2022: Supply Chain Management & Logistics Landscape—Questions Versus Certainty

The continuing pandemic and reemergence of new strains and variants has thrown much of the global supply chain mechanism and ecosystem into disruption and disarray. The search is now to revert, change and transform.

The year 2021, like the preceding 2020, was another unprec

edented year for global supply chains and logistics. A lesson derived from the ensuing situation was the unpredictability of predictions for supply chains, logistics, transportation, ports, retail, manufacturing, and distributors. Consequently, it created an impact.

The result here is a list of ideas and uncertainties for 2022. They are some of talking points and takeaways that have taken life during all this and what they may mean as things to watch for.

Overview  

The business story of the pandemic has been its direct and indirect impact on the logistics and supply chain management. The result—logistics bottlenecks and chaos, port jams, ocean shipping rates, inventory shortages, lockdowns, shipper workarounds both reshore and onshore.

There is need for trade and supply chain synchronization.  All of these are indicative of disruption and the potential for change, even transformation.

Status

The pandemic validated that Supply Chain Management (SCM) is critical and strategic. This is now globally understood. It also made companies look at the end-to-end supply chain, not just downstream with customer orders and stores.

Implicit and explicit is integrating the end-to-end supply chain. This may mean a new SCM structure than using logistics as the organization breakdown. That said there is still the challenge for firms to see the size, complexity, and nonlinearity of supply chains. What will all of it mean going forward?

Normal

This interrogative has two parts. One, when will logistics and supply chains achieve normalcy? After the upcoming Chinese New Year? Perhaps in the second half of the Year? 

Two, what will normal be and look like?  Will it basically the same as pre-pandemic except for a few changes? Or will there be transformations across supply chains, logistics, and transportation?

Supply chains

Stories about what happened and is happening treat supply chains as a monolith, one-size fits all—a cookie cutter approach.  There is no differentiation by company, industry, market, or regions of the world. That is wrong and creates misdirection for change and what is, can be and should be.

Technology

This is a high on the list issue. Covid has and will accelerate its use. The term, the single word, actually has multiple, different meanings. Start with the premise that there is no universal technology for logistic and for supply chain management. 

However, firstly there is the need for a disclaimer. Technology is not a silver bullet that fixes everything.  It is a process enabler. Its success is directly proportional to how well your process works or does not.

Here are some sure technologies you should have:

Data Analytics

Start with data analytics. There is an incredible amount of data in end-to-end supply chains. No other part of the organization can rival its mass. Tapping into it can provide insights and solutions for what is happening to your supply chain or logistics and possible ideas to improve it.

That can reap incredible benefits as to performance and cost. A trick is to understand what you are seeing—metrics, trends, or outliers. Or are they outliers?

Digitization

Then go to digitization. Moving away from paper and other media is important as we have learned as a step for operational continuity and control. It also aids in data ‘creation’ for analytics.

The length of supply chains and all the participants means this is not a quick-fix programme. Clearly this is mandatory and needed.

Visibility

Visibility was a topic before Covid. There are technologies that recognize it. However, this is more than track-and-trace from transportation-related firms. It is the same with inventory in warehouses. These constitute only a portion of activity.

What must be recognized are the internal and external gaps such approaches have as to players and process that are hidden each from buyers and sellers. These holes are signs of loss of control of the process.

The starting point should be the process related to two key documents—your purchase order and the customer purchase order. Start with creating and issuing your PO and upstream processes where supply chains of supply chain management begin. 

This is coupled with the visibility is the need to integrate it. Then you can use metrics to focus on events and not on all your activities.

Blockchain

Blockchain offers the potential for supply chain visibility. Regrettably, so far, much of it remains hype. There are issues. First, as with visibility and with its linear, transactional view, it misses participants in the supply chain. Those gaps can mean control lapses. Second, for the climate change, green supply chain supporters, there is the high energy used to make bitcoins.

Robotics

This is escalating in warehouses as companies deal with labour shortages and rising labour costs. It is especially for high-volume operations. Using this technology may be a deep-pocket question for firms.

That can mean using outside distribution centers that are technology centric. It may also, for some, mean process improvement to compensate for the inability to use robotics.

