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Dawn Tiura is the president and CEO of Sourcing Industry Group (SIG), an association representing Fortune 500 and Global 1000 companies with a combined spend of $17 trillion USD in sourcing and outsourcing.
David Maloney, Editorial Director, DC Velocity 00:01
Supply chain impacts of China's Covid shutdowns. Truck trailer sales are on the rise. And more investment in supply chain tech.
Pull up a chair and join us as the editors of DC Velocity discuss these stories, as well as news and supply chain trends, on this week's Logistics Matters podcast. Hi, I'm Dave Maloney. I'm the group editorial director at DC Velocity. Welcome.
Logistics Matters is sponsored by Aptean. Aptean is a global provider of mission-critical, industry-specific logistics and transportation management solutions. Aptean routing and scheduling delivers advanced transportation management systems to world-leading brands, helping them streamline daily operational processes. If you're ready to see savings of up to 30% and unlock the value of your transportation operation, Aptean can help. For more information, visit Aptean.com and discover what's next now.
As usual, our DC Velocity senior editors Ben Ames and Victoria Kickham will be along to provide their insight into the top stories of this week. But to begin today: throughout the pandemic, China has undergone a zero-tolerance Covid policy to slow the spread of the disease, but shutting down factories and ports has created shortages and supply chain bottlenecks. How have these shutdowns impacted cargo movement? To find out, here's Victoria with today's guest. Victoria.
Victoria Kickham, Senior Editor, DC Velocity 01:32
Thanks, Dave. Our guest today is Dawn Tiura, president and CEO of SIG, which is a global association focusing on sourcing, third-party risk, and sustainability in supply chain. Welcome, Dawn.
Dawn Tiura, President and CEO, SIG 01:45
Thank you glad to be here.
Victoria Kickham, Senior Editor, DC Velocity 01:48
Can you just start by telling us a little bit about SIG—what it is you do, who you represent?
Dawn Tiura, President and CEO, SIG 01:54
Yeah, so we represent primarily global high-cap organizations—so, Fortune 500, Global 1,000—and the commonality is that they all do global sourcing and they all have complex supply chains.
Victoria Kickham, Senior Editor, DC Velocity 02:08
So, you're in the perfect position to talk to us about what's going on in and around Shanghai with the Covid-19 lockdowns. This is obviously adding to the delays and disruptions that have been plaguing global supply chains recently. Can you talk about how the situation is affecting global trade from your perspective and your, what your clients are dealing with?
Dawn Tiura, President and CEO, SIG 02:30
Yeah, so I'm actually speaking from a member's perspective, because that's where I get all of my use cases, and the ocean carriers are redirecting a ton of shipments for interim storage, and primarily, it affects everything that goes through Shanghai, but the most important one is that they have had to divert all the refrigerated containers, because they literally don't have a place to plug them in. And so, it has just created additional havoc. So, you think about things that—the hard goods that are stuck there, because we don't have—because of the zero-Covid policy—but then you think about refrigerated containers that have to be diverted as well, it's complicating everything for everyone worldwide.
Victoria Kickham, Senior Editor, DC Velocity 03:14
It only seems to be worsening the labor problem as well, as more citizens are forced into lockdown. How does that affect port operations in Shanghai, in particular, and maybe in relation to what you just mentioned about the refrigerated container problem?
Dawn Tiura, President and CEO, SIG 03:32
Yeah, so, as you try and move everything and divert it away from Shanghai to other parts of China, you can go over land, but the city's lockdown measures are reducing trucking services in and out of Shanghai—they estimate by about 30% for Maersk. So, a 30% reduction—so, unless the ships can find another port that is not Shanghai, even—but for those who are in Shanghai and have already unloaded with the lockdown of the personnel, and they don't—they're not able to get the trucks in to start moving the materials around China, [let alone?] refilling the cargoes, cargo containers to go back on the ships. So, it's a it's a huge issue. You know, no one ever thought Shanghai of all the cities in China would actually go into a total lockdown. And it was a surprise.
Victoria Kickham, Senior Editor, DC Velocity 04:19
Yeah. You've mentioned some areas that have been affected. We've seen different reports that show, you know, the automotive industry and electronic goods, as well as things like appliances, have been the hardest hit. You've mentioned some others. What other—are there any other industries, commodities that your your members are telling you are a big problem?
