JThanks to the pandemic, supply chain issues affect everyone. Amid a shortage of truckers, rising energy costs, backlogs at ports, and more, it pays to understand what’s going on behind the scenes before the goods arrive at our doorstep.
“Supply chain” is a fancy term used to define the movement of products from where they are made to where they are consumed, says Jarrod Hunt, executive vice president of industrial services at Colliers.
To illustrate, Hunt gave an example of durum wheat grown in Montana for spaghetti noodles. This bushel of wheat can be transported thousands of miles, cleaned, ground into flour and turned into noodles before being routed to multiple warehouses for various distribution companies. All of this happens before it ends up on the grocery store shelf. In some cases, this wheat may even be transported to a foreign country for processing and returned to the United States as the final product.
Hunt says “supply chain” has become a standard term due to the temporal disruption of this highly sophisticated system of specialization, transportation and trade – a disruption primarily caused by the uncertainty of the Covid pandemic.
“Things such as the closure of factories and warehouses due to worker health concerns, the suspension of semiconductor orders for automotive and electronics factories, and the shifting of discrete manufacturing capabilities to other products such as PPE equipment have caused widespread and unforeseen choke points for various products,” Hunt said. The supply chain, he says, could be thought of as a finely tuned system of companies supplying other companies. Everyone is entirely dependent on the system working flawlessly, as it has for decades.
In another example from Hunt, pig farms in the Midwest were euthanizing herds and dumping them in pits early in the pandemic because no meat processing facilities were open to take the animals. Then, a few months later, pork reached historically high prices because the average production never reached the markets.
“There are hundreds of other examples, similar to the hog issue, that have created wild ‘super-cycles’ in markets that no economist or financier could model or react to with normal predictive expectations,” says Hunt. . We still face these problems today. From a global perspective, trying to catch up with what standard supply and demand balances have created significant imbalances in our transmission capacity and average generation efficiency, Hunt says.
Real Time and The Middle Mile
The pandemic, which has caused wild swings in markets and the way we live our lives, has accelerated the transition to growth or demise of specific industries or practices, Hunt says. Many companies have evolved very quickly for the sake of survival. Current concerns will eventually normalize and the panics will cease, but who will be left standing and what changes will they be forced to make?
Hunt’s advice is to plan for change but keep moving forward each day. “It’s important to have contingency plans in place and to quickly change the direction in which you are heading as new information becomes available,” he says. Keep in mind that what was a socially responsible policy a few months ago may no longer serve any purpose today. That situation could change again by next week, but common sense must be at the forefront, Hunt says.
In recent years, logistics companies have focused on the last mile of distribution, which is usually the most expensive part. The extra emphasis is on what happens before the last mile. Tackling the middle mile plays a vital role in optimizing deliveries throughout the supply chain and meeting consumer expectations.
The focus on the middle mile has now become the heart of multi-channel strategies. This requires full and partial loads to be delivered to multiple fulfillment centers. They use technology to plan additional routes and find the most efficient path between drop-off points.
Big or small, organizations can’t get bogged down in slow, methodical decision-making, Hunt says. The world has sped up dramatically with vast access to near instantaneous information. When we hear about success, it’s usually because an organization made decisions quickly and implemented the plan in real time.
Mid-mile optimization can be achieved by using technology to effectively reduce inefficient distribution. Companies have now implemented AI and machine learning to estimate arrival times. Logistics can be seen from a single screen with new technologies. Real-time tracking and visibility allows businesses to monitor what’s happening on every delivery at a granular level and proactively address them.
What was once a proven “just-in-time” inventory management strategy turned out to be a near-fatal weakness for some companies in April 2020, Hunt said. Planning safety stock and regularly having open and honest conversations with suppliers will be the new way of doing business.
With rising costs comes also occasional shortages of odd things like overhead doors or fasteners. “Who would have thought that overhead or garage doors and screws would ever be in short supply?” Hunt said. Many customers also told him that their goods were somewhere in a storage yard, but they couldn’t get the last leg of the scheduled delivery.
Closer to home
Hunt says true and lasting wealth as a nation comes from producing advanced goods, technologies and services that cannot be easily replicated. “Imagine what a wonderful situation we would be in today if all of our high-tech products and intellectual property were made here at home and protected from counterfeiting,” Hunt said. “Our foreign adversaries and those who would like to see the United States put at the rear of innovation would not be in the competitive position they find themselves in today.”
Hunt explains that it’s not an us versus them all the time philosophy. Yet we need to protect our innovation and the American Dream that allows people to take risks and end up with a big reward if they succeed. “The last 24 months have illustrated how connected we are to global players, and some are bad characters,” says Hunt. “We have to think about what the next 10, 20, 50 years will look like for us.”
Willem Sundblad is the CEO and co-founder of Oden Technologies, a New York-based advanced analytics platform that identifies opportunities for manufacturers to optimize production. In times of growing demand, supply chain crisis and labor shortages, improving efficiency is the best way to meet demand, says Sundblad.
The pandemic, explains Sundblad, has exposed the fragility of our global supply chain. Most companies have moved raw sourcing overseas to achieve better margins. “The pandemic shut down entire regions, causing backlogs,” he says. “There was a vicious cycle as shipping traffic increased, leading to raw material and manufacturing delays associated with increased consumer demand. Compounding pandemic-related safeguards further, the world has experienced weather-related disasters like the unexpected freeze in Texas and hurricanes, which have caused new backlogs.
Sundblad says we’re seeing US manufacturers bringing parts of their supply chains closer to production. They use technology to improve their visibility into their production to increase agility and resilience. Although no one can predict the pandemic, the rate of change is only growing. Companies that adapt quickly and embrace continuous improvement will win, he says.
According to Sundblad, the challenge creates an opportunity for growth. The supply chain crisis is forcing us to think differently, and it’s not as simple as hiring staff or buying equipment to scale up production. We need to become more efficient. By becoming more efficient, we empower and grow our workforce and develop the agility we need to stay competitive.
One of the best solutions Utahns can master is building the entire inner harbor. About the Utah Inland Port, Sundblad says the addition of new infrastructure to help improve US supply chain efficiencies is a good thing.
“Our nation’s maritime infrastructure is at full capacity, and the more we can relieve it of with creative new solutions, the better,” says Sundblad. “With a greater shift towards relocation or proximity and increasing domestic consumption, it seems very strategic to continue to invest in national shipping infrastructure to unlock bottlenecks. Utah is a center growing manufacturing facility and a strategic location to help bring great efficiency and relief to West Coast ports.
Hunt asserts that having an inland port in our market will only do great things for our trading environment. The ability to leverage more efficiency in the movement of goods in and out of the country and across the United States will benefit us. The additional infrastructure that will come from the Inner Harbor over the next 20 years will forever change the course of the Wasatch Front and our position in the global economy, Hunt said.
The inland port will also benefit small rural communities within a 200-300 mile radius of Salt Lake City, allowing small farming communities better access to global commodity trading markets, crucial for rural America to thrive. and be competitive. “Global transportation infrastructure and facilities have made America the most dynamic and envied economy in the world over the past century,” Sundblad said. “Continuing to focus on this and invest in these efficiencies will fuel this growth, this innovation and this dominance on the world stage.”