Remember when you didn’t know that much about the supply chain?
Just over a year ago, the process of getting the products we buy from one place to another was so efficient that it was almost invisible. Those days are pretty much history now, according to SanMar’s Senior Director of Global Logistics John Janson. “People know more about logistics today than they ever have,” says John in a recent interview with SanMar Radio.
Cargo stoppages and shipping delays are frustrating for everyone, but for someone in Janson’s role it’s a day-to-day struggle. “Every day it’s some kind of new challenge that pops up,” he explains. “We are professional Whack-A-Mole players right now.”
To understand the full picture, it’s useful to be familiar with each link in the supply chain and how they work together.
Across the Pond
The overseas shipping picture is the one you’ve probably heard the most about. Limited capacity and higher demand have led to longer turnaround times and rapidly-rising costs.
With seaports overloaded and ships full of cargo anchored in the harbor, the average wait time for a vessel to unload is often more than 10 days and costs have risen to 10 times or more what they were a year ago. While the rising prices have been an unwelcome surprise, they are also part of the cost of doing business right now. “It’s not about price,” says John Janson. “It’s about getting on the vessel.”
This has also led many companies to explore other means of international shipping, such as air freight. “Big apparel and footwear merchants are increasingly trying to switch from ocean to air transport to make up for huge production slowdowns in Vietnam due to COVID and ensure seasonal imports arrive on time for holiday shoppers,” says Eric Kulisch of FreightWaves. While shipping by air has historically been a last resort for SanMar, we’ve recently been using this mode of transportation more than we ever have before.
Once containers of product reach the United States, the next step in the journey is transporting those containers over land.
On the Rails
Trains may seem like an antiquated mode of travel to many of us, but they remain the often-unseen lifeblood keeping the products we buy in motion. As shipping volumes have risen overall, train capacity has also been stretched to its limit.
This has led many railroad companies, such as Norfolk Southern Railway and BNSF, to restrict pickup times and tighten cutoff times for customers. The reasons behind these decisions are to move shipping units out of storage facilities more quickly and to prevent containers from sitting for a long time.
Keep On Trucking
Containers not delivered by train are transported by trucks, which were already experiencing record low numbers of drivers going into 2020.
Driver shortages have been an issue since 2005 and have only gotten more significant since then, according to the American Trucking Association’s Truck Driver Shortage Analysis of 2019. This is due partially to a work force aging out of the industry, but also to finding new applicants who meet the standard for professional drivers. “Many carriers have strict hiring criteria based on driving history, experience, and other factors. As a result, despite receiving applications for employment, motor carriers are finding few eligible candidates.”
The COVID-19 pandemic highlighted these issues as shipping volumes increased and made the hiring environment even more competitive. “When you have companies offering $5000 sign-on bonuses, it’s harder for the smaller companies,” said Peggy Whited, head of Human Resources at Buckeye Water in Ohio.
Less Than a Full Load
Less-than-truckload (LTL) shipping carriers are traditionally used for smaller loads that can be delivered more frequently – an important aspect of the just-in-time model of the supply chain.
However, LTL carriers like FedEx and J.B. Hunt are not immune to the effects of an overtaxed logistics system. “’Tight capacity on the truckload side has meant that carriers are only accepting about three-quarters of all the loads that shippers send out,’” said industry analyst Dean Croke.
While all this is happening in the background, you as a customer are still waiting for that package to materialize on your doorstep.
Going the Last Mile
The final stage of the shipping process is often called “last mile” delivery – this is when a package is delivered to its final destination. This too saw a paradigm shift in 2020 that isn’t likely to change anytime soon.
According to John Janson, more than 60% of UPS volume is residential now, and that makes a big difference for shippers used to delivering to businesses. “It just takes a lot longer to run a residential route than a business route,” he elaborates. The math is pretty simple: more parcel volume plus a more complicated route means that delivery times get extended even further for carriers like UPS and the United States Postal Service.
From ocean ship to on your doorstep, the supply chain is a complicated network of different services that keep goods moving, and there are pain points in almost every part of that network. When everyone is feeling the pressure, there are things you can do to help.
Setting Expectations
“We’re leaning really heavily into strategic relationships,” says John Janson, explaining that shippers value customers who put in the time and effort to work efficiently. That means unloading containers quickly to get them back on the road, being a good steward of shipping assets and paying your bills. “This isn’t the time to be a transactional customer,” he adds.
On the customer side, it’s important to get orders in as early as possible and to be clear about what customers can expect. “People are so used to getting something in one day,” says John. “Now most of those things are taking two to three days.” Being aware of the factors influencing shipping time will help you set the right expectations with your customers.
We’ve spent the last year wondering what “normal” looks like and when we’ll get back to it. In the world of logistics, normality takes shape by getting the labor force working again, stabilizing the price of shipping containers and steadying the flow of goods. While it may take a while, people like John Janson and his team are hard at work, when they’re not playing Whack-A-Mole, making those things a reality for all of us.
Listen to the full podcast Unravelling Today’s Supply Chain Challenges on SanMar Radio for more of John’s perspective, and join the conversation with us on Facebook, LinkedIn, Twitter and Instagram.