Transportation

Depending upon the transport mode, there have been varying degrees of sticker shock with rates. Then there are issues from contract to spot market. How much of the higher prices will remain as things settle? How will you balance contract and spot rates in your shipping?

Second to the cost concern is the service quality and reliability provided by carriers. This may be the most important issue with its impact on production, sales, and customers.

Is all this just a matter of changing carriers? Or is there a need to reanalyze what you do and how to achieve reductions?

E-commerce

It is well known that online sales surged during the pandemic. The question retailers with stores have is how much of that e-commerce volume will come back to them. Amazon has defined the customer experience with its order delivery velocity.

They have done it with a supply chain management by redefining the process. Its supply chain includes logistics infrastructure—now the second largest delivery service in the US, warehouses, planes, freight forwarding, and trailers. They attacked the import logistics chaos by chartering ships to move products. Then there is also the rapid rise of cloud technology.

Last Mile

All this positions them with operations performance and lower costs, including the Last Mile.  How many e-commerce retailers can match it as they pay outside service delivery carriers?

These capabilities have placed many retailers in a competitive quandary. Does Buy Online Pickup In-Store (BOPIS) match the customer convenience of home delivery—for free? Will Buy Now Pay Later (BNPL) offer a way to compete?

But the threat of Amazon also includes transportation, logistics, and 3PLs. The concern is that they would offer/sell their services to other shippers. Besides their logistics capabilities and technology, Amazon also has a competitive advantage with its real-world supply chain management experience and expertise. That opens up 3PSCM and SCMaaS opportunities.

Resilience and Risk Mitigation

These two go together and hand-in-hand. Creating resilience requires reducing supply chain risk, both external and internal. Technology is one tool to becoming resilient. But, as the pandemic showed, it is about more than technology.  Achieving it is also about operations.

A key action is to assess risk spots. How else can you build resilience and reduce risks without understanding your end-to-end supply chain?

These can be infrastructure, technology, participants, and process.  And for end-to-end supply chains, that can mean extensive analysis to identify all activities, especially upstream. These include going deep into tiers for suppliers' suppliers and mapping it.

Other Reflections

There are more contingencies to consider:

The shortage of warehouse space: This demand reflects e-commerce sales and an inventory buffer arising from the logistics chaos of the pandemic.

The future of lean: Lean has been blamed for inventory shortages. Given the length of the pandemic and its end-to-end supply chain impact, this blame is a bit odd. Lean may gain more importance, especially for international, to remove excess time and smooth it.  Value stream mapping is a viable tool for this.

Inventory: Will companies carry more inventories to limit exposure with a future challenge?  Is this being resilient? With the need for more warehouse space, where will this additional inventory be stored? Or, instead of storage, will it mean using lean to move inventory more quickly instead of placing products in storage?

Reshore  / onshore: The inventory and supply chain disruptions have raised questions about reshoring away from certain countries and moving to others. Furthermore, there is the onshore to move production back to destination countries. The latter has potential for products and their materials that the pandemic deemed critical.

The analysis is the cost of reshore / stay the course, even with price increases, versus moving production onshore. Transportation, labor, understanding and defining the scope of products and materials are subjects at stake.  Think also of Bills of Material, suppliers' suppliers and the network diagram that it would resemble.

Net Carbon: Greenhouse gas / carbon reduction will gain more urgency. This will impact transportation, service providers, packaging, and more. 

Capital investment: The question of ports increasing capacity leads to the need to invest in improvements. A challenge to this is that much of the volume surge is historic and may not be sustainable. As such, what would be the return on investment if volumes calm? This question applies to other areas of logistics. Invest or wait for the drop. 

Next global challenge 

First, it looks like CoViD and its variants are not going away. That can mean ongoing lockdowns, logistics, and supply chain issues. Stay alert.

Climate change is a current and escalating global problem. It will have definite impact on supply chains and their underlying logistics, ports, warehouse networks and transportation. All as the world deals with rising sea levels and high temperatures and the effect. This challenge will require fresh thinking and may demand a redo of supply chains and logistics beyond Covid.

Conclusion

All this is a lot to digest, let alone act on. Disruption will be continuous. That means supply chain management and logistics transformation will not be an option.  It will be required.

The question for everything that has happened and may be happening is what are you doing? Are you preparing or sitting and waiting?

