Cooperating in a crisis
This year has shown us that cooperation is key and that we all need to look to new partners and wider networks to have the best chance of succeeding
It’s easy to retreat when tough times arrive, to look inwards and try to focus only on our immediate tasks and surroundings. However, the supply chain is a naturally collaborative process and requires many moving pieces to mesh together — often at great distance — to function effectively. Therefore, our first instinct in a time of major disruption, such as 2020, should be to reach out to other actors across the supply chain and seek win-wins to move vital product, even when there are severe constraints.
Collaboration and cooperation have become more important, allowing those with strong relationships and the means to manage their supply chains to fill in critical transportation gaps and move production or storage to new areas where reliability of supply is higher. Increasingly, cooperation is the new competition.
Defining relationships
This crisis has brought many things into focus and clarified the risks within supply chains, particularly when it comes to suppliers. Their capacity to react to issues and continue to ship in difficult circumstances is as important as your own company’s capacity to function. In many industries, concentrations of production, either within a small number of companies or in a relatively limited geographic area, proved to be highly problematic, as shutdowns dominated entire industries’ productive capacity.
Your tier-two, tier-three labor supply networks are radically different levels of complexity that you've got to contend with
“Businesses have to enhance transparency about their complete supply chains,” says Inverto Managing Director Thibault Pucken. “Many companies know only very little of their tier-one supplier, let alone those in the back rows. As long as everything runs as it should, it is sufficient to be informed about the most important KPIs [key performance indicators]. But to be prepared for disruptions and scenario-based planning, companies do need more.”
Greg Toornman, Vice President of Global Materials, Logistics, and Demand Planning for AGCO, agrees: “Your tier-two, tier-three labor supply networks are radically different levels of complexity that you've got to contend with."
According to Pucken, “The key formula,” in managing supplier relations and minimizing this kind of risk “is transparency. If a company knows about an issue, it has to simulate the consequences first. This requires scenario-based work. Companies with good risk management are prepared for such situations, which means they have thought about how to involve their suppliers and what information they want to share with them. Usually, they will set up pre-defined task forces that are cross-functional and have competencies to address the issues together with the suppliers.”
This relies on “professional risk management,” he notes. “This means following a four-step process: Firstly, companies have to enhance transparency by identifying supplies and product categories. Secondly, they conduct a risk assessment to evaluate the impact and likelihood: How likely is it that supply chains will be interrupted and what would it mean for the company? Then, follow the implementation of risk management strategies: E.g. diversification of supply chains for important product groups, getting — and staying — in touch with suppliers, replacement of supplies with a high degree of risk. Finally, this is not to be done only once. To ensure regular monitoring, responsibilities should be clearly defined.”
If businesses are yet to establish a channel with their suppliers, it is time to do so now
For example, “We have been collaborating a lot more with our corporate headquarters in Korea,” says Vitaliy Solovyev, Senior Supply Chain Director for Paris Baguette. “We established a weekly phone call just to collaborate on certain issues that we have seen in [some] states, that they might have already found the solution for overseas, since they've been ahead of this COVID situation. So, it has become helpful over time just to collaborate and get a different perspective from overseas partners on certain situations that we might have overlooked here in the United States.”
“If businesses are yet to establish a channel with their suppliers, it is time to do so now,” says Pucken. “The supplier must clearly understand what has happened, what the company expects, how it wants to react, and what contribution is needed from the supplier.”
Transforming transportation through tech
Clearly, visibility is the critical underpinning in building strong, accountable relationships.
“Visibility shouldn't be deemed a prize. In my opinion, it should just be an absolute expectation,” believes Oren Zaslansky, founder & CEO of Flock Freight. “How do we get all of these seemingly disparate entities to kind of line up on the same stage at the same time in a way that drives efficiency and value for all the parties?”
Visibility shouldn't be deemed a prize. In my opinion, it should just be an absolute expectation
Technological platforms and data may provide two critical platforms to help this process and aid collaboration, of which “one component is a stronger use of publicly available information,” points out Pucken. Layering on top of this, “Artificial intelligence [AI] can help to identify incidents like severe weather, labor disputes or political upheavals.”
