Strategic Supply Chain Planning 2021 | Beyond COVID

Companies are looking at diversifying their supply sources. Whether this means on-shoring, near-shoring or simply adding alternative regions to the existing base. This is not a quick proposition. Suppliers have to be located, certified and tested. Order patterns have to be established and inventory policies implemented. All of this takes data, analysts and time. Perhaps the most difficult part, managing change in your supply chain planning.

Whether you are a manufacturer, distributor or retailer you have to be able to support more direct consumer channels than you may have traditionally. This will involve better collaboration, inventory management and alternative fulfillment and transportation options. Again, this requires data, analysts and change management.

The companies that will lead the pack are the ones that recognize the permanency of the COVID changes on the horizon and establish long-term supply chain strategies to mitigate risk and guarantee products and service to the end customer.

Planning for Supply Chain Flex is Paramount

An exponential boom in e-commerce sales rapidly created significant congestion for last mile deliveries. The effect spilled across the entire supply chain. At distribution and fulfillment centers some shippers saw their small packages go unshipped due to volume caps implemented by parcel carriers. Elsewhere, LTL carriers facing heightened shipment volumes at their terminals delivered fluctuating service levels.

As a result, many companies examined how they complete final deliveries to their clients, a process that retail giants like Amazon have nearly mastered. More and more companies are shifting toward expedited service from either existing brick-and-mortar facilities or an adjusted network of distribution centers. Smaller, urban fulfillment centers added in certain areas can help skirt site-specific volume limits. More options make you less susceptible to geography-based capacity constraints.

But you must understand how those changes in network design affect cost and service performance. 

Through its ability to evolve a massive local network, Amazon proved to be among the most reliable carriers during the disruptions of 2020. Not everyone has the deep pockets to establish an Amazon-like network with large distribution centers and cross-dock strategies. 

However, you can determine where you can compete with that sprawling service network – and where you cannot. SKU rationalization, margin analysis of different channels and overall network design analysis can help businesses of any size understand where growth is occurring and where it is not. From there you can align your supply chain planning based on the demand patterns your business is experiencing.

Look Upstream to Determine Opportunity

With everything happening in the supply chain environment, it is important to get outside of your business and examine your network upstream to your suppliers. This provides insight in several important areas. 

Over the past 20 years companies have worked to reduce and remove inventory where possible, achieving the absolute least cost in the process. Today, you must balance inventory, determine which inventory is right, and even decide the right customers to serve. Understanding your processes, as well as those of your partners is integral to transportation cost management.

When your retail partner asks you to drop ship product to their customers, can you segment your inventory into the different physical channels to both serve those individual orders and continue filling regular store-level inventory needs?

How should your inventory model change as you move toward insourcing or reshoring? With longer lead times and growing landed costs emerging from foreign vendors, local suppliers allow you to manage a smaller inventory or direct ship to customers and, ultimately lower overall cost. Do you have the contingencies in place across your network of vendor partners to deploy local or regional sourcing in the event of ongoing disruption in Asia?

By stepping outside your own walls and understanding processes upstream and downstream – as well as their alternatives – you become a stronger partner, especially if you can offer your suppliers visibility into your own demand. Ultimately, that level of collaboration helps your partners plan better, improving efficiency and service to you in the process.

By helping customers understand their total value stream and deploying a lean-minded supply chain strategy consultation, we help them visualize how changes to their network can improve cost and service across their transportation environment.

Capacity for Change can Limit Improvement

Achieving flexibility in your supply chain requires both an ability to recognize when processes are not performing and a willingness to apply change. If you don’t change, nothing changes, and it became especially clear in 2020 that a lot of companies don’t know how to implement that change. 

Leadership has to want to change and improve, and it is important to understand that if you are not constantly problem-solving then you are going backwards. Smaller companies understand this especially well, but larger companies are often separated into silos and metrics conflict with day-to-day activity.

Are you willing to let your partners save you from yourself? If leadership is not willing to accept analysis and insight that supports change, then activity rarely changes until crisis occurs. And when that crisis occurs, without analysis to support process improvement, you may not be able to determine the right practices to change.

Performing that analysis is no easy task. A lot of smaller companies don’t have the skillsets or capacity to complete that data-driven look. Likewise, medium and large companies may dedicate people to monitor performance in different supply chain areas. They may not have the groups of people capable of not only understanding how to complete the analysis, but also problem solve. 

That is where Transportation Insight helps. We not only have the capacity to complete analysis of SKU-level performance, network design and alternative, contingency supply chain strategies. Importantly, we also teach your teams how problem solve, a skill that you can then pass along to others in the organization.   

Once we deploy a problem-solving mindset alongside analysis of your supply chain data, we can create a map of the transportation activities across your network and determine options for alleviating problem points that drive up your cost. By pairing those continuous improvement efforts with renewed network flexibility that eliminates the risk of disruption, Transportation Insight positions you for improved cost control and enhanced opportunities for growth. 

For more insight that will help support your supply chain strategy in 2021, download our latest industry forecast. Read the First Quarter ChainLink 2021 for a multi-modal look at the transportation trends that will affect your business in the year ahead.