Dawn Tiura, President and CEO, SIG 04:40
You know, there's almost nothing that has escaped the supply chain disruption now. You know, coming out of China, one of the things that we found early in the pandemic is that we thought we had diversified where we were sourcing our supplies. So, let's say I put 50% in South Korea and 50% in Vietnam. What we weren't aware of and and didn't think about was the fact that if we went into a second tier, both South Viet—excuse me, South Korea and Vietnam were buying from the same factories in China, and at one point, it seemed like all roads lead to China, and sometimes to the exact same factory. So, there really is very little that has not been impacted in our supply chain. So, everything, you know—the obvious ones, because of the chip manufacturing, or the telcos and the automobiles and the internet-connected devices. But this truly is hitting every single commodity, whether it be consumer choice—we have a number of retail organizations, they said, we used to offer 30 different colors of the same T-shirt in six different sizes; now we're reducing consumer choice down to eight colors, because we just cannot maintain the amount of inventory that we used to have before to to satisfy our customers. So, as you mentioned, refrigeration—GE stopped 12 of their lines on a normal refrigerator last year and narrowed it down. So, consumers are losing choices as well, across all kinds of commodities.
Victoria Kickham, Senior Editor, DC Velocity 06:05
Yeah, it certainly is a huge problem and ripple effect. How are companies dealing with this problem? You know, what kind of strategies can companies implement to sort of address these issues?
Dawn Tiura, President and CEO, SIG 06:23
You know, some of our members are working on collaborating and sharing their inventory levels, and, you know, we had a lot of sharing of PPE. early in the pandemic. But across, for example, the North American electric utility grid, while each of the utilities are designed a little bit different, there's a lot of commonality and a lot of adjustability, and historically, in times of, let's say, tornadoes, or hurricanes, different utilities could come in and help one another with manual labor. Now, they're actually sharing a lot of their inventory levels, so that they can borrow from one another. So, there's more collaboration in supply chain. There's, you know—the supply chain, you know, everyone sort of thinks of it as a straight line, and it's really like a bowl of spaghetti. So, if you think about all the interconnected activity within your supply chain, there are a lot of other places where you can borrow inventory if people are willing to collaborate, and we're finding our executives are much more open to it. So, collaboration, you know. God forbid, you know, the just-in-time delivery, you know, we tried to get re—we've tried to go, move to it and have very little inventory. We do have some members who are opening up their warehouse space again, and starting to stock inventory levels. And they're also just being realistic with their customers that the leadtimes have just grown tremendously.
Victoria Kickham, Senior Editor, DC Velocity 07:42
Yeah. What's the general sense in the business community about China's zero-tolerance Covid policy? You know, is there any expectation that things may change, given the, you know, with the social and economic ramifications?
Dawn Tiura, President and CEO, SIG 07:58
Yeah, there's, I mean, a lot of people are just tired of it, because they've proven that it has not stopped Covid or the spread of Covid, but unfortunately, you know, consumers and other organizations can't move the government of China. It's going to have to be an active choice that they make to say zero Covid is not going to be realistic. And it's going to start hurting their GDP, as it's hurting everyone else. So, we do hope that they're going to move away from zero Covid and just accept the fact that Covid is there, and you need to manage it, but you're not going to get to zero Covid. So, that is our hope and prayer from a lot of companies, I will tell you that. That's a conversation they're always having, is when are they going to wake up and move away from zero Covid?
Victoria Kickham, Senior Editor, DC Velocity 08:41
Yeah, yeah, not an easy problem to deal with. Sure. I also wanted your outlook for all of these issues of supply chain movement. Given that these lockdowns also come amid, you know, the Russia-Ukraine crisis and other global economic concerns—high inflation—you know, what's your outlook, given all that's really going on in the world?
