Bracing Your Supply Chain for Q4, COVID-19, and Keeping Up (Part 2)

Check out Bracing Your Supply Chain for Q4, COVID-19, and Keeping Up (Part 1) or watch the full webinar, “Build Supply Chain Resilience into Your Strategy in Time for Q4”, to hear from our panelists.

Participants:

• Jenny Bebout, Co-Founder and Director of Product, Convey
• Matt Hertz, Co-Founder, Second Marathon
• Rodney Manzo, Founder and CEO, Anvyl
• Moderated by Dave Glick, CTO at Flexe

Questions:

• What does “supply chain flexibility” mean?
• How are brands approaching their inventory strategy for 2021?
• How are key logistics players in last-mile preparing for Q4?
• Does Q4 planning differ upstream in the manufacturing sector?
• Does holding excess inventory through the supply chain build resilience?
• How can you use data to better forecast or determine risk?
• With the utilization of eCommerce, how will the dynamics of brick and mortar shift?
• What is the one supply issue that keeps you up at night right now? Rodney?
• What will a world-class supply chain look like 5-10 years from now?

The following transcript has been edited for clarity and readability.

What does “supply chain flexibility” mean? #

Rodney:

There are a few aspects to this, but what flexibility really means is being able to do what your business needs to do. It’s the ability to react to every aspect of your supply chain, both good and bad.

What I asked myself when I was at Apple and Harry's, or even today with many of our customers, is, "Can I ramp up and down across all aspects of my supply chain?" This is just not with suppliers, but it's with downstream partners like warehousing, pick and pack, etc. Your business is constantly changing. Are you stuck where you only can do one of those or the other? So, that's the first thing.

The second is, "Do I have the supply chain that is aligned to where I'm going with the business?" If you are a 2X-to-3X, month-over-month growth company versus someone who's establishing a sustaining brand, do you have what you need to be successful in those different areas?

Lastly, do you have the performance needed to support your business? So, there are differences in suppliers, there are different partners. And it's like, do I have the things I need to support the specific business I’m in. Because it won’t always look the same.

Those are the three high-level things I look at, and they're relatively easy whether or not you're a small, medium, or enterprise customer. You can constantly think about those, reassess, and build on them based on where your business is. Those are what flexibility should be in your supply chain.

Dave:

These are times when you are being forced either up or down. It's scary to make decisions, especially if you're having to sign a five-year contract with a provider because next year may be back to the old normal or maybe the new normal.

Jenny:

In terms of last-mile, there are two things that I'm thinking about: flexibility and fulfillment. We talk a lot about localizing inventory, using stores, using flexible warehousing to help with speed when it matters. In consumables, that's where speed definitely matters. You want something right away.

So a lot of that flexibility comes down to carrier networks. If you only have one carrier and that carrier is experiencing massive delays, which many of them are right now, or they're slapping on peak surcharges in the middle of summer, can you kind of bend and weave and use multiple resources and optimize when it matters. That's what many of our retailers are struggling with right now.

Dave:

Yeah. We had a customer who had a contract with one of the big three carriers and the carrier wouldn't even come pick up because they were too busy, and so we had packages sitting on the dock waiting for the truck to arrive and it didn't come till the next day. Super scary.

Jenny:

We also had a customer, this was pre-COVID. But Canada Post went on strike. It was the only carrier they used. So, you can imagine somebody was in deep trouble over there. So, it's just you never know when something is going to happen, and so you always have to be prepared and be flexible.

Dave:

We were talking to a digital native brand who's now shut their stores down so their only revenue source is eCommerce and they're shipping out of a single warehouse in Ohio and they're like, if they have a COVID case, we're not shipping any product for two or three days minimum while everybody gets tested and they sanitize the place. And so, that's like a zero-revenue situation that they're trying to figure out alternatives to.

Jenny:

It's happening with the suppliers too, actually. If you're suppliers, your drop-shippers are shutting down, that also leaves you stranded.