Mitigating Parcel Challenges in a Post-Coronavirus World

Consumers are now using e-commerce as their primary channel to buy everything from groceries and small electronics to home appliances and even cars. Most of those items move through one of three parcel networks: FedEx, UPS, or the U.S. Postal Service. Because of the sheer amount of parcels being processed and handled across the United States, we’re seeing natural “log jam” points come alive, resulting in delayed delivery and dissatisfied customers.

With the challenges mounting, is it possible to mitigate issues and maintain customer satisfaction? It’s possible – but it’s critical for teams to work together and understanding the challenges currently in play.

UPS Experiences Backups In The Northeast

The Northeast region of the United States was heavily impacted by the spread of COVID-19, forcing major cities like Boston and New York to virtually shut down overnight. Although those cities are starting to open, there remains a major backlog of parcels waiting for sorting and delivery.

At one UPS facility in Rhode Island, at least 40 UPS trailers remain on the dock, waiting to be processed. The parcels in these trailers represent a substantial amount of packages, destined for many different destinations across the northeast. Potentially, that could reflect over tens of thousands of customers who are frustrated because the items they ordered are not being processed for delivery.

The northeast isn’t the only facility experiencing problems. In Tucson, Arizona, employees at one facility is expressing concern about an outbreak of COVID-19. The local union claims 36 employees tested positive for Coronavirus, while three have been hospitalized for COVID-19 symptoms. If this facility shuts down for cleaning and sterilization, it could also create problems for parcel delivery in the Southwest as well, including the major population centers of Los Angeles and Phoenix.

Trouble Continues for the U.S. Postal Service

Packages sent through the mail are also facing delay threats due to the COVID-19 pandemic. The U.S. Postal Service is chartered by the U.S. Congress to deliver first-class mail, and in 2019 they delivered over 143 billion pieces of mail to 160 million addresses across the country, including parcel delivery through Priority Mail and other products.

But the COVID-19 outbreak has forced massive changes in their structure and how they manage their workforce. According to data from the USPS, at least 60 postal workers have passed away due to COVID-19 complications, 2,400 have tested positive for Coronavirus, and 17,000 employees – or three percent of their workforce – were temporarily displaced on quarantine. While there’s no way to measure the human loss, the number of employees affected by this virus is forcing the Board of Governors to work up a plan to keep employees healthy despite a decline in profit.

The profit drop comes from a reduction in one of their most successful business areas: Direct mail advertising. At one point, direct mail advertising made up 23 percent of revenue for the Postal Service. As companies look to save money and find new ways to get in front of consumers, they are pulling away from pre-sorted and direct mail advertising, putting a major impact in the USPS budget. The future of the Postal Service is now in question, as they are experiencing both a cash and personnel crunch like never before.

Managing Difficulties and Driving Customer Satisfaction

Although the COVID-19 pandemic is creating challenges, it’s nothing that we cannot overcome. With a combination of actionable insight and sound decision making, it’s possible to still drive customer satisfaction by understanding and controlling the current situation.

To start, it may be useful to start a relationship with a secondary carrier. Opening a new door with a carrier can expand your options, especially when it comes to expedited parcel delivery. For example: although UPS has an expansive ground network, FedEx can offer more daily flight connections. Understanding the tradeoffs and opportunities give you an upper hand in determining how to ship parcels to consumers, and through what options.

From there, constant analysis of parcel delivery optimization can help you determine how effective your plans are, and how to improve them even further. Through service and compliance audits, you can find out how quickly your packages are moving, if they are moving within guaranteed service parameters, and if how many packages end up lost or damaged.

Finally, understanding the current parcel situation can help you mitigate and manage customer expectations. Expressing the potential problems and managing an understanding of when parcels may be delivered can help customers better plan for the issues, driving better loyalty in the end.

Bringing it All Together With a Trusted Partner

Navigating the parcel world in a post-Coronavirus world doesn’t have to be intimidating. The experts at Transportation Insight can help you identify change opportunities in your parcel delivery program, and lead to long-term success. Schedule a consultation with us today, and learn how our decades of experience can quickly improve your parcel program.

How the Global Supply Web is Taking Over for Supply Chains

Over time, supply chains became more complex. Advancements in technology and navigation allows larger ships to enter ports and transport more goods with each pass. Aviation opened the door for faster trade, with critical items arriving to their destination in hours instead of days. As the internet came online for everyone, computers allowed us to track our freight in motion.

However, what hasn’t changed is our reliance on lowest-cost, single-source supply chain strategies. Although organizations of all sizes have the opportunity to map ideal networks and identify origins that balance cost with service, many companies remain fixated on having one supply chain, instead of sourcing through a supply web.

As technology gives us more tools than ever before, it’s time to break the supply chain. This period of COVID-19 disruption provides the perfect opportunity to make a transformation toward a supply web that will drive sustainable success in the future.

What happens when supply chains get too lean?

Before we turned the clock to 2020, supply chains around the world were very lean. That is: companies would order just enough inventory from overseas and relied on a soft market to get good prices on regular freight shipments.

