What We’ve Learned About Supply Chain
The COVID-19 pandemic has shown that the global supply chain is significantly fragile. Initially, the impacts of the virus led to manufacturing halts in China, which some consider the “world’s factory”. Subsequently, the decline in large purchases resulted in more layoffs within the supply chain. Academics state that it is a vicious cycle caused by negative shocks in the supply chain that could lead to less demand.
Meanwhile, more purchases are happening online, and the shift to e-commerce is not far off. According to UPS, total volume in local networks is still aligned with peak holiday movement. Home deliveries have increased while commercial deliveries have decreased. It makes sense to expect a bit of sanitization when businesses reopen. However, the underlying trend towards e-commerce remains intact.
In a post-COVID world, diversifying the supply chain and its resilience will become important strategic goals.
For this reason, we recently gathered experts from UPS, Deloitte, 6 River Systems, and Shopify to unveil industry insights and best practices to help you adapt your supply chain to the reopening of global economies. If you missed it, watch our webinar recording.
What We’ve Learned About Logistics
Businesses are reopening, but the pandemic is not over yet. In fact, a resurgence of the virus could cause us to backtrack two steps. “We may dip in and out of this pandemic repeatedly for a while,” says Sean Flaherty, Vice President of Retail and E-commerce at UPS.
Use this slide to anticipate what may happen next if the countries you sell in experience a resurgence of the virus and shutdowns again:
Flaherty mentions that China is cautiously reopening and manufacturing is slowly returning, but consumer spending is lagging, creating logistical imbalances and significant impacts on shipping capacity and pricing.
What you should expect for shipping and travel is a more balanced supply and demand with China’s reopening and decreasing demand in Europe and the U.S. Expect air freight rates to remain high until passenger traffic recovers and belly capacity increases. With passenger flights being canceled, there’s no place for goods, which are often transported in the bellies of passenger planes, to go. Since February, much of this volume has shifted to trucks or planes designed for transporting cargo.
The Global Business Travel Association indicates that business travel will resume in the third quarter, followed by intercontinental air travel, according to the International Air Transport Association, in the fourth quarter. While fuel costs are at historic lows and providing headwinds, maritime shipping costs may rise over time as demand for ship capacity (and shipping containers) increases as an alternative means of storing oil at sea until it can be sold later at higher prices.
What We’ve Learned About Trade Infrastructure
Infrastructure extends beyond warehouses, scanners, and printers necessary for order fulfillment. Jerome Dubois, Vice President at 6 River Systems, also wants organizations to consider digital infrastructure (data and networks) and human infrastructure.
The impact of the COVID-19 pandemic on infrastructure, Shift 1: Change in Order Profiles: The supply chain has historically been built around moving goods on pallets to big-box stores. E-commerce requires smaller order profiles. As demand shifted online, companies around the globe quickly realized that the fulfillment infrastructure couldn’t keep up with demand. Dubois recommends investing in several small batches of inventory located close to the consumer. The impact of the COVID-19 pandemic on infrastructure, Shift 2: The effect of labor constraints on service levels: With workforce shortages already prevalent and workload increasing, Dubois states that companies are finding it challenging to fulfill their execution promises. In some cases, shipping within two days has turned into shipping within two weeks. Dubois recommends introducing technology and tweaking the supply chain to increase the efficiency and productivity of the current workforce. Store replenishment networks should be transformed into direct-to-consumer (DTC) fulfillment networks.
Evolution
Segmentation
The store experience is changing to include ways that do not require direct contact. Merchants must prepare their businesses to take advantage of the shift to e-commerce. Dubois presents a slide outlining what merchants need to succeed online:
Best Practices for Commerce Infrastructure
Inbound Logistics
Identify the systems necessary to acquire, track, and manage raw materials. Organizations should be able to manage suppliers and know when inventory is received and ready for online sale so that fulfillment promises can be met.
Outbound Logistics
You should have the ability to accurately forecast demand. Last-mile delivery should be accounted for in your pricing strategy to understand the average demand value needed to provide appropriate (free) shipping thresholds to maintain healthy margins. Determine who is responsible (you or a third party) for fulfillment, including return logistics. Ensure you (or a third party) have execution options such as curbside pickup or click and collect.
Platform Technology
Owning customer data means managing it to extract actionable insights. Are you building or buying this technology? Besides cost, consider that as you scale, your technology will need to grow and evolve with you.
To hear more ideas from leading minds in logistics, watch the recording of the best practices for supply chain and logistics management above.
}
.lwrp .lwrp-list-item img{
max-width: 100%;
height: auto;
object-fit: cover;
aspect-ratio: 1 / 1;
}
.lwrp .lwrp-list-item.lwrp-empty-list-item{
background: initial !important;
}
.lwrp .lwrp-list-item .lwrp-list-link .lwrp-list-link-title-text,
.lwrp .lwrp-list-item .lwrp-list-no-posts-message{
}@media screen and (max-width: 480px) {
.lwrp.link-whisper-related-posts{
}
.lwrp .lwrp-title{
}.lwrp .lwrp-description{
}
.lwrp .lwrp-list-multi-container{
flex-direction: column;
}
.lwrp .lwrp-list-multi-container ul.lwrp-list{
margin-top: 0px;
margin-bottom: 0px;
padding-top: 0px;
padding-bottom: 0px;
}
.lwrp .lwrp-list-double,
.lwrp .lwrp-list-triple{
width: 100%;
}
.lwrp .lwrp-list-row-container{
justify-content: initial;
flex-direction: column;
}
.lwrp .lwrp-list-row-container .lwrp-list-item{
width: 100%;
}
.lwrp .lwrp-list-item:not(.lwrp-no-posts-message-item){
}
.lwrp .lwrp-list-item .lwrp-list-link .lwrp-list-link-title-text,
.lwrp .lwrp-list-item .lwrp-list-no-posts-message{
};
}
Leave a Reply