David Maloney, Editorial Director, CSCMP’s Supply Chain Quarterly 00:02
The Covid-19 pandemic showed us just how vulnerable supply chains are. Today we face many threats: shipping delays; a lack of workers; failing infrastructure; transportation rates that are out of control; cybersecurity threats; and of course, a worldwide pandemic that is still very much with us. But with each of these threats comes opportunities. Welcome to this limited podcast series from CSCMP’s Supply Chain Quarterly, the Top 10 Supply Chain Threats.
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Today, we focus on the threat of meeting holiday peaks. Here's your moderator for this segment, Supply Chain Quarterly’s executive editor, Susan Lacefield.
Susan Lacefield, Executive Editor, Supply Chain Quarterly 01:17
Thanks for joining us today. Today's podcast will look at the supply chain threat that we are facing as we head into the peak holiday shipping season this year. Joining us today to discuss this threat is Sean Maharaj, who is the managing director in the transportation, logistics, and distribution practice at AArete, which is a global consultancy firm. Sean, just to start us off, can you summarize how this year's holiday peak season looks to be different from previous years?
Sean Maharaj, Managing Director, Transportation, Logistics, & Distribution, AArete 01:48
Absolutely. Thanks for having me today, Susan. Well, I'd probably say, today, if we're looking at the supply chain in the peak season, it's, I'd say it's markedly different—and that's an understatement—compared to where we were in prior years. As we all know, last year had a pandemic, which we all lived through, and made our way through the rest of the modern time we have here today in front of us. I'd probably say that it's different in many ways. You could talk about labor shortages, massive production constraints, you've got Covid shutdowns that seem to still kind of plaque the whole supply chain in the manufacturing set. As we know, Vietnam is the latest to kind of announce that they had a random shutdown as it relates to Covid, due to vaccine rollout issues. We've got logistics infrastructure issues and pressures that right now nobody really would have anticipated from, from any perspective, even according to the data prediction models, and then we've got unprecedented demand putting some major stress on networks, as everyone shifted from, let's call it services, during the pandemic, to really just hard goods, and that lead to, just substantial backlogs of all kinds that we're seeing today.
Susan Lacefield, Executive Editor, Supply Chain Quarterly 03:07
Great. You kind of summarize a lot of risks that we're facing. currently. Are there two or three that you would be—point to as some of the major ones that companies need to focus on right now?
Sean Maharaj, Managing Director, Transportation, Logistics, & Distribution, AArete 03:18
Yeah, I'd probably say the two or three biggest ones right now, top of mind, are capacity constraint issues in the logistics network. As you know, you've probably seen trucking companies, transportation companies, rail, intermodal, all complaining of not enough equipment, it can't be in the right place fast enough at the right time. There's too many goods coming on. And the second component, I'd probably say is just a lack of labor, and, again, if you look at the supply chain logistics network, there's just not enough labor to work the networks efficiently or effectively enough to move cargo to the right place or to the right owner in an efficient manner. And that's what you're seeing right now at the port of, for example, L.A./Long Beach, where you see just in the last week or so there were 70-plus ships waiting off in the in the in the background there, waiting to get, essentially, unloaded, and now we've got umpteen number of cargo container ships and containers just waiting to be unloaded, and it's a significant issue. The third point, I'd probably say that really is, I guess, concerning is just around, I guess Covid and vaccines from offshore locations, and how that can impact the entire demand supply chain network as well. So, from my perspective, if that remains uneven and spotty, and you start to see these ad hoc shutdowns in the manufacturing set, as I said, the recent casualty in Vietnam, mostly footwear and apparel, that's probably the three biggest concerns I have.
Susan Lacefield, Executive Editor, Supply Chain Quarterly 04:55
Yeah, I certainly didn't have Vietnam on my list of potential threats out there until it happened. Is there any other problem area that might not be on companies' radar screens right now that they should keep attention to?