Container Lines Expanding Services Beyond Sea Freight: Alert for Forwarders and Shippers

Container lines versus forwarders. Vertical integration. Fewer players in supply chains. Does it qualify as disintermediation? How ugly can this get? Ocean carriers moving in on forwarders land side business.

Things are changing. Maersk and the big guys are moving in on forwarders territory. What will be interesting is which carriers do not do it--to protect their large forwarder account base--or too timid.

For carriers, it is a growth opportunity knowing there is only so much they can do with sea freight.

For shippers, it can present fewer players in supply chains and the benefits that can produce.

For forwarders, it is not a time to complain. It is a time to develop a strategy and execution plans to compete in this reality.

All this focuses more on shipper supply chains and less on standalone logistics services. It will be about where and how logistics fits into supply chains.  Not the other way around.

Carriers 'moving in' on landside services could push forwarders out of business - The Loadstar 

THE COLD CHAIN SUPPLY CHAIN

 

There are markets whose products fall into a special niche--temperature sensitive.  For: Pharmaceuticals. Food. Meat.  Fish and seafood.  Produce.  Chemicals. To protect against Thaw.  Freeze.  Melt.  Degradation.  Spoilage.  Growth of pathogens.  Loss of efficacy.  Cross-polymerization.  Product degradation.  Irreversible physical change.  With problems and failures, the product loses some or all of its purpose, quality, and value.  It may also create dangers and risks for end-users.  As a note, there is more as to industries and products, but this is illustrative of temperature control.

The cold chain segment got global attention with early stories about one of the CoViD vaccines and its extreme cold temperature requirements.  The temperature cited would have been a serious challenge for its worldwide movement, logistics, and distribution to vaccination depots and administration locations.

Supply chain management (SCM) for the cold chain is more than storage and shipping.  There is product risk that makes it unique. And that risk puts requirements of the supply chain. Overall, for cold chain, the SCM has to be elevated beyond non-unique products. This upraising should be done around the supply chain structure—process, technology, organization. And that structure should mirror the company.

The design of your supply chain and its operation should draw on lessons learned from the pandemic.  And that means resilience—both inside your four walls and outside.  Increased resilience means reduced risk.  A centerpiece of becoming resilient is your supply chain structure. 

First, though, there is no universal agreement or standard for the temperature range for the cold chain.  This reflects that the protection need depends on and varies by product.  Different products; different temperature range. From chill to cryogenic.

Managing the cold chain, end-to-end, is a challenge.  It is preferable to finding out at delivery that a shipment went bad.  The longer the transit both as to time and distance, the more parties and movement stops involved, the greater the risk.  The end-to-end challenge can then be defined as risk mitigation.

This special supply chain, especially for export/import, presents criticality and has requirements that must be recognized.  These demands meld and include:

·       Maintain end-to-end temperature. It is not an option.  Reality is where a company sits in the end-to-end cold chain affects how it handles it--from manufacturing through to local distribution.

There is a range of activities from production/preparation to "consumption" by the end-user.  With it goes important temperature integrity. Failures create product problems and even peril for end-users.  Be aware too of regulations that may apply.

There are two parts here. The logistics/transport segment will be highlighted below. The other is about your company and its product.

You sell the refrigerated product.  So you may view your role here as done.  And it is.  But they have to remember that it is your product, your company, and your brand image if something negative happens to the product. So the challenge escalates with changes in product ownership that may occur.  Be aware of the big picture here.

·       Understand the end-to-end logistics providers and infrastructure. This is the transportation and logistics.  Different modes and different roles. And warehouse/storage. Your issue, as always, is that the temperature is controlled.  

As with above, there are two parts.  The logistics infrastructure.  The refrigerated container or trailer and the warehouse.  And, the transport/logistics service providers who move these products. These two parts are what have permitted this market segment to significantly increase worldwide.  Selecting the right transport and logistics providers is underpins your success here.

This also is important when part of the logistics are outsourced. Be aware that the benefits an outside provider brings may also be offset because of possible risk with an outsider and how it fits into the supply chain operation.

Be aware of the providers that you may not see, that you do not select, or do not directly pay the charges.  For example, think of all the movements and places your export shipment goes through from your door to be safely placed on a ship. Think of potential delivery delays.  It is all to protect your shipment.

