Lessons in Logistics

Issue 2, June 2022

Top Takeaways from the Pandemic Upheaval

The nationwide baby formula shortage marked the latest high-profile chapter of supply chain snarls that crippled operations, contributed to consumer price hikes and captured international attention. As headline-making empty shelves and port backups play out on the public stage, logistics leaders see an urgent opportunity to accelerate innovations. They’re collaborating behind the scenes and across sectors to reimagine business as usual. Here’s how industry groundbreakers are navigating the ongoing uncertainty of today while forging a more resilient supply chain for tomorrow.  

1. Embrace Uncertainty

Planning for Plan B

Despite early optimism for a post-pandemic return to normalcy, our experts agree that supply chain disruptions are likely here to stay for the foreseeable future. McKinsey Global Institute predicts that over the course of a decade, shocks ranging from natural disasters to political unrest may cost up to 45% of a company’s annual profits.

The best defense, according to Karl Siebrecht, CEO of programmatic logistics leader Flexe, is embracing uncertainty and building “structural flexibility” into your strategic plan. This includes using technology and networks—instead of assets and leases—to pivot quickly in the face of disruption or address consumer behavior changes.

Through a single technology platform and a network of warehouse operators, brands—such as Staples, Walmart and Ace Hardware—are solving discrete logistics problems as they happen. They swap fixed investments and long-term leases with transactional programs designed to overcome demand spikes, distribution bottlenecks and product overflows—the new normal in supply chain operations. As the pandemic ushered in a brutal wake-up call in forecasting, many retailers recognized the value of integrated, open logistics networks like Flexe: “The most innovative companies understand that they can’t predict everything and now prioritize technology investments that deliver flexibility,” says Siebrecht.

2. Invest Sustainably, in Sustainability

California’s energy overhaul

Hollywood loves a comeback story, and Los Angeles’ ambitious clean energy tale is one for the ages. The transportation sector accounts for about 50% of California’s greenhouse gas emissions. In its efforts to transition to 100% renewable energy by 2035, America’s smoggiest city is on the road to becoming one of its greenest.

LA is already 10 years ahead of California’s statewide targets, according to Los Angeles Department of Water and Power Commissioner Nicole Neeman Brady. The board oversees the nation’s largest municipal utility, LADWP, which plans to reach the city’s aggressive green goals by “continuing to rapidly expand renewable energy resources, investing in energy storage, fostering transportation electrification, transforming our in-basin generating stations and helping customers reduce energy use,” says Neeman Brady. LADWP already sources more than 60% of its power from carbon-free energy resources.

With over 1 billion square feet of warehouse space in key urban centers, Prologis will enable this future through onsite solar and storage projects close to where energy needs will increase most in a net-zero electrified economy.

The city’s next major milestone will be the biggest electric vehicle station in North America. The project in Torrance, California, a collaboration between LADWP and Prologis, will replace 146 Class 8 diesel trucks with all-electric counterparts. The sustainable superstation will be a major boon for air quality—diesel trucks produce nearly half the country’s smog-forming nitrogen oxide emissions—and for shippers’ bottom lines as record-high diesel prices wreak havoc on profitability and cost predictability. Prologis is supporting LADWP’s efforts to provide solar power to the electric grid by offering to blanket more urban warehouses with rooftop panels and develop storage systems to house the surplus of renewable energy the solar arrays generate. Vibhu Kaushik, who recently joined Prologis from Southern California Edison, leads the company’s global utilities and energy storage efforts. His vision: a green future built through collaboration and innovation between utility companies and their large customers. “With over 1 billion square feet of warehouse space in key urban centers, Prologis will enable this future through onsite solar and storage projects close to where energy needs will increase most in a net-zero electrified economy,” Kaushik says.

3. Double Down on Digitization

Tech to keep on truckin’

Along with fleet electrification and continued pain at the pump, chatter in the trucking industry has focused on another hurdle: driver shortage. With more than 70% of America’s goods moving by truck, labor scarcity threatens to drive disruption across operations. The industry was reportedly down an estimated 80,000 truckers in 2021, and the American Trucking Association warns that number could reach 130,000 by the end of the decade.

Although alarming, the dire headlines may be missing the mark. “One of the things we have talked about too much is the number of drivers,” says Weston LaBar, head of strategy at Cargomatic. LaBar’s AI-enabled platform works like Uber for freight and matches drivers with shippers who have product to move. “But what we should focus on is making efficient use of the trucks that are already on the road. It’s about ensuring that every time a truck is moving, it’s hauling freight and being productive,” he says.