When the Coronavirus disruption started, some businesses were unaffected. Because of the planned Chinese New Year shutdown, many ordered extra inventory to cover them through the two-week break. As the pandemic spread and disruption expanded, we started discovering the weakness of a lean supply chain: The most in-demand items, like personal protective equipment and cleaning supplies, ran out quickly, forcing new suppliers to ramp up production not out of opportunity, but out of necessity.

Although the global disruption is providing a healthy correction on inventory, it also illustrated why companies need to develop a supply web for critical components. Organizations that relied primarily on Asian sources are experiencing a much slower recovery due to the extended shutdown of Chinese factories , combined with month-long lockdowns declared by other countries in the region.

Today, sourcing must take a multi-region approach. Those companies that took a multi-region approach are able to recover faster because they were not dependent on a single supply chain. While there is no “perfect” model to prevent sourcing disruption, creating an inbound supply web can help reduce challenges. By relying on alternative network strategies mapped during contingency planning, companies can bring in components from multiple continents and experience a faster recovery and return to production and distribution.

Creating and extending the global supply web

Identifying global sourcing opportunities is only the first step in creating a robust supply web. If your previous supplier base was only in China, do you have the infrastructure available to expand beyond Asia?

Take this moment to think about how a physical web works. A web retains its strength because the tension is spread out across several anchor points and supported by internal joists between each key line. The strength of the center hub is all based on the web’s construction and proper tension at the anchor points. Build on a weak anchor, and that corner of the web could be ripped out entirely. If the internal supports aren’t strong, the web will be ineffective at best, creating a liability at the center.

The supply web works in a similar manner. Inbound “anchor” suppliers must be strong enough to support the web as a whole, while the internal “support” comes from robust transportation networks. If you rely on a lowest-cost, single-source for all your components, it can be cut off from one single support. If you only have one mode to move that freight, any industry change or a drop in partnership can cut off component movement, weakening the web as a whole.

Just as you have to think about diversifying the web for strength, distributors also need to build an equally flexible transportation system. The best systems are set up with the ability to assign preferred mode and carrier to any order at any location, ensuring the best possible contract rates.

Managing the supply web beyond your base

What does it take for a distributor to build a robust supply web? It starts with network modeling and mapping. Companies that o create multiple models to react across scenarios have more flexibility in both operations and costs. A mapping exercise allows organizations to identify best-in-class carriers and consolidation strategies that not only improve efficiency, but implement future solutions faster.

Network mapping also allows distributors to identify efficiencies they may not see within their web. As more consumers stay home and rely on e-commerce for their daily needs, a network model can identify cost-saving direct-to-consumer strategies, including distribution center fulfillment and drop-shipping from partners to reduce waste.

Creating the right network builds businesses that can outlast any disruption and continue to serve customers with the best possible solutions. How can we help you create the best network map and evolve into a supply web? Contact us today.

Disruption – Not Necessity – Is the Mother of Supply Chain Improvement

However, the novel Coronavirus outbreak created major supply chain disruption which affects all companies and industries. In the interest of safety, a whole new set of rules govern how we do business. Some of those trends coming out of this include:

  • Rules on social distancing, mandating how many people can be in a space at a given time.
  • Truck and delivery driver safety suggestions for transporting goods from the warehouse to the end customer.
  • A spike in e-commerce orders and home deliveries across industries, including grocery and consumer packaged goods.

These changes have one thing in common: They all rely on a strong and resilient supply chain. Without a constant flow of inbound components and finished goods, they can’t go from origin to the warehouse, and then outbound to the end customer.

This is why it’s critical to master your supply chain now. Understanding where components come in, measuring key performance indicators, and cutting out waste is the only way companies can get the insight they need to drive future invention from supply chain disruption.

Excelling During a Period of Infrastructure-Led Disruption

When the novel Coronavirus began spreading in the United States, we saw a lot of supply chain disruption. The truth is we may not be done. A recent Gartner analysis suggests we could see three different scenarios play out as the country re-opens for business: a short-term disruption leading to a quick recovery, a long-term disruption leading to protracted recovery, or a resurgence of COVID-19 cases leading to one of the two other scenarios.

Because we don’t know which recovery to expect, your supply chain leaders need to understand infrastructure and operations weaknesses and opportunities now. There are many different ways to do this, including supply chain mapping and modeling, identifying new supply partners closer to your facility, and identifying the best transportation networks to achieve your customer service goals.

So why invest in technology and analytics today? Historically speaking, companies who invest in their processes and people during disruption experience a faster recovery than those who don’t. More importantly, a disruption allows you to view your operational plans candidly and determine how the combination of leadership and talent, technology, business mission and values, and process framework can improve your supply chain.

As we see from the Gartner figure above, infrastructure-led disruption can directly lead to new innovations within your supply chain and network plans, but only to the extent your talent drives them. Thus, disruption – not necessity – is truly the mother of invention.

Where Do We Start Driving Infrastructure-Led Disruption?

The first step to creating long-lasting change starts inside your company. Now is the perfect time to start having those conversations because leadership teams were talking about making lasting change well before COVID-19 became part of the common vernacular.

2019 survey of boards of directors by Gartner revealed those leaders anticipated a complete transformations of their infrastructure and operations by 2025, with the core goals being improving maturity, driving quality and creating more agile supply chains. The current situation gives leadership teams two options: either attempt to improve within the legacy framework, or use infrastructure-led disruption as an impetus to improve operations.

