What is “the supply chain”? Until March 2020, most consumers might be able to give a general definition: the set of people and processes necessary to get a product from the production floor to the doorstep. Now, however, from toilet paper to holiday gifts, online and in-store shoppers experience the effects of a disrupted supply chain. Product shortages and inflation-driven price hikes have put the spotlight on an industry most people take for granted.
Gerald Hofmann is a 25-year veteran of the third-party logistics industry and is currently the Chief Operating Officer at iDC Logistics, a Los Angeles-based, end-to-end logistics company. We spoke with Gerald to get his perspective on the current state of the supply chain and what the future holds in a post-pandemic world.
ESW: How did the global pandemic affect the supply chain and what’s next?
Covid accelerate a lot of industry changes. Many challenges were already existing. It was already hard to find skilled labour. Port congestions, issues with infrastructure and finding drivers – those issues were already part of supply chain experts’ day-to-day life before Covid.
Covid also accelerated the need for direct to customer deliveries, boosting ecommerce businesses. Some successful brick and mortar retailers started to see a lot of business opportunities like home deliveries and curb pickups. They started to grow inventory and needed to get their products available at any time. For example, TV [manufacturers] were producing more TVs because people were setting up their home offices and buying monitors to work from home. Import volumes drastically increased which created bottlenecks across the supply chain.
This volume increase created a new problem: finding warehouse space became a headache. If you’re increasing inventory, you need more warehouses to hold the inventory. eCommerce growth pushed for more fulfilment centres closer to the end customer with “dark stores”, regional fulfilment centres and so on.
We, as solutions providers, are working from multiple angles: lack of labour, lack of space, lack of drivers, congestion at the ports of entry and at the intermodal hubs. We are entering now a peak period [in the year] for retailers, and the flow of products is not going to stop. The stress on the supply chain won’t end until at least the end of 2023.
ESW: How have the last two years changed how consumers view the supply chain?
As supply chain experts before Covid, we were in the shadows. Having something on the store shelf or delivered to your door was just natural. Now people realise that there’s a full ecosystem. People put products into a container in China or Southeast Asia; people load these containers on boats; the boats are going to LA or any major US ports; the container is unloaded; a truck driver brings a chassis and takes the container to a warehouse; it’s unloaded; product is stored; we get an order; put the product in a box; the box is delivered to your house.
When Covid started and there were all the disruptions, everybody became aware of supply chain. People in our industry went from “those guys” or a cost savings centre for retailers to being real business enablers.
ESW: What have been the top 3 changes you’ve seen during this time?
The relationship [between retailers and supply chain] has completely changed. We are now seen as solution provider, not just guys moving boxes or trucks. So now, we have more freedom to offer solutions. [Customers] aren’t dictating to us; they’re listening to us about where to put [a] warehouse or what mode of transportation [they] should prioritise. It’s definitely more of a partnership nowadays.
Customers have also started to think ahead about having the right capabilities in place. Companies are now booking space in advance even if they won’t use it. Companies are willing to reserve yard space for inbound containers or pay more for the truckers or draymen to pick up their products.
A huge work has to be done on planning and forecasting, as well as connecting the dots between merchandisers and supply chain experts. For example, one of the major US retailers saw a complete disconnect between merchandisers and their logistics department. [Merchandisers] started to over-buy products that customers were not willing to buy any more – like what they were buying in 2020 and 2021. Consumers have already bought enough TVs, printers and desks.
And it results in what we see now. The logistics guys have containers they cannot unload. Distribution centres cannot receive products because they’re already at capacity – full of product they can’t sell because merchandisers didn’t understand the trends. It creates a bottleneck on the distribution side because products that are really needed can’t be delivered to the stores and that’s why there are empty shelves. This is the result of a lack of interaction between merchandisers and supply chain combined to create the current market disruptions.
ESW: What kind of technology do we need to solve these problems?
There is a dream of connecting all the systems. Today many supply chains work in silos. Multiple systems are being used. There is a [separate] yard management system, TMS – transportation management system – a drayage system, then you have the port systems. None of that is truly interconnected at a large scale. An end-to-end control tower supply chain platform is what we would need. Today there’s not that global platform to see the full supply chain, so logistics experts use multiple amazing systems but there’s no full integration.
You’d be surprised by the number of Excel spreadsheets that are shared around the world [to execute] operational tasks to handle products on a daily basis.
ESW: What role should supply chain and logistics play in creating more sustainable, responsible commerce?
We should have a seat at the table. When you think about it, our industry creates a lot of pollution. We have trucks on the road in the US and Europe. There are warehouses with trucks in and out all the time. We can play a big part in sustainability.
Fleets of trucks are going from gas to electric, like Amazon deploying Rivian electric vans. California has be pushing hard on electric trucks usage. In California, Arizona and Texas more warehouses are equipping themselves with solar panels to create their own green energy. Recycling is becoming more natural for warehouse operators. They recycle cardboard, shrink wrap, e-waste (computers, scanners) not throwing anything away.
The new generations of supply chain folks like Gen Z and the generations after will definitely help to create this shift. We have to be part of the solution.
Q: What does the future hold for the supply chain and related industries?
Our business is changing. We’re becoming the centre of business strategy. Supply chain and logistics is an amazing and exciting industry for sure. We’re on the front line and it’s not going to stop. Consumers need people like us to deliver products faster and better.
To learn more about iDC Logistics, visit their website. To learn more about optimising your brand’s logistics to better serve your customers, talk to an expert at ESW about cross-border solutions that power growth.