RESTORATION OF THE LOGISTICS NETWORK POST-COVID-19 WILL BE ONEROUS – THE OUTLOOK OF LOGISTICS EXECUTIVES!

June 20, 2020

In a recent BSMA COME TO ACTION forum, eminent logistics executives addressed the unprecedented challenges of COVID-19 and had a grim outlook for the recovery in the long term. The distinguished members of the round table were: Jeff Tucker (CEO, Tucker Company Worldwide), Edward DeMartini (Vice President, Air Logistics Development, North America, Kuehne + Nagel Inc), Larry Tillem ( Business Development Director, SkyCell North America, Inc.), and Lorant Kovacs, (Head of Vertical Market Healthcare Americas Region, Schenker Americas, Inc.), with Joel Glende (Executive Vice President, Manufacturing & Academia Member Engagement, BSMA) moderating.

Here are the highlights of Part 2 of the Forum which focused on restoration of the global transportation network after reopening of the markets:

DeMartini believes, “In the future, with a severely disrupted transportation network, Co-chartering could be a solution where both partners align their schedules and freight. You have to work together through the intermediary in order to get to the charter itself. Considerable synchronization of operations will be required.”

Kovacs added, “The temperature requirements of the cargo will have to be managed for compatibility for temperature-sensitive packaging. Some aircrafts have restrictions to what extent they can control the temperatures in the cargo holds and aboard..”

DeMartini expressed optimism that, “There’s a unique necessity and opportuniy in this entire disruption, specifically for the air freight industry, but also for the trucking industry, to seek consistent revenue. Is the shipper willing to throw out the 10-year-old rule of MQC, Minimum Quantity Commitment? MQC may return for stability of capacity and rates.”

Speaking for the trucking industry, Tucker says “We’ve never owned a truck in nearly 60 years. We track 100% of our loads electronically and shipments are digitally tracked with GPS. The conversations that could not have been had, even three months ago, about quality and capacity commitment and partner shipping. There is a willingness to provide the GPS tracking to shippers.”

Tillem stated, “In times of crisis, we have a great opportunity to use the power of collaboration. The more transparency we can provide upstream or downstream to subcontractors and the industry members, everyone will be happy to listen to construct their networks.”

DeMartini believes, “If we end up with less point to point flights, longer transit will be the outcome. It may become much more challenging to get that passive solution within a certain period of time without either opening the package, without either having to put it into a temp-controlled environment. You may find shippers have to regress back to active solutions for some of those types of moves. The pharma healthcare industry may have to relook at how they’ve mapped this out over the last five years and see where they may have to revert back to operational decisions.”

DeMartini professed, “We went from a TQM to a “just in time”, and we now have a new term, “just in case”. We’re going to somewhat revert back to a little bit of that TQM, where quality, safety stock and inventories are important. Over the long-term, you may have a supplier in the Far East, while you are sourcing 20 to 40% of that same supply from another supplier in a completely different region.”

Tillem observed, “We’re seeing too is the more traditional active / passive model is holding up quite as well as in the hybrid field. Today there’s more flexibility, more data and newer equipment, resulting in lower risk and longer times can be entertained. The pharma shipper and the 3PLs will benefit. “

Tucker believes, “The trucking industry is very adaptable thing, it just takes a while. I recall, we had a massive capacity shortage in 2003-05 and it took 16 months for the industry to normalize. In the polar vortex in 2014-16, it only took the industry six months to normalize. But in 2018, it took about 16 months to normalize when we had electronic log-in devices. Now we’re in unchartered waters. This is biblical. This is Epic.”

Tucker envisions, “If we lose a lot of owner-operators, some large carriers and mid-sized carriers now, resulting in lower capacity, and business begins to ramp back up later this year or next spring, we’ve got major problems. We will witness consolidation of freight with big asset-based companies. We cannot forget that owner operators are the lifeblood of this industry. They make this industry as fluid as it is.”

The outlook of the transportation industry appear bleak in terms of restoring the hey days of the last few years but implicit is the strategic intent to find breakthroughs which will transform the industry to greater heights. The consensus is that collaboration and deployment of technology will be the life line for prosperity through transformation.

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