Trying to improve a legacy model may not work for several reasons. If you can’t answer these questions, any attempt to repair a broken system could create more problems:

Going through a supply network analysis will not only answer these three questions, but give you the analytics you need to make better customer-focused decisions. By going through the exercise and continually improving infrastructure and operations through regular analysis, your team can drive true cost savings and customer experience improvement, leading to improved service and earning more orders over time.

Start Your Infrastructure-Led Disruption Today

Your leaders don’t need to approach infrastructure-led disruption on their own. Transportation Insight has the tools and technology your team needs to drive innovation, combined with the insight into thousands of supply chains across industries. With our expertise, our teams can help you understand where your supply chain is falling short, and where you can drive improvement both through disruption and into recovery.

Our team works through the lens of your business perspective, helping you unlock value from your supply chain and creating efficiencies into the future. Contact us today, and let us help you use disruption a tool to drive long-lasting success.

How E-Commerce is Driving the Supply Web Evolution

Many aspects of our life may be changed forever. Air travel shut down virtually overnight, with no indication on when we can fly to see friends and loved ones across the country. It’s not uncommon to see retail store shelves barren of the cleaning items we take for granted, leaving some to seek these necessities through less-traditional channels. Additionally, when shoppers do visit mega-stores, their carts are usually filled with groceries instead of household items, appliances and clothing.

Will isolation and social distancing cause a permanent change in shopping behavior? Will e-commerce become the new way Americans get their vital needs? A shift in consumer trends could have serious implications for retailers, their entire supply network and the overarching logistics strategies applied around the planet.

Why do companies need to pay attention to the spike in e-commerce orders?

With federal and state guidelines suggesting that everyone stay at home, online shopping increased in popularity. The online demand is so significant that Amazon is conditioning customers to not shop excessively on its platform. Meanwhile, e-tailers are overwhelmed with requests. We’re also seeing this trend among our customers as well. One customer – a chain of home improvement stores – recently asked for our help managing a skyrocketing e-commerce business that required an adjustment in their freight and parcel strategy.

The end consumer may see nothing wrong with this change. Online shopping is more convenient, requires less effort, and happens either over the phone or online. But for retailers and distributors, a growing e-commerce demand creates many issues on the back end.

While the growth of e-commerce has been the big story over the past decade, it still represents less than 20 percent of all retail sales overall. If that volume doubles, could your business sustainably make money?

Our research tells us that the largest companies are spending more time focusing on e-commerce profitability. Direct order fulfillment costs can easily exceed 25 percent of sales, which creates a precarious balance for companies offering direct-to-consumer service. Slim profit margins in brick-and-mortar retail add complexity. In the best situations, in-store sales only yields a profit margin of three percent.

If your e-commerce channels aren’t optimized for success, growing the channel is expensive at best, and unsustainable at its worst.

An inconvenient truth: environmental concerns from e-commerce

Another issue to consider is the environmental impact of online shopping. Fulfilling digital orders requires additional resources, including packing materials, corrugated boxes, additional fulfillment centers and waste handling. On top of that are emissions from trucks making last-mile deliveries and returns to homes across the United States.

All of the packaging and air pollutants have to go somewhere. While corrugated boxes and most packaging can be recycled, there’s never a full recovery of those materials. Although emissions can be reduced, we’re a long way from net-zero emissions globally.

These two challenges illustrate why the supply chain needs to change. We are no longer in a world where the supply network is one straight line from source to consumer. Instead, retailers and distributors need to work together to discover new ways to manage commerce through a supply web.

E-commerce as a catalyst to the supply web

As our world looks to e-commerce as a potentially permanent shopping solution, now is the time to start the transformation from a supply chain to a supply web. There are many different reasons why the supply web provides better solutions for both your company, distribution points and end consumers.

A supply chain suggests freight moves in one direction: from the source to the distribution center and then out to the retailer or customer. However, this model may create several unnecessary steps. For instance: if a customer makes an online order, the supply chain implies the product goes from its source point to the consumer. Under a supply web model, the order can go from the retailer or manufacturer to the closest distributor for fulfillment. The customer gets their order faster from the closest point, without the need for excessive shipping or re-packaging.

One of our clients in the construction industry recently transformed their supply chain into a web model. Instead of taking everything in at one center and re-distributing through smaller fulfillment centers, freight began moving from overseas into two different distribution centers that fed other centers in their network. This gain in shipping efficiency ensured customers could get orders in days instead of weeks.

Measuring the efficiency of the supply web is critical to success. Transportation Insight has tools which enable your e-commerce team to understand key performance indicators and drive success. Our margin management tool enables shippers to determine profitability by both dimension and SKU. It quickly identifies cost-killing areas of your e-commerce offering such as SKUs that drive split-package orders, excessive freight expense, high cube, high service expense or long zones.

The second key tool available through Transportation Insight is our supply chain and value stream mapping expertise. We develop a graphical representation of where your items, information and finances are coming from and going to. By mapping out your flows in this manner, we identify gaps and risks that can be mitigated through actionable plans and network optimization.