How are brands approaching their inventory strategy for 2021? #

Rodney:

The flexibility portion around the inventory positions and planning—there are a few things I'm going to take from Mike Corbo, the chief supply chain officer at Colgate. We spoke to him recently.

He emphasized that it's developing flexibility directly in your supply chain, knowing every single aspect. Do you know where your raw materials are coming from? Do you know what's happening within your factories? Do you know all those freight forwarders? Do you know who you're working with in warehousing? And it's like the people, the capacity. It's every single aspect, but then also putting contingency planning around this.

Mike did a great job with Colgate, and you can see what they did in a clearly international supply chain. What happened when China started going down in December—which I'm sure impacted a lot of people on this call—is he immediately and his team immediately moved everything to North America. And then what happened, obviously, North America went down. So, they moved everything back to China quickly and then China started producing. So, it was something where you're building that flexibility in but it's all through the dynamic of knowing what you're doing and knowing your entire supply chain.

How are key logistics players in last-mile preparing for Q4? #

Full question: Q4 represents a demand planning challenge. It looks like lots of interest in inventory. Q4 represents a forecasting challenge which leads to an inventory challenge. However, logistics will likely be the limiting resources. How are key logistics players in last-mile preparing for Q4?

Jenny:

There’s definitely human capacity, so, trying to hire. But, we just see logistics providers struggling even with, you know, integrations—just for technology, we see a huge backlog.

I also think a lot of these carriers are trying to up their game on experience. I see them actually doing some interesting things to compete here. So, you're seeing UPS trying to compete with Amazon, with points on a map and showing how many stops away they are, but they're going to have a hard time, I think, innovating now during the time of COVID.

Dave:

It's a fascinating time because, you know, you see some companies be like, "Man, this is day one. If we can innovate and we don't have any bureaucracy, we can still do stuff." And those companies are thriving. And then others who are, you know, probably older, more established companies still have lots of VPs and SVPs who want to weigh in on things and they're adjusting a little slower.

Rodney:

The challenge we're all experiencing, and certainly as the carriers are experiencing, is the physical side of eCommerce. It's not enterprise software. It can't scale relatively infinitely. It's not AWS or Azure or Google Cloud where it scales—there's only so much capacity in a FedEx van.

That’s incredibly challenging. Amazon announced they were bringing on 100,000 new workers. I mean, 100,000 of anything is a lot, right? Can you imagine hiring and onboarding and having them uphold your standards?

From a brand perspective, you can throw all your eggs in a basket and say, "Hey, you know what? I'm just going to hope and pray that UPS and FedEx and the carriers and my partners do their job," or what can you do to help compensate for the inevitable challenge that will happen? Do you start running promos, you know, marketing emails or discounting like you would in a typical year around Black Friday to create your own Amazon Prime Day to push demand up a couple of weeks to help the carriers balance their inevitable supply crunch?

Dave:

We always say moving protons and neutrons is harder than moving electrons. And this is a perfect case where the physical world is much harder to scale than the electronic world, the digital world. One question, I'm going completely off-script. One question I had is, we have all this labor on the street, you know, where we're up to 15%, 18% unemployment and now it's still about 10%.

Is it possible to transform people who are out of work, you know, as servers for example, to warehouse workers or delivery drivers? Is there going to be a fit between people who need work and the work that needs to be done in the supply chain?

Matt:

It's a challenging conversation and not one that I can totally empathize with because I'm fortunate in many ways that I'm not unemployed, so it's hard to kind of truly have that empathy. But if I just took a stab at it, you know, I absolutely think that a lot of individuals who, you know, over the last number of months or years have been in the hospitality space, who earn incomes that are somewhat akin to what a delivery driver earns or what an associate at a fulfillment center earns, I think there will be some level of transferability.

Now, I don't think every single bartender who's now unemployed will want to be delivering packages for Amazon. I think some subset would, but I think there will absolutely be this transfer of employment.

