The logistics and supply chain industry has endured a turbulent year which has propelled the sector to the front pages and news bulletins of mainstream media for all the wrong reasons. Global driver shortages, sky high air cargo and shipping rates and backlogs of container vessels at US ports have created the perception that the industry is badly misfiring. Supply chain shortages of some key components such as semiconductors have reaffirmed this image, as high tech and automotive manufacturers struggle to supply demand.
This is a shame, as at the beginning of the pandemic the industry was widely praised for its ability to function effectively despite huge pressures. Grocery store shelves were kept stocked and a robust last mile delivery sector ensured that a large proportion of the population could stay at home safe, supplied by e-retail platforms such as Amazon and Alibaba.
The market volatility which the Covid crisis has created has, if nothing else, reinforced the need for new thinking and a clear vision of the future – the reason why the Foundation for Future Supply Chain was established in the first place. The Foundation’s latest report looks at many different aspects of the industry, written by the experts which make up the Foundation’s Strategic Advisory Board.
- In his paper, Alan Braithwaite, Chairman of UK’s Chartered Institute of Logistics and Transport’s Freight and Logistics Policy Group, outlines 6 drivers of next generation rapid change and states that inventory must be de-coupled from demand. To do so must involve a more flexible manufacturing industry, predicated on agile processes and lower volume production.
- Celine Hourcade, Managing Director of Change Horizon, writes that sustainability will drive new ways of doing business based on corporate values, a culture of transparency, continuous learning, upskilling and accountability.
- Nick Wildgoose, CEO of Supplien Consulting highlights the risks relating to the adequacy and interconnections of transport infrastructure in light of the Suez Canal blockage caused by the container ship Ever Given in 2020. Companies need to be aware of the concentration of exposure so they are not caught out by a ‘single point of failure’.
- Jan Hoffman, Chief, Trade Logistics Branch, Division on Technology and Logistics, UNCTAD warns that the surge in container freight rates is having a massively disruptive effect on smaller, developing economies as well as an impact on production costs. To combat this, there needs to be more data-sharing between supply chain stakeholders, an improvement in the quality of port infrastructure and the diversification to the production of higher value products.
- Anders Petersson, Business Intelligence Director, Volvo writes about the challenges being faced by the auto sector – and others – due to the shortages of integrated circuit boards. New manufacturers are entering the market to help address the backlog of orders, but this will take time and huge investment. The crisis has prompted many OEMs to look closely at their lower tier suppliers to understand the potential on-going impact of the shortage to their operations.
- Ken Lyon, Managing Director of Virtual Partners, examines why the trucking industry has been so reluctant in adopting new technologies. He blames culture, lack of knowledge, the perception of costs and a lack of trust, mostly driven by the fragmented, micro- and small-business nature of the industry.
- Cecile Strokirk, Researcher and Project Manager, Seamless Transports at RISE AB, Research Institute of Sweden calls for better coordination and connectivity between seaports, inland terminals, airports, highways and railroads. This will only be achieved by digitalization helping to integrate the transport ecosystem.
- Ruthie Amaru, CEO, Freightos.com, writes about the potential which could be released by using Application Program Interfaces (APIs) to connect tech stacks in the sea freight sector. Carriers and freight forwarders can use this technology for freight pricing, booking, tracking and management but it will be constrained by endemic overbooking and the opacity caused by multi-layer contracts.
- Sarah Smith, Managing Director, Ti Insight addresses the important issue of the disparity of gender in logistics. She calls for a fair representation of women, not least to address the massive shortage of drivers. However, practical steps need to be taken – such as improving security and hygiene – and operations tweaked to reduce the number of overnight stays away from home. This will require political will and financial backing.
- Alan McKinnon, Professor of Logistics in the Kühne Logistics University, Hamburg examines the challenge of Carbon Labelling, listing several failed attempts to inform consumers about the amount of carbon generated at a product level. Now, however, interest is being rekindled as a result of advances in technology, such as Blockchain.
- Essa Al-Saleh, CEO and Board Member of Volta Trucks AB questions why it was taking so long to transition from the internal combustion engine to a zero-emission eco-system. He believes that by demonstrating cost savings, safety improvements and introducing the provision of finance and maintenance packages, the electric vehicle sector could step up to meet increasing levels of government regulation.
- Raghu Ramachandran, Founding Partner, 13 Colony Global provided a fascinating insight into trends in the e-commerce sector, detailing 10 key points which e-retailers should take into account to build out a successful operation. He believes governments will play an essential role in reducing the barriers to integrating ‘Product, Payments and Packages’.
- Mark Millar, Author of ‘Global Supply Chain Ecosystems’, highlighted the transition to two important production strategies in Asia: the ‘China Plus Option’ and ‘In China for China’. Covid-19 has accelerated the need to reduce risk and cut costs which will lead to the diversification of production and the shortening of supply chains.
- Finally, Anne Miroux, Faculty Fellow at the Emerging Markets Institute (EMI), S.C. Johnson School of Management at Cornell University describes the rise of Chinese corporations and how they have disrupted the global competitive landscape. Initially supplying Western OEMs, they have now created their own brands and are amongst the biggest spenders on research and development. The Covid pandemic could result in making them even stronger, with significant implications for global supply chains.
The range and depth of the papers contributed by the experts of the Foundation’s Strategic Advisory Board clearly show the huge challenges faced by the industry. Issues such as supply chain risk, carbon emissions, the Rise of China, alternative power, diversity and the evolution of e-retailing all pre-existed Covid. Now that the worst of the pandemic seems to be over, there needs to be renewed efforts by governments, manufacturers, technology companies and logistics service providers to develop or facilitate new and more efficient ways of doing business underpinned by ‘values’ as much as ‘value creation’.
Source: Foundation for Future Supply Chain, 03 February 2022
Author: John Manners-Bell