The significant profitability and sustainability challenges of e-commerce fulfillment are here to stay. By transitioning to a supply web model, your company can not only find better routes to profitability online, but also drive long-term, sustainable results.

Parcel Volume Caps Emerge Amid Retail Slump

Bound for a stay-at-home society quarantined under COVID-19 guidelines, a whipsaw in residential delivery volume is a burden on small package carriers like FedEx and UPS which are accustomed to commercial service driving operational revenue.

In response to the dynamics of the current norm, service providers across the e-commerce supply chain are taking unprecedented steps to control their own financial performance while still delivering a satisfying shopping and delivery experience.

Effects of the COVID-19 disruption are still emerging, even as organizations work to pivot their processes to meet the needs of a post-pandemic supply chain. Shippers that understand how shifts in consumer demands manifest across small package networks can pivot their supply chain strategy to control costs, avoid risk and capitalize on opportunity.

Retail Sales Plunge During April

U.S. retail sales dropped 16.4 percent during April, the largest drop of its kind since 1992. The April decline doubled the previous record for one-month tumble in the sales indicator – set just a month prior during March’s 8.3 percent record drop.

While the U.S. Department of Commerce reports the sharpest dips for clothing, electronics and furniture stores, society’s continued migration toward the online sales platform accelerates.

Month over month, the online segment posted 8.4 percent growth in April as Americans shopped from home for an expanding diversity of products, from groceries to office supplies. Compared to last year, the changes in consumer behavior accelerated by COVID-19 has increased e-commerce sales 21.6 percent.

DHL, which provides local e-commerce delivery in major U.S. markets, reported volume increases of 36 percent compared to February numbers. Increase is sharpest in the Northeast, according to a release that also stated that an increase in e-commerce orders over the past five weeks has pushed DHL’s parcel volume to peak season levels.

As U.S. businesses begin reopening their doors, monitoring the evolution of consumer buying habits after COVID-19 will be an important piece in maintaining an optimal parcel shipping strategy. Will the U.S. embrace on-site shopping again, particularly in malls and other brick-and-mortar establishments? How much of your retail sales will continue to come through the e-commerce channel?

Whether your organization is an e-commerce legacy or you’re seizing new market share, serving online customers requires an expert understanding of the service implications on transportation costs. In the hurry to serve peaking customer demand, it is easy to lose sight of profitability at the order and item-level. Lacking that visibility could prevent you from capitalizing in growth areas emerging in the same environment as broader economic changes.

FedEx Limits Parcel Shipments for Kohl’s and Others

FedEx limited the number of items that about two dozen other retailers can ship from certain locations. Applied in certain geographies where volume is heaviest, the move comes as retailers across the nation have increasingly begin using closed storefronts to fulfill online orders.

For retailers, this alternative fulfillment strategy facilitates sales even when other conditions pre-empt an on-site purchase. When fulfillment alternatives are included in supply chain contingency planning, retailers can quickly pivot their network to serve emerging customer segments or specific geographies, and still maintain optimal transportation cost.

“These customers have seen significant volume growth since the spread of Covid-19,” FedEx said last week in a notice to its Ground workers reviewed by The Wall Street Journal. “In a time of already high volume growth, capping the number of packages to be picked up at these locations will limit any negative impacts to the FedEx Ground network.”

While retailers are able to keep inventory moving off shelves though online fulfillment, the volume increases in certain parts of the country have challenged FedEx facilities that were not prepared to handle a rapid increase. This is most prevalent along the East Coast and West Coast, particularly the Pacific Northwest, where the COVID-19 impacted has persisted the longest.

Customers initially affected by FedEx shipping limitations included: Kohl’s, Belk Inc., Neiman Marcus Group Inc. and Nordstrom Inc., retailers like Abercrombie & Fitch Co., Bed Bath & Beyond Inc., Hobby Lobby Stores Inc. and Eddie Bauer, and other sellers like Groupon Inc. and Young Living Essential Oils LLC. The limits varied at each location.

In an environment when parcel carriers are limiting volumes, shippers can improve critical business decision making through on-demand access to dashboards that reveal real-time access to your order volume, historical transportation transactions, carrier volume requirements and accessorial trends. Increased visibility to these and other Key Performance Indicators can deliver improved cost management and increased awareness of cost-service trade-offs.

Supply Chain Master Can Map, Mitigate Risk

Organizations that are re-calibrating their supply networks to address the weaknesses and opportunities emerging during COVID-19 can benefit significantly from the support of a supply chain expert.

Our unrivalled expertise gained across thousands of supply chains allows us to offer guidance when the way forward is unclear. We’re currently helping hundreds of clients assess their small package program to make sure they have the network in place to meet e-commerce delivery demand today and tomorrow. Deploying a best-in-class technology platform to gather, manage and analyze your parcel data, we provide evidence to support your go-forward strategies.

Leveraging this technology alongside deep parcel industry knowledge and multi-modal expertise, shippers can effectively identify any existing supply chain gaps impact performance and cost management.

To learn more about how we can map your strategies for e-commerce success in the face of supply chain disruption, talk to an expert today.