It was Warren Buffet who said a number of years ago that, you know, I'm going to butcher the stat because that's what stats are for. But it was something along the lines of like 100 years ago, 20% of the workforce were farmers... Today, I think it's some 1%, maybe 2%. And we haven't seen this permanent 18% unemployment for farmers who were never able to find a job, right? The tractor is what killed them because the tractor automated a lot of the jobs that humans were doing manually. But this country has a way of transforming folks to different jobs where new value is created, where new industries and models are created. These individuals will find places in those companies.

Rodney:

Just in general, I'm very bullish on all aspects of supply chain. It's been manual and fragmented for a while. So, whether that's the technology side or the manual side, like pick and packing or working in distribution centers, it's an industry that's continuing to scale, again, for every type of worker. It’s coming to light, especially with COVID, how important supply chain truly is. It will be a place where it's going to be a growth category for workers to move into, which is great for everyone.

Dave:

I think back to 2001 when we had the airlines and 9/11 and, you know, this is a disaster at the time, but, like, now we have apps on our phones and no one carries a paper ticket anymore and it's just much better. A lot of innovations came out of these changes and I expect this is the same for supply chain.

Does Q4 planning differ upstream in the manufacturing sector? #

Full question: We had a question about how the last mile player is preparing for Q4. Does this differ upstream in the manufacturing sector? Are they preparing differently for high big time Q4?

Rodney:

There are a few different aspects in the first mile that we’re seeing. Manufacturers are trying to build more flexibility into their supply chain, which is happening in a couple different ways: They are working on getting both their unskilled and skilled workers up to speed faster with training development, and they're increasing their capacity in their factories. If they’re based in China, some are looking to neighboring countries like Vietnam and Thailand and some are even looking to Europe as an option.

What's nice about additional locations and capacity for brands is that it helps mitigate risk in the first mile and it helps with costs over time. China is getting more and more expensive if you manufacture there. So, it's helpful throughout.

Does holding excess inventory through the supply chain build resilience? #

Rodney:

That's such a hard question to answer since it's so nuanced into your particular product categories. Working capital is king, and having cash is important.

If you have products that you're not rapidly changing or introducing—if you feel like you're going to sell through it—then yes. If you’re seasonal, then you could be putting your business at risk of having high write-down or write-off.

So, it’s nuanced. I would probably take a stronger inventory position not knowing what's going to happen tomorrow. I'd rather support my customer and not miss a sale, again, focusing on them versus worrying about cash. But it's so nuanced. It's really hard to say specifically what the best option is.

How can you use data to better forecast or determine risk? #

Full question: What specific pieces of data are being used to create new metrics or revitalize old metrics to incorporate better risk factors or contingencies into the business plans or sales projections? So, are people using data to be better at forecasting or figuring out their risks or contingencies?

Matt:

That’s something we talked about here at Second Marathon before we got started: What type of companies should be using modern logistics tools and modern logistics solutions.

And I think I kind of answered that question two ways. The short answer is that every company must embrace modern logistics solutions. Embracing new technology and tooling is much more common today than it was a few years ago. To not embrace it and to continue to rely on the rudimentary pen-and-paper approach is akin to managing your business on a brand new computer with Windows 95 running. It’s just not going to cut it.

In supply chain, the stack has changed, technology has changed, business has changed, and you must embrace today's suite of offerings. I find that there's a pretty strong correlation between receptiveness to new and modern logistics solutions and the age or life cycle of the brand.

Some of these older, more traditional legacy brands have a lot of bureaucracy, it's really hard to implement new technology and to even have the headspace to think about that versus younger brands that have a tendency to be more agile. There's so much technology out there, so many great tools that I wish I had when I was running the operation at Birchbox a decade ago.