·       Integrate the logistics activities and their continuous movement.  This means coordination, collaboration, planning, and more. Not every step is providing some type of temperature control, but where there is activity, nothing must go wrong.  This can include temperature fluctuations.  Think of the times where, for example, a trucker moves a refrigerated container or trailer. Or it is an export move, and all the players must make sure the container moves, is plugged in, and other attention that is needed. The interim steps and players cannot be excluded. Think the same with delivery and stops on the route.

·       Assess and validate the process (not procedure).  Follow the product and the activities. Understand what participants say happens.  Then examine it with tracing and tracking customer orders or purchase orders.  Do you find gaps that slow down the process or redundancies along the process which are made because of gaps?  Think of holes in the process as potential temperature protection failures--risks to your product's integrity. Reducing process time can improve process control and product integrity.  Think time and temperature.

·       Utilize technology. It is not optional.  You need to know if doors on the trailer were left open or how long a container sat unprotected.  That is an application for technology to monitor and maintain. This is both for storage and for transport.

Visibility, which is more than track and trace. Blockchain, add blocks and build the chain for visibility. It also aids with the chain of custody that is important for many.

You also want technology at a granular level—the case and pallet.  This tech application is increasing.  Bots.  Sensors. Chips. Temperature trackers.  Sensors. Time-temperature indicators (TTI) that change color. Data logging monitor.  RFID (radio frequency identification) tags.  GS1-128 bar codes and labels for international shipments.  

·       Organization.  While cold logistics is a vital part of the supply chain, its role should be defined.  This differs from the more traditional of fitting the supply chain into the logistics. This difference is not subtle. 

than delineating by logistics and transportation, the organization should upstream and downstream. That also aligns with how the company does things.  Upstream would be sourcing and manufacturing (or for sea and agriculture, it would be close to those activities). Downstream would reflect more as to sales.

The particulars of your product will affect your efforts above.  It also comes into play as to trailer specifications and how you load the shipment.  The devil is in the details.

 When your high-stakes cold chain supply chain operation is designed and operates well, then chill.

SUPPLY CHAIN RESILIENCE. IT IS REQUIRED.

Here are some thoughts for manufacturers, retailers, and MNCs on supply chain resilience. This is a work in progress.  I will add more, so check back from time to time.:

Here is a presentation I did on Supply Chain Management Resilience at Supply Chain Management Resilience (slideshare.net)

A lesson from the pandemic over time is that supply chain resilience and agility are moving targets. And there are two parts to them--inside the four walls and outside.

The story about the pandemic, supply chains, and resilience continues to be outside the 4 walls. At the origin--lockdowns at factories, shutdowns at ports and airports, logjams at ports, backups of moving containers at ports, inabilities to move containers at IPI/ramps, and more. It is supply chain whack-a-mole.

Is technology a second need for resilience, while logistics and logistics infrastructure are the first need? What changes will be made as a lesson from the pandemic?  We need an end-to-end assessment. Fixing this and that still leaves weak spots in supply chains--weaknesses that are waiting for the next global issue, such as climate change.

Typhoon brings more supply chain in China, closing air, port, and rail hubs. External resilience is a bigger challenge than internal, including technology.

Becoming supply chain resilient is more than inside the 4 walls and technology. This bridge shutdown is an example. I-40 bridge across the Mississippi has jammed traffic for over a month and is costing truckers and businesses millions.

Building supply chain resilience is not optional.

Over the past 14 months, think of all the stories about supply chains.  The E2E supply chain.  Its innate resilience. Being tested daily. When material, manufacturing, and logistics / transport demand exceed their design capabilities. Then add continuing CoViD impact as ports.   maritime

Increased supply chain resilience means reduced supply chain risk.

The timeline for the pandemic has given a new meaning to supply chain resilience.  14 months and counting.

Look at the big picture. Your end-to-end supply chain.  AND, you may be part of your customers' E2E supply chains.

Supply chain management is the largest part of every company--external and internal. And it touches about every department inside.

There are two parts to your supply chain resilience--inside your 4 walls and outside.  Inside the company gets much attention.  Outside, despite its size and complexity, does not--and that can be a shortcoming in your effort.