From Micro to Macro: The Effect of Social Distancing on the Supply Chain

In restaurants, they are moving tables and putting a hard maximum on the number of people allowed inside. Although the return of patrons generates badly needed revenue, moving tables apart means less diners, resulting in less money coming in the door. In order to maintain a peak level of performance, those restaurants need to turn tables and customers faster to achieve the same amount of revenue.

A similar concept will be introduced into the supply chain, as factories, warehouses and distribution centers come back online. Employees will need to consistently stay six feet apart, forcing managers to figure out how to keep up productivity while adhering to guidelines. Are you prepared for the change?

The Newest Constraint in the Supply Chain: Social Distancing

There are several supply chain constraints that most companies can plan around. These include capacity, throughput, and on occasion, emissions.

Using an Extended LEAN approach, managers and facilities are encouraged to reduce the amount of time and distance per process. This reduces waste throughout the production line, improving efficiency and ultimately providing more output with the resources already in place.

But due to social distancing, there’s a new constraint supply chain managers must deal with: the maximum amount of physical distance you can remove from production. Some of these situations are easier to plan for: Truck drivers can stay in their cabs, while using e-signatures for receipts.

Other conditions are going to be much more difficult to apply: In the interest of keeping employees healthy, they must consistently stay six feet apart. Companies now have to determine what that means for receiving, production and shipping. If employees have to maintain a safe distance, how does that affect their critical daily operations? Some companies say they are experiencing a 40 percent decrease in capacity due to the social distancing protocols.

Social Distancing Extends From the Facility and into the Network

The physical plant isn’t the only stakeholder affected by social distancing. The impact of lost production and capacity also extends to your logistics network.

If your output is slower due to social distancing, it can have a ripple effect on everything from loading trucks and time-in-transit to service guarantees. Capacity decreases mean it takes more time to load trucks and impedes trucks from moving freight from point-to-point. That cuts into your bottom line.

From there, the issues fall like dominoes. The late truck has more time on the dock, so your freight is arrives at its destination later. When it does, there could be a delivery failure due to a closed dock or a receiver bound by rules prohibiting deliveries outside a set window. Additionally, freight bills could increase because transportation providers are unwilling to wait a long time for freight loading and unloading. Your carrier partners might not be able to meet service times because of your approach to social distancing.

There are ways to approach this that will help your business move forward. Once the impact to individual facilities is determined, it’s possible to reconfigure your logistics network to meet the current capacity needs. Some of the options your team can explore include:

  • Do you need to reduce inbound material shipments until capacity can increase?
  • Should you adjust your outbound schedule to ensure you can maximize transit lanes?
  • Can your team or warehouse be more efficient in managing inbound and outbound freight?

Having a Partner to Help You Adjust for Social Distancing

It’s critically important to have a partner in your corner that not only understands how to configure logistics operations using tried and true techniques, but how to translate them to the broader supply network to balance cost, service and risk. While technology plays a key part into this transformation, these solutions need to be approached with a holistic solution in mind.

As we reopen facilities and plan for the “new normal” for the foreseeable future, it’s important to solve these problems now. Because we have no idea when social distancing practices will ease, the problems you face now won’t go away on their own. Instead, solving them will help you become a “shipper of choice” as activity ramps up. You can also maintain profitability and positively plan for the future.

In this race, Transportation Insight is your complete partner in success. Our technology tools allow you to decide between the best carriers and networking options.We can also help you drive success through supply chain mapping, optimization, and applied Extended LEAN strategies with social distancing in mind. Because we’ve worked through thousands of supply chains with hundreds of companies across industries, we know how to apply the best practices and wisdom around your current and future strategies.

Partnership matters – and Transportation Insight is prepared to help you now and well into the future. Contact us today to get started with a consultation on how your facility can manage productivity despite social distancing.

Serve Customers With a Personalized Supply Chain

Society’s sudden move to a shelter-in-place and work-from-home environment dramatically affected buying behaviors, and, in the process, expectations increased on companies responding to demand.

Organizations equipped with an agile, customer-centric supply chain network are capitalizing by evolving their service to the current environment. Distributors are re-locating inventory to meet emergent demand for products needed to support COVID-19 response in specific geographies. Retailers have kept Americans fed and working by adjusting online fulfillment strategies to utilize brick-and-mortar curbside pick-up or alternate home delivery methods. Manufacturers are drop-shipping products directly to homes to meet newfound interests in exercise.

As customer preferences carry even greater weight in modern supply network planning, the organizations with a holistic network view will deliver the most cost-effective shipping strategies that empower choice-conscious clients.

Customers Take Control

In 2016, parcel and express delivery volume bypassed railroads to become the second-largest transportation sector behind motor freight, according to the Council of Supply Chain Management Professionals’ 28th Annual State of Logistics Report. With that leap, consumers seized control of logistics spending and “supply chain as we’ve known it” changed forever.

In the past, traditional retail strategies put the brand in control, using a push-based system with consumers at the end of the supply chain. Throughout the rest of the supply network, past experience drove inventory decisions, and product was pushed to stores based on what consumers “should” like and purchase.

