Dealing with troughs and peaks
The big swings between feast and famine in supply chains aren’t over in 2021, so businesses need to be fast-moving and flexible
We may now be early into 2021 but it is clear that we won’t be returning to business-as-usual any time soon. Continued fluctuations in demand outside of expected norms, sudden changes to capacity in transportation networks and the pressing need to distribute the vaccine and Personal Protection Equipment (PPE) will challenge supply chain managers. We all need to be monitoring the situation closely, preparing on-the-ground networks and making the most out of opportunities as they arise - that was the conclusion of a behind-closed-doors conversation held by Reuters Events – Supply Chain.
The following summarises the thoughts expressed during that conversation while keeping participants’ anonymity safe to protect the open and frank conversations that are part of our roundtables.
Ups and downs both in and between markets
Throughout the conversation the central theme was the way market dynamics had been shaken by the tremors radiating out from the pandemic and how then to rapidly react.
Most often the issues arising are coming from capacity crunches in specific areas that are putting additional stress on operations.
Frustratingly for supply chain managers, this is coming from multiple angles.
As COVID-19 hit, there was a sudden pullback by many companies working in the freight and shipping sectors, with air and sea freight carriers either forced or choosing to reduce capacity on a number of key lines. As the pandemic spread and responses were initiated in different manner and with varying success, global production and product movements also became de-synced.
The pandemic also brought reduction in capacity through its direct effect on the workforce, with social distancing mandated and employee headcount often reduced, sometimes dramatically.
The net effect is major disruption in ports that will linger for some time, shortages in some product categories and difficulties in rapidly ramping up capacity when demand spikes suddenly in certain geographies or for specific product types, all whilst a boom in home deliveries continues in the consumer sector.
The vaccine vacillation
A huge wellspring of demand for logistics firms is coming from vaccine and PPE distribution. This demand is likely to be the biggest challenge for European and US shippers in the next six months, especially as vaccine distribution has its own peculiarities and complexities.
Most notably, this is in the form of temperature controls, which are a major consideration for any company looking to move this vital product.
Not only do the current crop of vaccines need to be chilled, but the temperature requirements change between different offerings and the amount of time that they can be left outside of these parameters varies. Some, such as the Pfizer vaccine require extremely low chill temperatures and are fragile, requiring use within a short period of time after their storage temperature, typically -70oC, is breached.
This is causing a huge amount of forward planning within the sector that needs to take in the complete supply chain, from factory, to road or freight transportation, to warehouse, and then to the eventual end destination of clinic, vaccine centre, pharmacy or hospital. Deliver too much and that precious vaccine must be disposed of. Fail to have the capacity to rapidly move the vaccine from refrigerated airfreight to refrigerated truck and, once again, it has been wasted.
The emphasis for this hyper-demanded product is to plan ahead and to make sure the labour and structures are there for a functioning end-to-end supply chain, as well as open communication channels between production, transportation and end user.
Reconfiguring for resilience
Supply chain operators would be wise to take these lessons and apply them to their complete businesses, alongside a major focus on forecasting collaboratively. Players need to coordinate and recognise where expectations of high volume are and be realistic about what can be handled in these complex times.
It was emphasised that the move to digital and paperless systems would be highly beneficial here, and that it would be a focus across supply chains in the medium term. There is now a clear realisation across the sector that emails and phone calls are not enough to coordinate the modern supply chain and that change is necessary, as is a move to standardisation in order to enable this process.
There was also a consistent theme of the necessity to add in additional warehousing space within the sector, not only to handle immediate needs of customers but also to help create buffers. As companies look more closely at building resilience, adding in buffer stock is a definite emerging trend.
This is especially pertinent, as according to the 3PL 2020 Third-Party Logistics Warehouse Benchmark Report 50% of 3PL warehouses in the survey are utilising 90% or more of their current space, and 13% say that they are at the extremes of using more than 100% of their typical capacity.
This workshop was sponsored by Tradeshift.
Tradeshift drives supply chain innovation for the digitally connected economy. As the leader in supply chain payments and marketplaces, the company helps buyers and suppliers digitise all their trade transactions, collaborate on every process, and connect with any supply chain app. More than 1.5 million companies across 190 countries trust Tradeshift to process over half a trillion USD in transaction value, making it the largest global business network for buying and selling. Discover commerce for all at tradeshift.com.