The unexpected pandemic has rattled entire industries and disrupted supply chains worldwide for the first time as heavily since the Second World War. More than 80% of organizations have reported having been negatively impacted by the COVID-19 crisis and 66% of organizations believe their supply chain strategy will need to change significantly to be more resilient in the future.
In recent years, over 80% of professionals say they plan to significantly increase logistics outsourcing budgets. However, in an industry that has been slow to advance, will the pandemic finally push supply chain providers and organizations to embrace demand planning, digitization, and predictive analytics to design truly resilient supply chains? While investments towards supply chain resilience require trust and time, committing to change can lower transportation costs by 10% to 20% and increase customer satisfaction by 20% to 30%.
In this article, we look at the impact of supply chain disruption and four ways a 4PL provider helps organizations design for supply chain resilience.
Invest in operational efficiency
The increasing demand to move containers and the lack of additional capacity has resulted in a wave of rolled cargo. In December 2020, more than one in three containers shipped globally were rolled-over at transshipment hubs. The result of cargo rollover is excessive delays to get to destinations, scheduling unpredictability, and cargo laying stranded in the ports. This frustrating situation is unlikely to be resolved soon considering carriers’ increasing use of short-term capacity management to balance supply and demand. It may actually be a sign for the future, where carriers may want to retain their flexibility of routing and rerouting during transit, optimizing the cost of their vessel operations rather than go back to the past of full pre-planned vessel schedules and adherence to that during sailing.
To ensure supply chains keep running, we power supply chain operations and decision-making from regional control towers with teams of dedicated, experienced logisticians. These control towers provide real-time information about shipments and risk levels based on automated alert messaging, acting fast to mitigate risk, efficiently orchestrating a response plan, and executing it at the drop of a dime. These include messages such as shipment status, port delays, or production slowdowns.
Design for supply chain visibility
Supply chain partners around the globe, from carriers to terminal operators, have experienced record disruption. The number one challenge is monitoring end-to-end visibility, with less than 10% of organizations having upstream and downstream visibility of their supply chain network. Sharing data between partners is a roadblock within the industry; however, 4PL providers tap into their internal operational professionals for visibility on demand.
For example, when global trade slowed in February 2020, the growing container imbalance sent a ripple effect from port congestions to record rates. A study from the Fraunhofer Center for Maritime Logistics and Services and Container xChange found that equipment sits empty for 45 days on average, despite high demand levels. In regions with low container availability, such as China and the US, the average rose to 61 days and 66 days, respectively.
In a March 16 press conference, the Port of Los Angeles’ Executive Director Gene Seroka reported, “the seventh month of year-on-year increases, driven by one-way trade of imports.” According to Seroka, “the lopsided trade imbalance we are witnessing is now at historic levels,” with the port churning out 799,315 TEUs of cargo in February, 10% above the monthly record set in February 2018.
The pandemic will continue to disrupt staffing levels in ports and warehouses until vaccination rates increase. The relentless increases in demand for goods and further stimulus packages will pile on further pressure. It is very likely we are entering a new and permanent peak season.
Having visibility allows organizations to understand what is happening in the supply chain, identify where risks are, and make the right business decisions. As a 4PL provider, we partner with organizations, gaining access to historical data and understanding the goals of the organization to improve decision-making. Leveraging integrated technology, we provide you with real-time end-to-end visibility of your entire supply chain to identify constraints and quickly take action to mitigate them. For instance, 4PL visibility tools provide companies with contingency planning to track, analyze, and act on transit delay factors such port congestion, on-time sailing, and transshipments for accurate planning and improved crisis response.
Leverage data and analytics
With containers longer in use by shippers, stuck in inland depots or onboard vessels, steady availability of ocean shipping containers has become more complicated in regions where supply was not an issue before. For troubled locations with a history of ocean shipping container shortage, things have become tough. Also, the dip in demand for vessel capacity during the early stages of the COVID-19 pandemic has since surged and is far exceeding the pre-pandemic demand levels.
The continued shortage of equipment (or at least being available in the regions where needed) in combination with limited vessel capacity has led to long and unpredictable delays in delivery times and skyrocketing shipping rates. For the route from Asia to the West Coast of the U.S. for example, rates are up 145% year over year.
Rolling bookings, canceled services, and blank sailings are the new normal for both exports and imports. Exports from the USA and Europe now have to be booked up to 6-8 weeks in advance. Attempts to advance bookings, reverse rollings, or even incentivize carriers with additional revenue to expedite a shipment are largely ineffective.
Making data-driven decisions is a smart way to manage the above problems and mitigate disruptions proactively. A 4PL has advanced data and analytics capabilities that can transform your supply chain data into meaningful insights, make data-driven decisions, and help you to prepare for disruptions. Using up-to-date data, advanced analytic tools, and artificial intelligence techniques, a 4PL conducts scenario planning on how disruption will affect your supply chain and come up with proactive risk mitigation plans. 4PLs also have tools to enable you to predict when and where excesses and shortages are likely to occur and proactively navigate them. For instance, a 4PL can anticipate container shortages and then mitigate them by shipping out more volume at an earlier stage through a different route versus waiting before disruptions occur.
Maintain a single source of truth
Global container line schedule reliability remains low as carriers contend with cargo volumes and port congestion resulting from COVID-19 lockdown measures and other restrictive actions. As a result, empty equipment is not returning to its origin fast enough, and vessel schedule reliability is suffering. Global schedule reliability plunged in December 2020 to 44.6%, 31.7% lower than the same month in 2019. Consequently, shippers have to deal with delays and missed deliveries.
Maintaining a single source of truth for all your visibility data and making it accessible to all supply chain partners is key to supply chain resilience and can enable you to solve schedule reliability problems. A 4PL has solutions that give real-time visibility on all shipments and allow customers, manufacturers, and suppliers to actively share information through a single platform. For example, with our cloud-based proprietary technology OIA Connect, our customers can report their supply chain progress and quickly collaborate to take corrective action when schedules are not met. This smooth flow of data helps executives to quickly understand risks and opportunities as well as save time and costs.
Take control of your supply chain
The pandemic continues to show a pressing need for organizations to build long-term resilience. Supply chain predictability, as it was known in the past, is not often embraced due to necessary cost optimizations in transportation networks. To mitigate supply chain risk, bounce back quickly from disruption, and gain an edge over your competition in what will become a new normal, partner with a 4PL to handle your entire supply chain system ecosystem.
Your bottom line will thank you.