LM reader survey points to a post-pandemic supply chain and logistics reset

With the onset of the COVID-19 pandemic approaching the three-year mark next month, it is fair to say that how freight transportation, logistics and supply chain practitioners approach their operational processes has seen some changes over that time.

That shift, in many ways, was to be expected, given the economy’s sudden shutdown, at that time, which was subsequently followed by a massive uptick in demand. That swing led to an upended supply chain, with fewer people working, higher demand levels, and elevated freight rates over an 18-to-24-month period, beginning in March 2020. It also was a driver for high congestion levels at key U.S. ports and tight over-the-road and intermodal capacity, too.

These factors—and others—have helped to influence industry stakeholders to take a whole host of steps to essentially reset their supply chain and logistics operations and processes, in order to be better prepared for the unexpected, whether that were to come in the form of another pandemic-type event, a natural disaster, or war or terrorism, among others.

That was evident in a recent Logistics Management reader survey of 100 freight transportation, logistics, and supply chain stakeholders.

One of the key findings highlighted in the survey was that 94% of its respondents indicated that their supply chain and logistics operations were impacted by the pandemic.

Reasons provided by the survey’s respondents varied, but some notable observations included: a personnel shortage, a raw material shortage, and transportation limitations, due to carrier shutdowns; longer lead times for components and ingredients, as well as extended production lead times due to lack of staff; and an inability to move product in a timely fashion due to unavailable freight, transportation, or labor, among others.

“We had to change our approach to delivery for final mile to our customers,” said a respondent.  “Many were shut down, so we needed to be creative. We also had raw material suppliers who had their operations disrupted.  This required us to boost our safety stock to ensure uninterrupted supply.”

With these myriad challenges, came some eventual logistics lessons learned. Feedback related to lessons learned was along the lines of things like moving more freight to asset-based carriers, stockpiling certain raw materials, using multiple suppliers, focus more on domestic sourcing, shifting from a just-in-time inventory management approach to just-in-case, and the importance of having your entire supply chain mapped out and understood from a risk mitigation perspective.

As for steps stakeholders are taking to reset logistics and supply chain operations, the survey found that 78 respondents are focused on a reset, with 22 saying they were not.

One respondent said her company is pushing its business continuity planning further down into its supply base. Another indicated his company now has three large warehouses across the country, in order to be able to receive freight from multiple ports.

Other comments pointed to “a deeper analysis into supply chain strategy, insourcing certain functions that were previously outsourced, implementing longer lead times for materials and supplies, developing supply sources in Mexico and South America to backup or replace China

“We are getting back to the expectations we had prior to the pandemic and asking our suppliers to have product on hand when we order it…as that is what our customers are expecting so we are becoming more demanding,” said a food shipper.

John Larkin, Strategic Advisor, Transportation and Logistics, for Clarendon Capital, said that when looking at the longer-term, in regards to a supply chain reset, more nearshoring and re-shoring activity, to the U.S., is likely in the cards, as the automation of manufacturing really begins to take off and the cost of that automation comes down.

“Labor is still in short supply, and when you have manufacturing taking place in an automated fashion in the U.S., you not only have to move all the finished goods but also the raw materials, components, and sub-assemblies. That really increases the amount of transportation required, from a freight point of view, which is very encouraging for the long-term, especially as we get through this period of a [supply chain] reset. I am very bullish on the long-term and think that the supply chain is going to be much more North American-oriented, with a lot more volume per-dollar of retail sales than we have now because of insourcing, nearshoring, and automated manufacturing that seems to be picking up steam here in the U.S.”

Independent Supply Chain Analyst Chris Rogers observed that, for practical purposes, multiple sourcing has to be the way going forward, in terms of a true supply chain reset.

“Sourcing from multiple suppliers in multiple countries will help to provide that flexibility,” he said. “Nearshoring or re-shoring on its own is not the answer. A company can move its manufacturing operations to the U.S., in Texas or California, which could get hit by an unforeseen storm. That is not the answer, and it helps to make the case for multiple sourcing. That brings it to the central conflict, which is the need for supply chain resilience. But that requires buy-in from company stakeholders, in the sense that they may need to swap less efficiency for better resilience.”