Ongoing expansion of e-commerce has increasingly shifted decision-making for many organizations toward the customer experience. With the outbreak of COVID-19, historical buying behaviors are no longer valid and the consumer is in charge now more than ever. Companies that didn’t have a consumer-centric approach are adapting to survive.

Adopting a consumer-centric approach isn’t automatic, however. It requires thorough understanding of your customers’ preferences from point of purchase to final delivery.

Consumer Behaviors Changing Forever

While society has steadily shifted more buying to online platforms, COVID-19 sent more people online to buy a broader array of products than ever before.

In March, online grocery sales hit an all-time high. And in April, online grocery retailers topped that record by about 37%, according to survey data from grocery consultant Brick Meets Click (BMC) and research firm Symphony RetailAI.

Driving the sales growth was a 33.3% increase in the total number of orders: 62.5 million in April vs. 46.9 million in March. Spending per order grew more modestly, as did the number of online grocery shoppers.

Retailers like Wal-Mart and Target are reporting record online sales growth as well, giving further evidence that more buyers are turning to e-commerce sales channels for everyday needs. As the convenience of online buying appeals to a broader population, the need for diverse delivery options will increase, just as it has since parcel transportation took the No. 2 spot in logistics spend in 2016.

Effectively fulfilling those customer delivery demands requires a transportation strategy supported by multi-modal expertise and technology. Transportation management systems that integrate vital transportation information from freight and parcel service providers, along with historical shipping data, can offer a strong basis for decisions that improve customer service and protect bottom line profitability.

A Case for a Personalized Supply Chain

Organizations that can create a supply chain personalized to the expectations and behaviors of their customers can achieve greater brand loyalty. By allowing customers more control over their delivery experience, brands can create greater loyalty and improve customer retention.

At the same time, the shippers that establish a nimble network can rapidly respond to fluctuations in supply and demand and capitalize on opportunities for growth.

To learn more about creating a truly personalized supply chain that serves your customers’ needs, read Transportation Insight’s Guide to Mastering Your Supply Chain.

In it, we share more data about emerging customer trends as well as strategies and tactics to create a stronger supply chain that ultimately drives growth. Read it today to evolve your supply chain to meet your customers changing fulfillment and delivery needs.

Indirect Supply Management Matters in Today’s Environment

With certain supplies harder and more expensive to secure, how can manufacturers ensure operations continue on a level playing field? The answer lies in a company’s approach to indirect supply management.

Challenges Faced by MRO and Office Supplies Due to COVID-19

When you think about the MRO supply chain, it almost seems simple. Replacement parts and consumable supplies come up the chain and into your storage. When a piece needs to be replaced, it comes out of currently held stock. To ensure stock doesn’t run low, warehouse managers keep a recurring order open to ensure replacement and consumable items are available.

However, the COVID-19 pandemic changed everything. Many of the pieces we take for granted, like personal protective equipment, were immediately redirected to first responders who needed it more. Additionally, normal supply chains were disrupted because of shutdowns in China and companies utilizing a work-from-home model to prevent the spread of novel Coronavirus.

Protective equipment and replacement parts are only two of the potential shortages MRO operations faced by buyers of indirect supplies. The slowdown also extends to regular office supplies. As more people are forced to work from home, the demand for copier paper is dropping. As a result, two of the major paper producers in the United States have temporarily shut down at least three plants which produced office paper for printers and copy machines.

Although it appears that the supply chain may be in a crisis, your business doesn’t have to navigate these changes alone. By tapping into a group purchasing environment, sourcing MRO and office supplies doesn’t have to be an excruciating process.

Why Indirect Supply Management is a Critical Part of Your Business

There’s a lot of power in group purchasing. Groups who regularly order recurring supplies are able to get volume discounts and oftentimes improved availability for even the most in-demand supplies.

For example: A group of our indirect sourcing customers reached out to us to help secure face masks for their regular operations in breathing hazard environments, such as painting and other high-particle- producing environments. Our team quickly got to work on the request, and was able to find a source of high-quality face masks. After ensuring their quality control was to the clients’ standards, we secured orders at a competitive price with a quick delivery window, ensuring our clients’ businesses could continue to operate uninterrupted.

Indirect supply management is a tool available to your team to find the essential items you need at reasonable prices. By working with a partner in this space, your company can consolidate their overall supply space and form strategic partnerships on items they will regularly need. What makes our partnerships unique is that we can put it all together in a group purchasing model, which allows us to drive savings for our partners.

When you combine indirect supply management with other disciplines, like LEAN management, your company can actualize savings in multiple ways. By focusing on reducing waste and improving efficiency, the supplies your company relies on can be utilized smarter. While this drives cost savings at the core, it also gives your team a mindset of constant improvement, which benefits your entire organization through new thinking and problem solving skills.

Get Support from the Leaders in Indirect Supply Management

No matter how you are sourcing your products today, it can be improved through consolidation and smart partnerships. As you set your plans towards the next phase of your business, now is the time to look at your accounts payable data and get a spend analysis to map out how you can get even greater efficiency around your indirect materials operation.

Transportation Insight is your partner in driving success now and into the future. Let’s start a conversation today about how we can drive savings for your company together.

