April 8, 2020
Exploring the Future of Freight During COVID-19
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Recently, Flexport participated in a virtual media roundtable, "The Future of Freight and Logistics," to discuss how freight forwarders and other businesses are responding to the impact of the COVID-19 pandemic on supply chains. Moderated by Harshad Kanvinde, Practice Leader - Strategy & Supply Chain at Slalom Consulting, the session included Flexport Founder and CEO Ryan Petersen with Dan Lewis, Co-Founder and CEO of Convoy, and Karl Siebrecht, Co-Founder and CEO of FLEXE.
Following are takeaways from the session, along with perspectives from Ryan, that shed light on how forward-thinking technology and logistics strategies can help companies remain agile in the face of disruption.
On Supply Chain Chaos
Nothing is predictable this year. Supply is trickling in from China, and the demand for medical supplies is high, but, otherwise, supply chains are erratic due to consumer stockpiling and logistics snarls.
“Just as demand comes back online is the exact moment there’s very little capacity for airfreight,” reveals Ryan. “We’re currently seeing Chinese factories running well below what’s expected as they come back online.”
On Strategic Solutions
As demand disruption continues, supply chain strategies are shifting.
Right now, essential goods, like medical supplies and groceries, are moving, but with China’s cargo supply still at approximately half what it was, greater potential for disruption could occur soon.
“We’re helping our customers with innovative solutions, including premium ocean freight products that shave time off shipments from 21 days to 12, instead of suggesting they spend inordinate sums on airfreight if they don’t have to,” explains Ryan. “Every supply chain has different needs, so we are also helping customers that have never used airfreight to ship that way for the first time.”
On Long-Term Impact
Supply chain disruption is nothing new. Last year, the big unknown was roller-coaster tariffs that inspired supply chain managers to diversify away from China and into Southeast Asia. The COVID-19 pandemic further complicates that strategy by impacting supply chains everywhere. Has diversification really helped?
Ryan points out that goods “are sourced and manufactured in many different countries, and disruption at one border has downstream effects that are incredibly difficult to model and predict . . . That said, making everything yourself is very costly and might not be the best response, even though it might seem less risky today.”
The balance: don’t overcorrect because of an unprecedented global event.
On Optimizing for Resilience
Rapid delivery requires that inventory is available in whatever region a business wants to serve.
Ryan advises, “Optimizing for one-hour delivery will make the supply chain more resilient. If you’re only optimizing for just-in-time manufacturing and only have inventory to fulfill expected demand one week out, you have no chance of accommodating black swan events.”
On Global Pandemic Experience
While the global economy seems like it’s at a near standstill, a large number of logistics providers are still operating. Producing and distributing in different regions as COVID-19 spikes or subsides around the world keeps trade as strong as possible during a challenging time.
“We’re reaching out to our partners in those heavily impacted hot spots to show our support,” assures Ryan, “and to let them know that when business goes back to normal, we'll be here for them . . .
“Earlier this year, we were able to source and supply thousands of masks directly into Wuhan, thanks to the bravery of the truck drivers willing to drive into that area. We would love to be a partner for anyone trying to ship tests or medical equipment. That team can be reached at Flexport.org.”
On Agile Technology
The digital transformation of the current millennium has trained logistics companies to be more prepared than ever—assuming their freight forwarding partners have kept up. Data-driven platforms allow sophisticated, effective pivots in times of uncertainty.
“This isn’t just about customers adopting new technologies, but also if their provider is able to,” warns Ryan. “Software has such an impact on companies’ ability to be agile. You can’t predict the exact nature of disruptions like this, but there is always going to be some disruption changing how we do our work.”
On Airfreight Demand
As China continues to come back online in the coming weeks, airfreight pricing is likely to continue increasing. But Ryan believes that long-term predictions are tricky right now.
“Airfreight is different, because the supply of capacity doesn’t track demand for products. Airfreight supply is related to passenger travel,” Ryan clarifies, “and airlines aren’t expecting their passenger flights to return to normal until April 2021. This means we can expect airfreight prices to stay high as supply remains limited for at least 12 months.”
On a Post-COVID World
As the world teeters on the precipice of possible recession, companies and nations that were forecasting growth even a few months ago have quashed their predictions and many don’t know what to expect.
Ryan sees an opportunity for logistics managers to play a more strategic role within companies, especially in terms of emergency preparedness planning.
“I think we’re going to see a world where logistics managers are trained to think about shipping cargo, containers, physical goods, and pallets, and they’re starting to recognize where dollars are tied up in inventory. If you can show the company how you can better manage cash, now you have an opportunity to be a more strategic function.”
On the Coming Months
In fast-changing times, Flexport customers can continue to build agility into their businesses by maintaining a strong operational network to share information that flows freely between the right people for faster decision making.
Ryan expands, “Cash is king right now. If you have inventory that is not selling, get creative and find ways to unlock that cash. The Small Business Administration (SBA) announced a program to get credit and low-cost financing to make payroll.
“How do you get your team focused on playing offense? How do you get in touch with customers to let them know you’re open for business and find solutions and products you know they need? How do you quickly learn the e-commerce game?
“Whoever is most adaptable to change is going to come out ahead.”
While COVID-19 tests the resilience of supply chains around the world, smart shippers can bolster their approach to logistics with the right data, strong relationships, and agile strategy.
To find additional solutions for managing the impact of COVID-19 on global trade and the supply chain, stay up-to-date with Flexport COVID-19 Trade Insights.