Digital logistics tools are helping manage the chaos and uncertainty the coronavirus has injected into the supply chain, but the crisis is a warning sign that the freight industry overall needs to do a better job of making sure companies are equipped to absorb the inevitable disasters of the future.
“Logistics software platforms are fundamentally more agile than old school systems; they are built to put structural flexibility into supply chains,” said Karl Siebrecht, co-founder and CEO of Flexe, an on-demand warehousing company.
The coronavirus pandemic is “painful on a human level and supply chain level,” he said. But it is also an opportunity to build more resilience into supply chains to mitigate the impacts for “when it happens next.”
Siebrecht joined Dan Lewis, CEO of digital fright network Convoy, and Ryan Petersen, CEO of Flexport, a global freight forwarding platform, in a virtual roundtable yesterday about how COVID-19 is impacting their companies and supply chain partners.
The wide-ranging discussion touched on panic buying, swings in supply and demand, remote work and how tech platforms, long touted for making supply chains more efficient, serve as a critical lever to keep freight moving in times of crisis.
Throughout the 90-minute conversation, one common if obvious theme emerged: “The biggest and most important thing is [coronavirus] has made things very unpredictable,” said Lewis.
Supply chain disruption
Asked for his view on trucking impacts, Lewis said Convoy is seeing up to five to 10 times the normal demand into cities like Seattle, an epicenter of the crisis. At the same time, the system is continuing to absorb a big drop in freight coming into the Southern California ports from China, where the pandemic started.
As a result of these reversals, the transactional spot freight market is growing very quickly, Lewis said. “All existing agreements aren’t really holding up.”
Sharing an example of how panic buying has upended inventory cycles, Siebrecht said bottled water companies at this time of year are typically building up inventory in anticipation of summer. Now all “pre-built inventory” is being sold immediately, he said, with one large player registering its highest month of sales – 900 million bottles of water – over the past month.
Flexe is managing today’s “unforeseen peaks” in several ways, according to Siebrecht. Citing a couple of examples he said the company, which connects hundreds of warehouses across the U.S. and Canada, is spinning out additional warehouse capacity and accelerating distribution of medical supplies.
“Because this is a software-based business, we can move really quickly,” he explained, noting that Flexe received two requests on March 17 from companies needing hospital equipment; one shipment arrived yesterday, the other one is expected to arrive today.
Petersen described the collapse in air freight that has accompanied the current crisis, and said skyrocketing air cargo prices have fueled demand for Flexport’s “premium ocean service,” which shaves four days off the typical trans-Pacific voyage.
The company is also taking creative approaches to problems, like chartering a Boeing 747 for a company that makes baby wipes and had never shipped by air before – “ever,” according to Petersen. Ventilators and masks are also being shipped to hospital systems by air “in a rush delivery mindset,” he said.
Insourcing, or outsourcing
Taking a 40,000-foot view, the panel discussed whether the current crisis exposed fault lines in the supply chain, and what solutions might come out of it.
The group agreed that the pandemic was an “extreme example” of a broader trend toward uncertainty set in motion with last year’s tariffs and port labor strikes in 2018 – and would likely intensify debates over domesticating the supply chain vs. maintaining a global supply chain and whether companies should accelerate efforts to source goods from a variety of locations instead of depending on a single country.
Flexport is seeing volumes from Philippines surge, but “in a global pandemic, I don’t know that diversifying helps you that much,” Petersen said, noting there’s a balance between risk and cost.
“Ultimately the best insurance policy is running your own garden and growing your own food,” he said. “But that’s costly. It’s a hard calculus if you are a supply chain manager.”
Harshade Kanvinde, a Slalom supply chain consultant who moderated the roundtable, talked about infusing more overall agility into the supply chain to avoid inventory problems such as retailers running out of soap while their shelves are full of shampoo. “They’re practically the same ingredients,” he said.
A freight tech pull back?
Digital logistics companies are not immune to the cataclysms shaking the global economy. A couple of pilot projects have been paused, Siebrecht said, from customers that want to get consumables to market. “Everything else takes a back seat,” he said.
Without offering details, Lewis said Convoy is adapting to the pandemic by changing its priorities about what to invest in and what problems the company will try and solve with technology..
Recounting a story about a major international freight forwarder whose employees had to haul their desktop computers home because they didn’t have laptops for remote work, Petersen said the crisis spotlights tech providers are enabling new workflows.
“It’s not just customers adopting tech and how it will help them,” he said. It’s about how the platform of the provider enables remote work, connecting people, companies and factories all over the world.
“Software has such a role, keeping companies responsive to something like this,” he said. “We cannot predict something like this by its very nature. But you can predict that something like this will happen.”
