Chairman of supply chain risk data and analytics company Resilience360 outlines steps to responding to coronavirus outbreak at retail supply chain conference.
With outbreaks now reported in Italy, Iran, and South Korea as well as in China, coronavirus, or covid-19, is continuing to trouble many companies' global supply chains. Speaking today at the Retail Industry Leaders Association (RILA) Link 2020 supply chain conference, David Shillingford, chairman of the data and analytics company Resilience360,outlined possible near- and long-term impacts and best practices going forward.
Speaking before a packed room of approximately 175 supply chain professionals, Shillingford said that the potential global economic impact of the virus will be significant. The SARS (severe acute respiratory syndrome) outbreak in China in 2002, for example, had a $40 billion impact on the economy. Shillingford believes that covid-19 will have an even greater impact as the role China plays in the global economy has grown from 4% in 2002 to 16% today. Bankruptcies caused by the outbreak have already happened and will continue to happen, he says.
Demand patterns will be significantly affected by the virus, warns Shillingford. There has been a strong drop off in Chinese consumer demand, particularly for luxury goods, since the outbreak. At the same time, there has been a dramatic shift in online purchases of consumer goods. For example, the purchase of home hygiene goods online has increased by 150 percent in China.
Meanwhile, factory, port, and border crossing closures have taken a toll on the supply chain side of the equation. Even companies that do not have manufacturing facilities in China are feeling the disruptive effects as raw materials that they rely on are trapped in China. For example, Shillingford estimates that 90 percent of factories in Bangledash rely on raw materials from China.
One of the most challenging aspects to managing the outbreak has been the uncertainty. For example, some factories in China that had been on lockdown due to quarantines have been opened again as the virus is contained, and only to be then locked down again for failure to comply regulatory requirements. Furthermore, lockdowns and force majeure certifications that release companies from fulfilling a contractual duty due to an "act of god" are being handled at the local level, making them hard to track.
Shillingford advised attendees to be aware that other large socioeconomic factors may determine how well an area is able to respond and recover from the virus. For example, migrant workers make up a large proportion of the workforce in China. Many of these workers returned to their home region for the Lunar New Year and now are unable or unwilling to return. So even if a factory or port is open, there is a question of whether there is someone there who can do the work.
How to Respond
Shillingford provided some advice for how companies can respond the threat:
Talk to your procurement team: Your procurement team should have a firm idea of where your suppliers are and how they may be affected.
Map your supply chain: Knowing who and where your suppliers are (and who and where their supplier are) will help you better anticipate risks and disruptions.
Reach out to suppliers: If you haven't done so already, it's time to reach out to your suppliers and find out how they are being affected.
Seek out and use sources of demand data that go beyond historical demand, as demand will be very different from historical patterns.
Start embedding risk management practices in your supply chain operations. Shillingford sees a day when supply chain risk management departments and roles will no longer be separate from supply chain management but will be incorporated into the responsibilities and roles of all supply chain departments and positions.
Wash your hands. It sounds glib, but it's most important that you take care of yourself, your team, and your internal and external partners.
Finally, Shillingford encouraged attendees to collaborate not only with their supply chain partners but also competitors.
"There's a ton that can be done as a group," Shillingford said. "Of course, there is going to be competitive elements, but we are better when we work as an industry or multiple industries."
More information and advice on the coronavirus outbreak by Resilience360 can be found in the following reports:
J.B. Hunt President and CEO Shelley Simpson answers a question from the audience at the Tuesday afternoon keynote session at CSCMP's EDGE Conference. CSCMP President and CEO Mark Baxa listens attentively to her response.
Most of the time when CEOs present at an industry conference, they like to talk about their companies’ success stories. Not J.B. Hunt’s Shelley Simpson. Speaking today at the Council of Supply Chain Management Professionals’ (CSCMP) annual EDGE Conference, the trucking company’s president and CEO led with a story about a time that the company lost a major customer.
According to Simpson, the company had a customer of their dedicated contract business in 2001 that was consistently making late shipments with no lead time. “We were working like crazy to try to satisfy them, and lost their business,” Simpson said.
When the team at J.B. Hunt later met with the customer’s chief supply chain officer, they related all they had been doing for the company. “We told him that we were literally sitting our drivers and our trucks just for you, just to cover your shipments,” Simpson said. “And he said to us, ‘You never shared everything you were doing for us.’”
Out of that experience, came J.B. Hunt’s Customer Value Delivery framework. This framework, according to Simpson, provides a roadmap for creating value and anticipating customer needs.
Framework for Excellence
J.B. Hunt created the above framework to help them formulate better relationships with customers.
The framework consists of five steps:
Understand customer needs: It all starts, according to Simpson, with building a strong relationship with the customer and then using the information gained from those discussions to build a custom plan for the customer.
Deliver expectations: This step involves delivering on the promises made in that custom plan.
Measure results: J.B. Hunt believes that they are not done when freight makes it to the destination. They also need to measure how successful they were versus what the customer expected from them.
Communicate performance: This step involves a two-way exchange, where J.B. Hunt walks the customer through their performance and gets verbal agreement on whether or not they have met the customer’s needs.
Anticipate new value: Here J.B. Hunt looks at what they are hearing from their customer today and then uses that information to derive what the customer may be looking for in the future.
Simpson said the most important part of the process is the fourth step, communicating performance (perhaps reflecting the piece that went wrong in that initial failed customer relationship).