Start with your supply chain structure--the organization, process and technology.

Much of the stories on SCM resilience talk about technology.  That can be a singularity of focus and miss much as to supply chains.  Let's go beyond things like robotics, drones, and 3D printing.  

• Data analytics.  Think of all the data across your end-to-end supply chain.  And what it can mean to operations and performance.
• Digitization.  This also provides more data for analytics.  All the documents and all the participants in your E2E supply chain.
• Visibility. Again, E2E. This is more than the track and trace transportation providers give you. Go deeper.  Granularity. The real needs is with your inventory, purchase orders, and customer orders. Take a purchase order and track all that happens, including parties that you may not normally see. They are there. This is very important too if chain of custody is an issue--pharmaceuticals, food, agriculture/seafood, and more.
• Blockchain. Getting all the transaction participants. Again, including those you may not see.  Build the blocks for your chain. Gives visibility. And data.

Assess your process. Removing gaps improves your speed and responsiveness.  Gaps are potential points where there is no resilience.  Follow your inventory/products/finished goods/raw materials, and more. Take your purchase orders and customer orders. See each step of the process. Look for gaps and redundancies, made to compensate for gaps.

External--look at the two segments of your supply chain--upstream/inbound and downstream/outbound.

Upstream is large and complex. It is where the supply of supply chains begin. There are supply chains within supply chains.

Map your end-to-end supply chain.   That is important so you can see everything.  That includes parties you may not see; ones that your suppliers or logistics providers may use.

Work with your suppliers on resilience.  That includes having them work with their suppliers' resilience.  Now you see the size and complexity.

Logistics providers that are outside of your organization and control: who do you use and why?  What is each of them doing to build resilience?

For outside your 4 walls, is logistics, transport, or maritime potential use of Force Majeure an anti-resilience issue?  What do you do about it?  How do you recognize it and become resilient with that legal situation?

2021. IN SEARCH OF THE NEW NORMAL FOR SUPPLY CHAIN MANAGEMENT

First, a disclaimer.  I did not predict a global pandemic and the impact it would have on businesses, supply chains, logistics, and transportation.  Supply shocks. Demand shocks. Amazing front line efforts across supply chains, transportation, and logistics. As a note, much of what you may read for 2021 is a continuation of what is happening and what is accelerating. E-commerce. Technology. Investors. Retail.

So I am going to take a different approach. It will not be predictions/forecasts. It will not revisit what happened and what will continue to happen.  Besides what is happening—let us talk about what should be happening. The new normal. Pandemic takeaways. Some of the content reflects what supply chain management was supposed to be when the term took hold. And before it became about costs.

2020 validated the strategic and critical importance of supply chain management. Coupled with that is the recognition of the end-to-end supply chain.  That is a different take from the pro-CoViD when it was just SCM. 

Supply chains manned the front line in keeping companies and therefore economies going.  That recognition had begun earlier with e-commerce, Amazon, and how they used a new supply chain management to drive its order delivery / click-to-door times.  Supply chains also show in discussions about global trade and onshore/nearshore.

So here are ideas on changes to supply chain management as part of the new normal. There is a slant on operations which is important and is and was with coronavirus:

Organization. It is time to move away from the transportation, warehouse, logistics approach. Define instead as upstream and downstream.  So that:

·       Mirrors and aligns with how the business operates and the supply and demand shocks with CoViD.

·       Recognize upstream chaos with suppliers and import transportation. Container lines. Ports. Upstream complexity, size, nonlinearity, and supply chains within supply chains.  It also brings procurement/purchasing and inbound transportation/logistics into this segment.

·       Delineate downstream.  All the transportation problems.

·       Enforces SCM's strategic and critical importance.

·       Break from costs and cost centers view. That obsession has held back supply chain management development.

·       Move from nodes (stop) and links (start) to a flow of materials, parts, components, and finished goods.  Think of the inventory turn speed and financial benefit.

·       Operate supply chains with the end-to-end scope.

·       Bring focus on resilience.

·       Enhances planning and operations.

Role of transportation and logistics.  Tied to the organization is how transportation and logistics fit into this supply chain.  Their importance is unquestioned, and I am not diminishing it. CoViD taught that.