Sean Wanigasekera, Global Supply Chain Manager for Levi Strauss & Co. says, “My number one focus is to implement the AI and machine learning platform.” The goal of this is to make sure that “even if you are a factory somewhere in Mexico, or Haiti for example, that we employ, even though we don't own the factory,” they can have visibility over demand and disruptions through information that machine learning gathers and parses. He hopes this will give “them a sense of ownership, a sense of responsibility for the brand, as the organized data can say a story that can speak to what's going on, so that they can react before we even tell them.”
Toornman shares this opinion. When there is accuracy in the “shippers’ ability to have forecasted shipping items, weight dimensions, [and] freight time, [it] enables the effectiveness to optimize your costs. So, with our 4PL partner, they have all the data within the TMS transportation management system. They can look at where those flows are — the type of volume, the weights for example — and within that come up with who could be potential collaboration partners. Then from there, they reach out to the potential partners.”
“For us, it's relatively simple,” says Toornman. “Press a couple buttons, and you can see by lane over the next 12 months what you're going to be moving, and what type it's going to be. Then, it comes out to the actual execution. So, if you're shipping 40 truckloads a day, and they're shipping 40 truckloads a day in the opposite way, then you’re a match made in heaven.”
Very small things over a large fleet became huge savings
Zaslansky’s Flock Freight is also using tech to improve the effectiveness of transporting goods by seeking more collaboration to move less-than-truckload shipments. “We create algorithmic carpools. We carpool the freight or create a shared truckload with tech.” This has an added benefit in “a massive reduction in greenhouse gas, massive reduction in consumables, like tires and brakes,” notes Zaslansky, as fewer customers are paying for half-full freight.
“Very small things over a large fleet became huge savings,” says Solovyev. “An investment of $50,000 became a $150,000 payback, $250,000 payback, in just over a period of six months by making small optimal changes to a fleet. There's definitely tools out there that you can utilize to make small optimal changes that over a large scale not only reduce the carbon footprint, but also optimize your fleets and improve your savings.”
Sharing is caring
“I would say there's been several years’ worth of advancement in terms of our ability to manage flow in our network,” thinks Josh Buchanan, Director, Supply Chain Innovation and Network Design at Walmart, when it comes to collaboration in supply chain flows.
The technology and the need to redress the major imbalances created by the pandemic — which has forced its own creativity onto supply chain managers — has accelerated this.
I've been talking to our different channels of distribution to alleviate some of our excess inventory in the stream, to be able to sell rather than waste it, and it's been a collaborative effort between our transportation distributors as well as our broad line distributors
“Sometimes, it's partners who have not traditionally been partners of ours,” says Buchanan, such as “taking refrigerators from somebody like a Cisco that generally serves restaurants that are closed, whereas we have a lot of volume moving for shorts that's anticipated.”
Solovyev has also “had numerous communications with our frozen storage providers with regards to how we can leverage their national network to further optimize our growth, as well as re-evaluate what our current inventory positions are. I've been talking to our different channels of distribution to alleviate some of our excess inventory in the stream, to be able to sell rather than waste it, and it's been a collaborative effort between our transportation distributors as well as our broad line distributors.”
Mike Izdebski, Vice President of Logistics for Carver Companies, found that for one of its supermarket clients “the volume was ridiculously out of balance because of the pandemic,” meaning they needed an additional 75 trucks to service the need. They met this demand “by collaborating with our sub-tier, which provided the vehicles. Another example was one of the ocean liner shipping companies asked through the Port Authority if they could store containers at our facility. So, we were able to provide a level of service by collaborating with multiple parties.”
These are just a few examples of the many ways in which companies are looking to each other in the crisis, and strengthening their bonds with suppliers to build resilience and maximize market opportunities in tough times. Those lessons are ones we can take forward throughout supply chains to increase our ability to respond to crises, alleviate imbalances, and improve sustainability.