply chain in a variety of ways, presenting weaknesses, challenges, opportunities and solutions. Being open to new ways of doing things, building new relationships, adding buffer stock, increasing domestic inventory and adding more storage space in multiple markets closer to population centers are just a few of the ways today’s modern shippers are successfully navigating disruptions. While the future of the supply chain remains uncertain, we believe many of these changes are here to stay.