Dawn Tiura, President and CEO, SIG 09:04
You know, I'm optimistic that by probably halfway through 2023, I think that the supply chains will be righted. But we have containers, they're in the wrong places. We have, you know, we've lost 85,000 truckers, just in North America. We've got to calm it down and coordinate and get containers in the right places, not have ships leaving and racing back to China to refill and leaving the ports, you know, the the ports of the West Coast, the United States, they're leaving empty because they make more money by racing back to China, refilling, and bringing their goods back. So, we have things that are rotting and things are going [bad?] on the ports because we're not able to get them onto container ships. So, at some point, it's going to take some global cooperation to say that everyone needs to pause, you need to get the containers in the right place, get the ships in the right places, and make it equitable that people will take, they will stop and reload before they go back to a more expensive route, where they're paid more. So, it will take global cooperation, and I think that will be coming over this year. I know that the current administration was supposed to start a global supply chain think tank, and I don't, I have not heard of it actually being launched, and I'm shocked. It hasn't been. So, I do think by middle of 2023, when everyone wakes up and says "We have to pause and put all these chess pieces back in place," I think things will start to return to pre-pandemic delivery.
Victoria Kickham, Senior Editor, DC Velocity 10:37
Let's, let's hope that that outlook describes what happens. I certainly share your optimism about that. Thank you so much, Dawn. We really appreciate you being here with us today.
Dawn Tiura, President and CEO, SIG 10:50
Well, thank you. It's really important work that you're doing, so I've loved listening. So thank you.
Victoria Kickham, Senior Editor, DC Velocity 10:55
Thank you. We've been talking with Dawn Tiura of SIG. Back to you, Dave.
David Maloney, Editorial Director, DC Velocity 11:00
Thank you, Dawn and Victoria. Now let's take a look at some of the other supply chain news from the week. And Ben, you wrote this week about a jump in the number of truck trailers. How does that affect the freight market?
Ben Ames, Senior News Editor, DC Velocity 11:13
That's exactly right, and it seems like a little bit of a random detail here, but it's actually on the really similar topic to what our guest was just mentioning about getting those containers back in the right places. We've been writing for months now about the historically tight freight market over the road, which makes it hard, of course, for retailers or manufacturers to move their materials around the country. That's caused by a few trends. There's no simple answer. There's a truck-driver shortage. There's a shortage of trucks themselves. But this week, we saw numbers from trailer manufacturers, which showed that in March, they had booked the largest number of orders to build new trailers since back in December 2020, so about 15 months. And that could be really significant for the freight sector, because with more trailers, you can load more cargo—for example, sort of hot-swapping them, putting cargo into one unit while another one is moving so the trucks can move their trailers around—and that creates faster turnaround times in places where we've been seeing congestion, like warehouses and the ports that we were also talking about earlier in the show. Experts like the transportation-sector analysis firm ACT Research said that the numbers show that manufacturers might be changing their strategy. In recent months, those trailer makers just hadn't been accepting orders because their capacity was completely full. That's because of things like high steel prices, scarce labor, other supply chain shortages. And so that made it hard for those manufacturers to feel confident in their own economic forecasts, or for that matter to set prices for making trailers. So, by accepting this new jump in orders, that shows that they're finally comfortable enough to take new orders, and both ACT and another firm, FTR, said that they were both unsure that this new level of building could be sustained, since some manufacturers are already backlogged into December of the year that we're in and may not be willing yet to take new orders that they would then be making, looking into 2023.
David Maloney, Editorial Director, DC Velocity 13:19
Right. So Ben, it sounds like the builders of transportation equipment are doing their best to keep up with demand, but market conditions are holding them back?
Ben Ames, Senior News Editor, DC Velocity 13:29
That's exactly right. And we saw a similar kind of pattern this week, actually, in a different sector of the economy, which is retail shopping, that we all do. The American shoppers is an amazing creature, because despite all sorts of disruption that we've endured these last couple years—pandemics and trade wars, port delays—they—we—just keep ordering new goods, both online and in stores. And in March, we heard from the National Retail Federation that that trend continues. The government data shows that overall retail sales in March were up half a percentage over February, and up almost 7% year over year. Despite occasional month-over-month declines, those sales have grown, year over year, every month since May 2020, about two years ago. However, that growth comes, like we were talking about with the trailers, despite some variables that are pulling us back, and that means inflation here, which is cutting into our buying power. That's mentioned by the consumer price index, the CPI, which rose 8.5% in March from that month last year. And there was also a 12-month increase of almost 8% in February, and seven and a half percent in January. So, it's [a] significant drain on our spending power, although the shoppers just keep going. But it's an interesting parallel to me. Just as those trailer manufacturers are trying to push production despite being held back by procurement and labor, so are shoppers trying to push consumption, although they're held back by inflation increases. So far, it's working out for both of them, but, for sure conditions are tight out there.