Examine Indirect Spend to Drive COVID-19 Cost Savings

The spread of the COVID-19 virus disrupts transportation networks, products paths and consumer demands that drive your performance. The problems that threaten business viability merit priority response.

In the current Coronavirus climate, the supplies for your everyday functions also need attention. An expert partner who can take over management of complex indirect spend areas can provide critical cost savings, which you can rapidly deploy in other areas of your business.

A reliable sourcing resource can also leverage long-term relationships and collective buying power to help make sure you have the Maintenance, Repair and Operation (MRO) items, office products, and packaging materials required to support your operations.

Here’s some of the latest marketplace activities that could affect costs in your indirect spend categories and challenge your ability to secure vital supplies.

MRO Items for Health, Safety in Short Supply

Most organizations that support MRO procurement are operating distribution centers and warehouses as usual, with added attention to necessary safety precautions at these work sites. Products are still moving out facility doors. However, distributors are placing priority on serving needs for specific “essential” industries, such as healthcare providers and first responders.

That’s a good business decision for these supplier partners, particularly as they face short supplies for personal protection equipment. Protective gloves, masks, coverall suits and similar products are all in back-order status.

Although healthcare facilities get priority service for these items, if you have needs, go ahead and place orders with your supply partners to make sure you are in the queue when supplies become available.

To expedite MRO service, many suppliers are shipping products directly to production facilities. This can expedite the process of getting needed products to end users. Make sure to explore direct shipping options from your supplier partners.

Social Distancing Affects Vendor Managed MRO Inventory Process

One of the biggest impacts of the novel Coronavirus in the MRO space is in the area of vendor managed inventory. State and federal directives are limiting contact restrict suppliers’ ability to complete on-site visits to monitor MRO supply needs.

Vendors provide an important resource in making sure you manage an optimal supply of MRO items. Too much product can consume valuable operational and storage space. Too few resources can threaten a shutdown at critical times.

To make sure their clients are able to continue monitoring their MRO needs, many suppliers are providing hand-held scanners and creating a customer-managed inventory environment. This keeps products moving, but it is important to monitor activity. Supply inventory can quickly get out of balance and create unnecessary costs.

Available Office and Facility Supplies Still Moving

Distribution of office and facility supply products continues as usual, but many of the same products in short supply on grocery store shelves are also limited in commercial and industrial settings. Paper products, disinfectant, hand sanitizer and similar products get priority delivery to healthcare operations, leaving a short supply which puts limits on available resources.

In some geographical regions, the desktop delivery option is discontinued, and the typical next day delivery guarantee is suspended. While there’s no sign of a supply crisis for the majority of these items, it may become harder to get some of the more common office and facility supply items as more states adapt to shelter-in-place environments..

When you are dealing with your supplier partners, a little bit of patience can go a long way. Like many of us, they are working in remote environments. In some cases, companies providing essential workplace supplies employ thousands of people unaccustomed to working outside of the office. As they shift remote, some systems aren’t engineered to handle additional workflow yet.

Rest assured, your supply partner is working to meet your needs. When you seek support, response may be delayed, but having patience with your trusted partner can reap benefits today and tomorrow.

If you encounter supply changes, we can leverage our power as a Group Purchasing Organization to tap additional supply resources. In the world of indirect sourcing, strategic partnerships not only support a network of options, but they also can help realize significant cost savings.

E-Commerce Drives Boom in Cardboard, Packaging

Many manufacturers and distributors of packaging are deemed essential because they are supporting medical supplies, pharmaceuticals, energy generation, and food and beverages. Increasingly, operations not supporting essential end uses are production reduction or shutdown.

Corrugate facilities are running at full capacity to meet a demand spike driven by online ordering. One key area to watch in this aspect of packaging is linerboard prices. Right now, those prices are stable after a slight decrease in January. Linerboard pricing will deserve a close eye over the next few months as old corrugated container (OCC) prices rise and forecast demand increases.

For flexible packaging products like polybags, stretch film, poly sheeting, etc., prices continue to decline due to a decrease in global oil prices. With many e-commerce shipments relying on these materials, it will still be important to monitor not just cost, but ability to access supply.

Rely on Strategic Sourcing, Relationships, Patience to Weather the Storm

When it comes to indirect materials that support operational process, many organizations make purchases on a tactical basis. Now, when uncertainty clouds the market place, a partner that deploys a strategic mindset to indirect spend can be a vital resource.

Transportation Insight has developed strategic partnerships with suppliers. In communicating with our supplier partners more and more, we’re learning that MRO, office supply and packaging providers are supporting the clients that work well with them. When you’ve built relationships over decades, as we have, achieving win-win scenarios for everyone involved becomes second nature.

Let us leverage the partnerships we’ve created to help you get indirect spend reductions, and, more importantly, access reliable supplier partners that you can depend on during times like these.

Right now, many organizations are thinking about short-term survival. As you prepare for business after the COVID-19 pandemic recedes, instead of revisiting old strategies, consider opportunities that deliver better service at improved cost.

Let us show you a more strategic way of addressing your indirect spend management. To understand how much you can start saving today, schedule an indirect spend assessment. We often achieve double-digit savings for our clients, and we may be able to help you drive cost out of your supply chain.