April 2020 | Commentary | Good Question

GOOD QUESTION | How should shippers adjust their supply chains in response to the disruption caused by COVID-19?

Tags: Demand Planning, Technology , Supply Chain


Keep a daily pulse on supply and customer demand. Daily monitoring on COVID-19 restrictions in supplier and customer locations is essential to understanding when and where to ramp up or down capacity within your supply chain limits. It's also important to communicate up and downstream projected manufacturing or demand signals so that your supply base can ramp up appropriately to your latest sales inventory operations plan.

Shift your shipments from using heavy brokerage models to asset-based carriers. Setting up contracts with asset-based carriers will lock in longer-term, lower rates and capacity that will help you through the end of the crisis and further.

—Ashley Yentz
Vice President, Supply Chain Solutions
LeanCor


Hone the power of data and technology to ensure access to capacity. The increased uncertainty has made it difficult for shippers to identify a carrier to keep freight moving. When shippers have to defer to the spot market, costs are typically higher, time windows to find a truck are shorter, and there's a higher probability of service failure. Digital freight marketplaces streamline the process by leveraging AI to generate instantly bookable rates and quickly match a given shipment to the best carrier.

—Jim Nicholson
VP, Carrier Sales and Operations
Loadsmart



Evaluate contracts, with an eye on two issues: first, whether those contracts can and should be subject to force majeure, the doctrine that permits delay or cancellation in the event of certain identified occurrences beyond the control of the parties; and second, whether suppliers for critical components and logistics services can be diversified. In the long term, shippers need to reassess the risks in their supply chain. Disruptions are a fact of life in a global economy. But what the pandemic has shown is how fragile these supply chains can be.

—Sarah Rathke
Partner
Squire Patton Boggs


Decentralize and regionalize supply chains. Bringing the supply chain closer to the customer will enable companies to mitigate risk and create more resilient systems. Increase consumer exposure to e-commerce and the digital world will stick. Recalibrating brands and service offerings will be key to successfully attracting and retaining customers.

—Ivan Barrios
CEO & President
World Trade Center Miami


Leverage on-demand production. An increasing number of companies are turning to localized and on-demand manufacturing alternatives to offshoring. Manufacturing locally—or closer to the point of consumption—has been made more economically feasible and created more production agility with the proliferation of digital manufacturing.

—Bernie Henderson
Director of Strategic Sourcing
Protolabs


Set up at least one backup for anything mission critical. Eliminate the single sourcing of any critical components. And look multiple tiers upstream in your supply chain, because having two parts suppliers that are both dependent on the same manufacturing location doesn't eliminate that single point of failure. In the e-commerce space, that applies to Amazon's fulfillment service, which introduced restrictions, causing many e-commerce stores to scramble to find new distribution channels.

—Jake Rheude
VP of Marketing
Red Stag Fulfillment


Adopt a continuous delivery experience (CDX) in order to more intelligently make decisions on moving goods from A to B and provide insight into real-time data about how your products are moving. A CDX platform provides a real-time and continuously updated view into shipment statuses.

—Adam Compain
CEO, ClearMetal


Collaborate with internal and external business partners (warehousing, manufacturing, transportation, etc.) to ensure alignment on supporting changing business needs. True two-way partnerships are critical for positive outcomes. Effective forecasting and consistent communication from the shipper to these partners, as simple as they sound, can be the biggest keys to the overall supply chain's performance during a difficult period.

—Jon Fish
SVP, Strategic Partnerships
Arrive Logistics


Diversify touch points along the supply chain. As we witness shutdown after shutdown, some shippers are being left with warehouses that are no longer in operation. By diversifying and expanding points throughout a 3PL's chain, everyone is better armed to handle disruptions. Additionally, we expect to see a needed shift in the industry to have a more prominent focus on predictive analytics.

—David Caines
COO, Kenco


Create a dynamic process for prioritizing risk and assessing exposure. Businesses should increase their decision-making frequency to adapt to a rapidly changing environment. As the crisis begins to become more controlled and the outcomes more predictable, leaders need to understand the long-term implications of an altered manufacturing and distribution landscape.

—Melvin Bosso
Principal
Myrtle Consulting Group


Optimize your labor configuration. If you mitigate your current demand plan, you can flatten out labor requirements and consumption. For example, it can be helpful to run two skeleton shifts in the place of one. This mitigates the risk of your entire workforce being out of commission. Manufacturing companies are going to try to retain their talent as much as possible, because it was so difficult to get them in the first place.

—Sam Dawes
Senior Manager
Leader, Consumer and Industrial Products Practice
West Monroe


Step By Step

Shippers shouldn't make rash decisions in the heat of the moment that could affect their businesses permanently. They should lay out a plan that allows them to adjust as the shipping environment continues to evolve.

Immediately, a shipper should connect directly with their carrier representative and ask to lock in their current discount tier if their shipping volume is down. If volume is up, they should ask for a better discount that reflects the increase.

After 30 days or so, shippers should look at their shipping data from the last month and watch for trends in what customers are buying and how they want it shipped. UPS and FedEx are no longer guaranteeing service times, so that must be taken into account when calculating total landed costs.

The global slowdown over the next few months offers a chance to reimagine shipping operations and the customer experience. A shipper's distribution centers likely offer plenty of opportunities for efficiency and improvement. They could optimize packaging, conveyor systems, and where products are in the distribution network for faster shipping if carrier guarantees don't return.

In six months, shipping and commerce could be closer to what we know as "normal," and if they are, shippers should compare this year's shipping data to last year's and consider how the changes they've made during the crisis will help them moving forward. In particular, they should consider the location of their distribution centers and how adding or relocating them might improve delivery times and preserve the customer experience.

—Andrew Brueckner
Head of Strategy
VeriShip, LLC


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