According to LaBar, the key to a sustainable transportation network is working smarter, not harder. Cargomatic’s digital marketplace lets shippers instantly tap into a network of 35,000 drivers across the country. The self-service platform uses real-time location data to find the right cargo space at the right place and time, leveraging technology to create capacity on demand. This approach improves utilization by up to 30%, reduces empty truck moves, and shortens wait times at warehouses and ports. Doing double the work with half the number of trucks makes for a smaller carbon footprint, too.

Ultimately, agility is the name of the game when volatility is the new constant. LaBar underscores the importance of investing in technology that enables real-time visibility and nimble decision-making to respond quickly to disruptions and forecast what’s coming next.

4. Prioritize People

Planting a strategy for growth

The trucking industry is a microcosm of the wider supply chain labor shortage where turnover soared to more than 55% in 2021. Evolving employee priorities are, in part, fueling this unprecedented trend. “The idea that we align our careers to one company isn’t the way you and I think about our jobs anymore, and it’s not the way supply chain employees think about theirs,” explains WorkStep CEO Dan Johnston. “Frontline workers are taking more ownership of their careers than they ever have before.”

It’s this beautiful moment when the right thing to do from a human perspective and the right thing to do from a business perspective are the same thing, which is to invest in your people.

According to Johnston, the mass exodus is about much more than money. WorkStep—which creates retention technology focused on warehouse, trucking and manufacturing roles—surveyed more than 18,000 workers and discovered that lack of career advancement is the top reason for turnover. Put simply, employees plant roots where they feel they can grow. “All of those things that make us feel appreciated and satisfied, like we have purpose, matter more than ever,” adds Johnston. He says misaligned job expectations and poor manager relationships are also pushing employees out the door.

Today’s modern labor crisis requires modern solutions. Smart data analytics paired with integrated digital tools are essential to identify issues and take action before workers quit. Founded in 2017, WorkStep’s technology provides valuable insights at every step of the employee journey. For hiring, WorkStep matches employers to candidates from their network who are a fit in both skills and job preferences. On the retention side, the platform collects regular feedback, analyzes that data, and evaluates employee sentiment and turnover drivers over time. These insights have helped companies like WestRock, one of the nation’s largest packaging enterprises, reach 82% retention rates with WorkStep-placed employees.

As the Great Resignation shows no signs of slowing and a record 4.5 million workers quit in March, the need to listen to workers and prioritize their happiness has never been greater. “It’s this beautiful moment when the right thing to do from a human perspective and the right thing to do from a business perspective are the same thing, which is to invest in your people,” Johnston says.

When it comes to predicting risk and disruption, we all know visibility is key. Prior to the pandemic, however, focus centered largely around the last mile: a shipment’s location in a warehouse or its whereabouts on the road to the customer. An end-to-end view of the chain of production, including everything that happens before something is made, has remained opaque. A recent report found that about half the companies surveyed understood the location and risks of their tier-one suppliers, but only 2% have visibility beyond that. These deep-tier blind spots have brought industries to a halt, as seen with the global semiconductor shortage.  

“We’re in a moment of crisis,” says Evan Smith, CEO at Altana AI, a federated artificial intelligence platform creating a shared source of truth for the global supply chain network. “Whether it’s geopolitical, COVID or natural disasters, disruptions are typically occurring upstream from the finished goods. To build resilient networks to reliable supplies and reliable economies, we’ve got to bring those upstream movements into the light.”

The solution seems obvious: visibility for every tier of the supply chain. But much of this crucial intelligence is padlocked behind data sovereignty, intellectual property and data privacy protections. Enter federated learning. The technique, coined by Google in 2016, is a decentralized form of machine learning that enables the sharing of key data insights while hiding identifying information. When applied to the vast amount of potentially sensitive supply chain information, it allows Altana AI to create shared global intelligence without sharing actual data.

Global enterprises, like Boston Scientific and Merck, are using this technology with the Altana Atlas platform to create multi-tier visibility for each of their product’s value chains. This allows them to engage and collaborate with their extended network to build resiliency, navigate compliance requirements, and get ahead of risks and disruptions. The logistics industry is evolving, and its forward-thinking leaders are adopting next-gen technologies, such as AI, machine learning and data analytics to keep pace. Smith says the old ways of doing business, from antiquated software to closely guarded supplier relationships, are being rewritten and replaced as a matter of survival. Collaboration, transparency and visibility are today’s competitive advantages, he says.

Further Reading