Sean Maharaj, Managing Director, Transportation, Logistics, & Distribution, AArete 05:10
I'd probably say the availability of raw materials, and I say this because if you look at, again, just in the Vietnam context—and it's not the only one; we could talk about fuel, we could talk about foam shortages semiconductor—but if you look at, as an example, specifically in the Vietnam context, you're talking about synthetic fibers, and that is relatively hard to find elsewhere outside of Vietnam, although China can be a somewhat good, quick alternative. But it's hard to find, and that seems to be an issue as it relates to a lot of footwear and apparel manufacturers right now.
Susan Lacefield, Executive Editor, Supply Chain Quarterly 05:49
Right. Is there anything companies can do to mitigate these risks, or is this something they just got kind of ride out, for the time being?
Sean Maharaj, Managing Director, Transportation, Logistics, & Distribution, AArete 05:57
I think it depends on who you talk to, because typically, we might say that, you know, if you're the Walmart, Home Depot, type of—Target—and large toy manufacturer, that has, essentially scale and pricing power, you're probably pretty well off, but there are some ad hoc stories that, in terms of taking control, I've seen some smaller retailers essentially just act very early on when they started to smell some of this coming their way, in terms of bottlenecks and issues in production, and they acted very quickly and had a resiliency approach to their supply chain. I probably would say that a lot of—I'd say, manufacturers, producers, and even retailers really starting to thinking about nearshoring. And I'll give you an example. Right now you're you know, you're seeing, I think, Steve Madden is an example, very quickly announced that they were moving 50% of their manufacturing to Mexico and Brazil. So I think resiliency in the supply chain, and adaptability, flexibility is really going to be important, especially considering a lot of companies had just kind of gone one-source resourcing into China, and that now has really kind of plagued the whole, the whole issue, if you will, in being terms of Asia-centric.
Susan Lacefield, Executive Editor, Supply Chain Quarterly 07:20
This might actually be the tipping point of bringing manufacturing and sourcing back to North America,
Sean Maharaj, Managing Director, Transportation, Logistics, & Distribution, AArete 07:26
North America, and could be nearshore.
Susan Lacefield, Executive Editor, Supply Chain Quarterly 07:28
Okay.
Sean Maharaj, Managing Director, Transportation, Logistics, & Distribution, AArete 07:29
As I said, Brazil, South America, you know, there's Mexico, Costa Rica—all those areas are, are very good options right now, and in fact, we're seeing some clients right now that are saying, let's nearshore some of our offshore customer operations and back-office automation, away from Asia and into the likes of Colombia and Costa Rica.
Susan Lacefield, Executive Editor, Supply Chain Quarterly 07:50
Hmm. Interesting. So given all the attention that has been out there in the general press about these supply chain constraints, can companies expect their customers to be any more tolerant about shipping delays?
Sean Maharaj, Managing Director, Transportation, Logistics, & Distribution, AArete 08:05
Yeah, that's a tricky question, and I would probably say that the fact that it's been so well socialized, in my opinion, throughout the whole consumer environment that, you know, start shopping early, expect delays, you may not get what you want, I think that goes a little way, in terms of some forgiveness in the consumer realm. A challenge I see that is for larger retailers and providers like Walmarts and Amazon, who really have done an incredible job of making sure that you can get what you want, when you want it, and as fast as you want it, being hyperfocused on customer experience—especially Amazon—there will be some forgiveness, but I'm just curious to see how this plays out. I think the consumers will go a little way with retailers on this, but it's it's definitely going to have its limit.
Susan Lacefield, Executive Editor, Supply Chain Quarterly 08:53
Wow. It's certainly a fascinating time to be in the industry, and to be a watcher of the industry. Well, Sean, thank you so much for taking some time today to talk to us. This has been very illuminating, and we hope to have you back.
Sean Maharaj, Managing Director, Transportation, Logistics, & Distribution, AArete 09:05
Thank you, Susan. What a pleasure.
David Maloney, Editorial Director, CSCMP’s Supply Chain Quarterly 09:07
Thank you for joining us for this podcast from CSCMP’s Supply Chain Quarterly, the Top 10 Supply Chain Threats. We encourage you to subscribe wherever you get your podcasts.