Supply chain is the sexy new topic. It wasn’t always that way. Until recently, squeezing out costs through freight and logistics only got the attention of the professional supply chain geeks. Now it is on everyone’s mind and has become a hot area for innovation.
Here’s what I learned recently while facilitating a meeting with top distribution CEOs:
- “Dwell times” for cargo just sitting around is not limited to container ships lined up outside the ports. Airports are over-capacity too and freight is piling up on tarmacs. Apparently, there is not enough staff to move shipments and not enough warehouse space.
- Freight costs have skyrocketed. One CEO said his air freight costs are about 8 times normal. Many companies are buying space on planes and trucks in advance and paying whether they use it or not just to hold the capacity. Plus, fees and surcharges at every step of the process are going up.
- Inventory is a weapon. Many companies are buying forward to make sure they have something to sell (and their competitors don’t). And some customers are paying fees to move up the priority list for deliveries.
- Legal teams are getting a workout looking at all the contract ramifications of these changes. Expect more and more litigation.
- The US freight and logistics infrastructure is antiquated compared to many other nations.
BUT all these changes are creating opportunity and sparking creativity. For example:
- Salespeople are having to be much more assertive and collaborative to meet customer needs and also handle rising costs discussions effectively. Meaning it is a great time for partnership and deepening of relationships with customers.
- All the constraint is driving both revenue and margin quality for those nimble enough to take advantage of the opportunity.
So while these changes can seem overwhelming, successful CEOs are taking the disruption as an opportunity to improve operations and drive growth. I hope you do too.
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