Not only can this framework be used to drive excellence in a company, but it can also be adapted as a model for driving personal excellence, Simpson said. Instead of understanding the customer needs, the process starts with understanding yourself: what your strengths and interests are. This understanding helps drive a personal development plan and personal goals for the year, which can be measured and assessed. For example, each year, Simpson gives herself a letter grade on each of her personal goals and communicates her assessment back to her boss. She has also found it helpful to anticipate where opportunities lie beyond what she is personally doing.
Confronted with the closed ports, most companies can either route their imports to standard East Coast destinations and wait for the strike to clear, or else re-route those containers to West Coast sites, incurring a three week delay for extra sailing time plus another week required to truck those goods back east, Ron said in an interview at the Council of Supply Chain Management Professionals (CSCMP)’s EDGE Conference in Nashville.
However, Uber Freight says its latest platform updates offer a series of mitigation options, including alternative routings, pre-booked allocation and volume during peak season, and providing daily visibility reports on shipments impacted by routings via U.S. east and gulf coast ports. And Ron said the company can also leverage its pool of some 2.3 million truck drivers who have downloaded its smartphone app, targeting them with freight hauling opportunities in the affected regions by pricing those loads “appropriately” through its surge-pricing model.
“If this [strike] continues a month, we will see severe disruptions,” Ron said. “So we can offer them alternatives. We say, if one door is closed, we can open another door? But even with that, there are no magic solutions.”
Turning around a failing warehouse operation demands a similar methodology to how emergency room doctors triage troubled patients at the hospital, a speaker said today in a session at the Council of Supply Chain Management Professionals (CSCMP)’s EDGE Conference in Nashville.
There are many reasons that a warehouse might start to miss its targets, such as a sudden volume increase or a new IT system implementation gone wrong, said Adri McCaskill, general manager for iPlan’s Warehouse Management business unit. But whatever the cause, the basic rescue strategy is the same: “Just like medicine, you do triage,” she said. “The most life-threatening problem we try to solve first. And only then, once we’ve stopped the bleeding, we can move on.”
In McCaskill’s comparison, just as a doctor might have to break some ribs through energetic CPR to get a patient’s heart beating again, a failing warehouse might need to recover by “breaking some ribs” in a business sense, such as making management changes or stock write-downs.
Once the business has made some stopgap solutions to “stop the bleeding,” it can proceed to a disciplined recovery, she said. And to reach their final goal, managers can use the classic tools of people, process, and technology to improve what she called the three most important key performance indicators (KPIs): on time in full (OTIF), inventory accuracy, and staff turnover.
CSCMP EDGE attendees gathered Tuesday afternoon for an update and outlook on the truckload (TL) market, which is on the upswing following the longest down cycle in recorded history. Kevin Adamik of RXO (formerly Coyote Logistics), offered an overview of truckload market cycles, highlighting major trends from the recent freight recession and providing an update on where the TL cycle is now.
EDGE 2024, sponsored by the Council of Supply Chain Management Professionals (CSCMP), is taking place this week in Nashville.
Citing data from the Coyote Curve index (which measures year-over-year changes in spot market rates) and other sources, Adamik outlined the dynamics of the TL market. He explained that the last cycle—which lasted from about 2019 to 2024—was longer than the typical three to four-year market cycle, marked by volatile conditions spurred by the Covid-19 pandemic. That cycle is behind us now, he said, adding that the market has reached equilibrium and is headed toward an inflationary environment.
Adamik also told attendees that he expects the new TL cycle to be marked by far less volatility, with a return to more typical conditions. And he offered a slate of supply and demand trends to note as the industry moves into the new cycle.
Supply trends include:
Carrier operating authorities are declining;
Employment in the trucking industry is declining;
Private fleets have expanded, but the expansion has stopped;
Truckload orders are falling.
Demand trends include:
Consumer spending is stable, but is still more service-centric and less goods-intensive;
After a steep decline, imports are on the rise;
Freight volumes have been sluggish but are showing signs of life.
CSCMP EDGE runs through Wednesday, October 2, at Nashville’s Gaylord Opryland Hotel & Resort.
The relationship between shippers and third-party logistics services providers (3PLs) is at the core of successful supply chain management—so getting that relationship right is vital. A panel of industry experts from both sides of the aisle weighed in on what it takes to create strong 3PL/shipper partnerships on day two of the CSCMP EDGE conference, being held this week in Nashville.
Trust, empathy, and transparency ranked high on the list of key elements required for success in all aspects of the partnership, but there are some specifics for each step of the journey. The panel recommended a handful of actions that should take place early on, including:
Establish relationships.
For 3PLs, understand and get to the heart of the shipper’s data.
Also for 3PLs: Understand the shipper’s reason for outsourcing to a 3PL, along with the shipper’s ultimate goals.
Understand company cultures and be sure they align.
Nurture long-term relationships with good communication.
For shippers, be transparent so that the 3PL fully understands your business.
And there are also some “non-negotiables” when it comes to managing the relationship:
3PLs must demonstrate their commitment to engaging with the shipper’s personnel.
3PLs must also demonstrate their commitment to process discipline, continuous improvement, and innovation.
Shippers should ensure that they understand the 3PL’s demonstrated implementation capabilities—ask to visit established clients.
Trust—which takes longer to establish than both sides may expect.
EDGE 2024 is sponsored by the Council of Supply Chain Management Professionals (CSCMP) and runs through Wednesday, October 2, at the Gaylord Opryland Resort & Convention Center in Nashville.