Risk management remains front and center

The supply chain disruptions that have characterized the past year and a half have put a sharp focus on risk management, a theme that was intensifying as the supply chain prepared for peak shipping season over the summer. Pandemic concerns resurfaced with the spread of the Covid-19 delta variant, further straining an already stressed global supply chain and causing experts from all corners of the industry to warn of capacity constraints, bottlenecks, and the challenges of accelerating e-commerce activity.

“I think what everyone is starting to think about is, what is going to be the impact of delta?” Bill Thayer, co-founder and co-CEO of logistics-as-a-service platform Fillogic, said in August as companies were gearing up for peak-season shipping activity. “We were already going into a very difficult third and fourth quarter. Delta will just make that worse.”

Logistics technology companies like Fillogic—which helps retailers manage their middle- and last-mile deliveries through its mall-based microdistribution network—are witnessing the problem firsthand, and they report a growing awareness among shippers, carriers, and logistics services providers alike about the need to manage risk in the face of rising disruptions. Leveraging technology investments, rethinking inventory strategies, and getting a better handle on the last mile remain key tasks as supply chain companies head into the busiest season of the year, they say.

PUTTING TECH TO WORK

Mark Stanton, general manager of asset management solutions provider PowerFleet agrees that one of the most worrisome risks heading into peak season is the delta variant and its potential impact on global supply chains. As of late summer, delta had already been blamed for slowdowns in Asia, where outbreaks shuttered operations at factories in China and Vietnam, and temporarily closed a major terminal at China’s Ningbo container port. Although such shutdowns have had varying impacts on global supply chains depending on their location and length, they are a reminder of how supply chain vulnerabilities have been exacerbated since the onset of the coronavirus pandemic.

“There is a huge amount of backlog” in the supply chain, Stanton explains, pointing to the compounded effect of the pandemic on seasonal supply chain stresses such as back-to-school and holiday shipping demand. “Every link in this supply chain … is really being stretched, and has been stretched.”

Technology is one tool that can help address some of those problems, especially by improving visibility across the supply chain. Stanton says companies such as PowerFleet—which provides telemetry solutions for over-the-road vehicles and material handling equipment, including electronic logging devices (ELDs) and asset-tracking and condition-monitoring devices—can help provide some of that insight. PowerFleet’s equipment can be used in the field—on trucks, vans, containers, chassis, and the like—as well as in the warehouse, where it can be used on forklifts, in storage containers, and on other equipment. Data derived from such technology can help companies collaborate and communicate more effectively, improving their ability to react and respond to disruptions. Incremental gains in productivity and efficiency add up as well.

“Anyone in this space is being asked to be more efficient,” Stanton explains, adding that companies have been much more attuned to this need since the pandemic hit and, as a result, are more focused on implementing new technology and using it to its fullest potential. “I think there’s a lot more focus on risk mitigation and trying to plan for the future. And there’s been more emphasis on making sure that whatever the technology platform is, you are getting the most out of it.”

Stanton says customers are asking what more they can do with technology tools and whether or not they can get added value out of the information gleaned from them. As an example, he cites the case of a prospective customer that was looking to improve management of its refrigerated tractor trailers: The customer had recently lost a trailerload of seafood due to delays that resulted in the load’s spoiling before it reached its destination. The loss to the customer was about $177,000, a figure that multiplies when you factor in the ripple effect of that loss through the entire supply chain.

“What did that do to the supply chain when that product didn’t get where it was supposed to be? It’s not just $177,000; it could be hundreds of thousands more, even millions in lost sales because that product didn’t get there,” he notes, adding that greater visibility into the trailer and improved monitoring can help fleet managers avoid such situations—and learn from them. “Customers want to know, ‘How do I manage my risk so that doesn’t happen next time?’ There really is a great deal more emphasis today on the technology that will help them get to where they need to be and beyond.”

Thayer agrees, and points to warehousing capacity constraints and a resulting need for alternative fulfillment strategies. Demand for logistics real estate continues to outpace supply, and Fillogic is one company that is benefiting from the trend. As of late summer, its tech-enabled microdistribution hubs were coordinating e-commerce fulfillment and delivery activities for retailers at five locations nationwide, with plans to add another 22 locations by the end of the year. 

“Logistics networks are overwhelmed,” placing additional stress on e-commerce fulfillment networks, he explains. “Everyone is looking for an alternative.”

SHIFTING STRATEGIES

Spencer Shute, a consultant with supply chain and procurement consulting firm Proxima Group, agrees that there is a growing appreciation for the tools and strategies required to better manage supply chain risk. As one example, Shute says more companies will be focused on switching from a just-in-time inventory model this peak season to a just-in-case or hybrid method that allows them to store more inventory close to where it’s needed. Executing on those tasks will require an innovative mindset, he says.

“That could mean changing the processes that we do today, or it could mean implementing new software,” Shute explains, emphasizing the need to take steps that expand visibility throughout the supply chain. “As we move forward, that’s going to need to be a part of risk management. You need visibility into your supply chain to assess risk.”

You can’t eliminate all risk, Shute adds, but you need to be able to see it in order to deal with it. Companies that have spent the past couple of years investing in tools to improve visibility are in the best position to weather the current storm—especially when it comes to dealing with accelerating e-commerce activity, which is expected to reach record levels again this holiday season.

“If they haven’t been putting in the work to make their networks more e-commerce friendly, [companies] will be behind the eight ball,” Shute warns. “The biggest risk is [around] customer promises and customer expectations; meeting those will be challenging for all shippers.”

Shute says businesses will adapt their shipping strategies to deal with those challenges, moving away from free, fast shipping toward strategies that place more conditions on free shipping—such as spending minimums, early orders, and slower shipping routes.

“Those are things retailers will have to consider,” Shute says. “Retailers are going to start passing more of that cost on to customers—but in more creative ways.”