David Maloney, Editorial Director, DC Velocity 15:11
Yeah, certainly seems that way. Interesting. Thanks, Ben.
Ben Ames, Senior News Editor, DC Velocity 15:14
David Maloney, Editorial Director, DC Velocity 15:15
And Victoria, you've reported this week on increasing investments in supply chain tech. What more can you tell us?
Victoria Kickham, Senior Editor, DC Velocity 15:22
Sure. Yeah. So, this is very much in line with the trend where we've been seeing accelerated interest and adoption of technology, especially these past two years during the pandemic. So, it seems that companies are reaping big rewards from their supply chain tech investments, and that trend is expected to accelerate this year. And that's according to research from [a] technology provider called Cleo and a research firm, Dimensional Research. They published a report this week. The companies polled more than 100 executives at both medium and large organizations, across both North America and Europe for their report, which is titled "Achieving Business Agility Through Ecosystem Integration." Their goal was to understand the greatest business threats facing companies, both last year and this year, and determine what those companies are doing to mitigate risk. Not too surprisingly, respondents identified the pandemic and subsequent supply chain disruptions as the greatest threats over the past year, and they said that tech investments are really helping them to address those challenges. The business leaders surveyed said they increased their firm's agility by investing in integration technology in particular. These are tech solutions that are used to sort of connect applications and systems to one another, to sort of share information, enable transactions between the systems. An example would be that, you know, sometimes businesses will use application integration software to create a bridge between a new cloud application they may be using and an older hosted application on site, and this just allows them to, you know, connect a range of independently designed applications together; so, really just facilitating more communication. About 20% of the respondents said that those kinds of investments drove $3 million or more in additional revenue in 2021. Half of respondents said they saw at least a million dollars in added revenue from this kind of technology investment. So, some pretty big gains, companies are seeing.
David Maloney, Editorial Director, DC Velocity 17:25
You said that the trend is expected to continue. So what's the outlook for that investment?
Victoria Kickham, Senior Editor, DC Velocity 17:31
77% of respondents said they plan to invest $100,000 or more in supply chain technology in general this year. So, that's a pretty big number, and again, much of it will be focused on those integration technologies I talked about—you know, things that help connect disparate systems and applications. About 60% of the respondents said they invested in integration technology as their primary way of responding to disruptions to business last year, followed by 53%, a little more than half, who said they invested in back-office applications like ERP, CRM, WMS, and TMS solutions to meet those goals. Another interesting statistic that I thought, more than 90%, the vast majority of executives interviewed said that this technology-driven agility that they're so focused on is a really key initiative for their companies moving forward. So, more technology, more to come on the technology front, that's for sure, and just a really interesting continuation of this, this rush to implement more and more tech solutions along the supply chain.
David Maloney, Editorial Director, DC Velocity 18:37
Yeah, well, that certainly sounds like good news for everyone in the industry. Really. Thanks, Victoria.
Victoria Kickham, Senior Editor, DC Velocity 18:42
David Maloney, Editorial Director, DC Velocity 18:44
We encourage listeners to go to DCVelocity.com for more on these and other supply chain stories. And check out the podcast Notes section for some direct links on the topics that we discussed today.
And again, our thanks to Dawn Tiura of SIG for being our guest today. We welcome your comments on this topic and our other stories. You can email us at firstname.lastname@example.org.
We also encourage you to subscribe to Logistics Matters at your favorite podcast platform. Our new episodes are uploaded each Friday.
And speaking of subscribing, we encourage you to check out our new sister podcast series, Supply Chain in the Fast Lane, coproduced by the Council of Supply Chain Management Professionals and Supply Chain Quarterly. This past Tuesday, we discussed the state of air freight, and next Tuesday we look at the rail freight market. Subscribe to Supply Chain in the Fast Lane wherever you get your podcasts, and be sure to catch the past episodes.
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We'll be back again next week with another edition of Logistics Matters, when we'll look at Earth Day and efforts to reduce emissions produced by global transportation, so be sure to join us. Until then, please stay well and have a great holiday weekend.