But with an end-to-end supply chain, then how to position them is a discussion that needs to be had.  They should be defined in terms of the supply chain, both upstream and downstream. And then blended accordingly. I see them in a type of matrix management across the supply chain organization for operations, negotiations, and performance/relationships management.

Also, there are 3PL providers. With the emphasis on the supply chain, they should transition to 3PSCM or SCMaaS, which brings in some of the technology that is discussed below. Otherwise, the logistics focus of these outside firms can clash with the supply chain focus of the company.

Borrowing from the original 3PLs which were freight forwarders with staffing inside the customer, I think this would create a continuous collaboration among the buyer and seller. That would be a unique relationship with great upside for all.

Technology, Resilience, Blockchain, Visibility.  Technology and investors have gotten much attention. And I expect they will be, both for predictions/trends and accelerated usage for 2021. To me, tech options are for supply chain operations and planning.  They are not an option. The question is which you need most.

First, part of the company tech group should be imbedded in supply chain management. This would improve understanding of needs, operation detail, any vendor selection and implementation.

TMS (transportation management system) and ERP (enterprise resource planning) are two technologies that have been around for a while. This section is about "new" ones.

Much of the tech push comes down to resilience and the need for it.  Some see resilient supply chains meaning technology, which cannot catch diseases, replaces humans. Others see the improvement to operations or planning.  Warehouse robotics for order picking and storage and autonomous/driverless vehicles meet both needs.

Digitization can meet both with providing data that can be used with analytics and artificial intelligence. Move away from documents.  Much in supply chain management is not digitized. Nevertheless, digitization is a requirement of what must be done. This can be seen with international and all the parties involved in each transaction. So this area is one that needs attention. 

Some automation is in the hyped stage.  Blockchain is an example. It is supposed to build supply chain visibility and chain of custody.  That has not been established and, at times, seems to be about cryptocurrency than supply chain management.

Visibility is much needed. It should be end-to-end, upstream and downstream. It also ties to the chain of custody.  Two points here. One is the recognition of the number of stakeholders and 

participants involved.  Think of all the suppliers, their suppliers, various transportation modes and providers, warehouses, customs.  And where they are located.  A good example is with an import order and shipment.  The players you see and do not see.  That reach/scope is a weakness in present visibility and blockchain—the activities that are missed.

The other point is this is really about your purchase orders and your customers' orders.  It starts with your purchase order and your supplier's performance and your performance with a customer order. The perfect order—delivered complete, accurate, and on time.

The need is for an integrated view. Where is my purchase order? Will it arrive as planned?  That is the starting point—at the supplier.  Same with what you do with the customer order.  The other point is misdirection.  Is not about transportation. And a track and trace of a shipment.  Where is your end-to-end inventory—and that includes in-transit?  Is it in the correct positions?  Transport is a secondary means to all that. 

Some of the technologies require spending and resource capabilities that not all firms have. For them, assessment and increased focus must be used to improve supply chain management.

E-commerce.  Many retailers were closed during the pandemic.  That and public health concerns made shoppers go online.  E-commerce growth surged. Big time.  Retailers who were already positioned with their supply chains to drive the online customer experience are doing well.

It would be interesting to see costs for two retail fulfillment options of in-store versus warehouse.     Fulfillment—in-store vs warehouse. Or for BOPIS vs Click-to-Delivery. It is about order picking performance and costs and last-mile delivery cost.  There should be nothing in the analysis as to an allocation of store overhead/fixed costs. If there is, then perhaps there should be recognition of the cost for customers to pick up orders instead of having them delivered.  The point is to have apples with apples, and not mixed fruit salad.

Manufacturing should gear up for its customers wanting fast order delivery.  E-commerce is more than customers sending online orders.  It is about those orders and delivering them as specified by customers.

Tied with the retail and manufacturing online business are the supply chains for e-commerce as compared to traditional business.  How many warehouses should there be to provide needed order delivery speed? Will firms use the standard vertical warehouses designed for pallets of products instead of the horizontal for online?  The volume of orders is a factor here as is the shipping of cases or pallet loads versus eaches.

Conclusion.  The pandemic is changing how and what business is done and what customers are doing.  This means both now and post-pandemic—the new normal  It is a matter of what should be with supply chain management versus what will be.