Logistics is Essential
Logistics is an essential services industry sector, vitally important to the US and world economy and touching every aspect. The global pandemic is affecting various segments differently, but tens of millions of essential workers carry on in the US, responding to the urgent needs of other essential businesses, services and infrastructure entities and to consumer demands for ‘vital’ provisions. Agile response characterizes the immediate focus of logistics service providers serving their communities. Longer term, expect re-evaluation of ‘optimal’ inventory levels in an increasingly interconnected global economy.
Just a few months ago, the definitive view of logistics as an industry, published by AT Kearney in collaboration with Penske Logistics (2019), saw it ‘cresting a hill,’ as an industry “at a new crossroads after toughing out the steep grade of last year’s constrained capacity and rising prices. This year demand has softened, and growth is in doubt, but not to the point where a steep decline is visible.” How things have changed!
The US economy is in freefall, as businesses shutter and the COVID-19 health crisis threatens every aspect of normal life. 13.5% of the US workforce has filed for unemployment, and up to 30% unemployment has been projected. But essential workers, and tens of millions of logistics workers in particular, continue to deliver.
Typical consumers, if there is such a thing, can easily see that doctors and nurses are essential workers. But consider that without logistics workers, they cannot do their jobs!
Logistics involves extended supply chains with individuals involved in identifying and sourcing materials and inputs to vital goods, supplying them via plane, train and truck to manufacturing facilities and out again as component parts or finished goods, through quality testing procedures and safety regulated inspections, transported to distribution centers or interim storage facilities, processed through pick and pack, sequencing, labeling and specialty or standard packaging in preparation for US market shelves, transported to stores and arranged on shelves or point of purchase displays for consumers to select. There are companies and teams involved each step of the way – with ‘back office’ teams supporting the effort: paychecks being calculated, maybe adjusting for hazard conditions and changing requirements, paid for by financial management teams identifying funding sources, managing collections of accounts receivable, and information systems troubleshooters ensuring everyone can communicate, adjust and respond to changing demands in real time.
We see the driver making the delivery, but there were teams of people involved in ‘pulling’ that product and its accompanying literature from the appropriate warehouse racks, ‘picking’ that set of materials, noting what they’ve ‘pulled,’ in the system, so that what remains is clear to the next ‘picker,’ operating the machinery that shrink wraps the final product, packs it into cartons, stacks the cartons onto pallets, runs the forklift to secure pallets stacked earlier, moves it all to the appropriate door for outbound pickup, scanning contents going out for system logging of outbound product. Then a driver scans what she’s picking up, loads pallets of product into the truck and drives the load to the store where a clerk logs the receipt and a crew puts those products on the shelves for you. Manufacturers, packagers, bottlers, transportation and third party logistics providers (3PLs) work together to get those essential food and beverages, paper products and cleaning materials to the shelves, and those medicines, pharmaceuticals and cleaning tools and supplies to the hospitals and clinics. And there are teams of essential communications technology workers and companies, platforms and visibility tools supporting the teams and processes along the way to be as efficient as possible.
It really does take a village! Logistics workers covers a wider swathe of functions than most people realize. And it truly is absolutely, positively essential to every aspect of our interrelated economy.
Earlier this month, we shared that 70% of all jobs in the United States are in the services sector, led by Trade, Transportation & Utilities with 27.8 million jobs. Aspects of the transportation sector predominantly serving international trade are hardest hit by government lockdown orders, banning non-essential travel and requiring physical distancing during essential outings. US airlines, railroads and cruise ships are laying up, cancelling flights, furloughing workers. Large intermodal carriers with whom we spoke saw volume drops as much as 50%, though already picking back up as companies seek to replenish inventories. But at the other end of the spectrum, last mile carriers, parcel delivery companies and direct-to-consumer deliverers are struggling to keep pace with surges in volumes as consumers sheltering at home seek to ensure supplies they may need for the duration. Public warehouses are anecdotally reporting returns to volumes still well above typical but beginning to approximate ‘reasonable’ volumes as frightened consumers adapt to the new ‘normal.’
Jere Van Puffelen, a highly respected warehouse logistics industry leader, shared his perspective on the immediate crisis and potential longer-term impacts, from the perspective of a thriving third party logistics company owner with consecutive years of double digit growth, now operating at full capacity. PRISM Logistics serves customers shipping the foods, beverages, cleaning supplies and medicines we’re seeing on the shelves at our favorite grocery stores, as well as equipment to hospitals and packaged goods and cleaning supplies throughout the western US. Definitive essential. On essential workers, Jere points out that ‘I’ve always said that every member of the team is important. The janitor is as important as the owner. Every one of us has a job to do on the team, and our success and our customers’, depends on every one of us doing our job well.” He noted that while his company has always prioritized safety and cleanliness, given the nature of products they handle and customers they serve, they’ve amped up the intensity aligned to government directives and their own commitment to ‘stay ahead of this thing,’ with dedicated personnel cleaning, disinfecting facilities and beginning again immediately on completion. All day. Every day.
Longer term, Jere suggests that the impacts of ‘great toilet paper shortage’ of March 2020 may well dictate adjustments to this industry’s definition of ‘optimal’ inventory levels. This sector, which has prized cost-cutting efficiency as the watchword, with just-in-time deliveries direct to production and minimal inventory in constant movement, is now grappling with the rippling shockwaves of product outages and inventory stockouts.
Prescient companies and teams have incorporated risk mitigation strategy to supply chain planning for years, but look for those efforts to become more pervasive, and not just the province of the very large, big budget players. Providers of risk mitigation software are being recognized as high value partners in this time of need. Resilinc, a leading provider in this space (artificial intelligence-based supply chain mapping and disruption monitoring), has partnered with UPS to create a hospital-to-hospital exchange for critically important Personal Protective Equipment (PPE) nationwide. Free of charge for hospitals and healthcare organizations, the cloud-based platform is known as ‘The Exchange at Resilinc,’ and permits vetted peer organizations to locate and then borrow or exchange items listed on the platform such as respirators, N95 masks, and gloves. Partner UPS Healthcare will pick up and deliver the items – which could ultimately ease shortages of medical products and supplies during the coronavirus crisis.
The Council of Supply Chain Management (CSCMP)’s Silicon Valley/San Francisco Roundtable is one of several CSCMP Roundtables which have featured learning events that play the Resilinc Risk Game, as hands-on learning to manage impacts of a disaster and even pandemic specifically, as companies competing in a simulated market environment. Spoiler alert: the bottom-line learning is that solid intel, strong partnerships and good team play are key to success in a globally interconnected world. And it will be the many millions of individuals and teams working in logistics that continue to deliver what people need.