With the utilization of eCommerce, how will the dynamics of brick and mortar shift? #

Full question: With the utilization of eCommerce, how will the dynamics of brick and mortar shift? How does one leverage this real estate post COVID? So, is there a real estate play here?

Rodney:

When I was at Harry's, they were going to be a direct-to-consumer company, sell online, and disrupt the men's grooming sector. That was the plan. What they started to see was, there's a huge opportunity to expand your reach and also go to where your customers are. And that's brick and mortar.

You see this approach where, and I've mentioned this before, where these direct-to-consumer companies are doing both. And I think there's a great play to do both. Allbirds, and others are doing this, and taking that strategy.

I don't see brick and mortar going away. I don't. I see it continuing to expand and the strategy being to have both channels. You want to go where your customers are and where they can pick up your product and see your product to activate and engage them and to get new customers. So, I'm not as bullish that retail and brick and mortar and all that is going to go away. I don't think it is. I think it's going to expand and it will be different.

Jenny:

I agree with Rodney on that one. The stores are really valuable. And we're seeing two things. We're seeing an increase in ship-from-store, and figuring out how to architect that within their stores. And we’re also seeing some creativity, especially among the D2C. Urban storefronts can be really expensive, so stores are shrinking and not holding as much inventory there, but then they're creating these special little DCs that are outside of that area, and used for same-day delivery and shipping locally.

Dave:

Yes. We've also seen, at least one of our customers has done exactly what you said, which is strength there, lean out their footprints, and they have one day of cover in the store and then we've set up a DC outside of towns that replenish into that so that you can get, you know, 8 to 12-hour replenishment, which allows you to significantly shrink the amount of cover you have in your store

What is the one supply issue that keeps you up at night right now? #

Rodney:

It's having product. In such a dynamic market, you have to know if you actually have specific products. And you have to know where they are throughout the supply chain—whether it's being produced, being shipped, in a warehouse, wherever it is. And it's a very complex market right now. We mentioned sales operations planning is difficult and that no one truly knows what's happening, both good and bad. Having product is the number one thing.

Matt:

Understanding where the risk points are in your operations. There's a lot of legacy players out there, a lot of brokers in the space that pride themselves in not providing a whole lot of visibility to the shipper, to the brand, to lock in customers. Meanwhile, there are certainly tools nowadays that are really trying to take the other side of that trade and provide better visibility.

Supply chains and operations are often highly fragmented. There are so many parties. And not having a good sense of where your product is made, how it gets to you, assuming that it's going to hit your DC at some date because that's what someone told you—you need to know all of that. There's definitely this trend of really wrapping your arms around visibility and understanding where all the breakpoints are in your operation.

Jenny:

I also agree on the visibility piece. And then I would add on the carrier diversity, and just the challenges with carriers delivering on time right now. It's a huge problem for eCommerce companies, for any company shipping right now, to keep promises and then having to keep up with, "Where is my stuff?" inquiries. It’s a big challenge for everybody.

Dave:

The best way to get rid of, "Where is my stuff?" is to ship faster. If people slow down, you'll get more calls. When I think of supply, I think of warehouses and the billions of square feet up there. But as that industry grows by an incremental 20% to 40% or 60% year over year, that warehouse space is being snatched up. And if you're not on time to the party, you're going to end up with no place to ship from come Q4.

What will a world-class supply chain look like 5-10 years from now? #

Full question: Are there ongoing considerations for transforming the supply chain industry? What will a world-class supply chain look like 5-10 years from now?

Rodney:

That's a great question. And really, there are three things here to constantly think about and work on.

The first is just that technology is definitely eating up the supply chain right now. There's no question about it. And with that, comes the question of whether your supply chain has what it takes to actually support this technology. For example, many countries have firewalls, so can you use these technologies in these countries? Is the technology simple and user-friendly enough to be used globally by all parties involved?

The second is, and we really think about this every day at Anvyl, is, how do you make historical incumbent technologies better? Probably most of the brands, most of the retailers have ERPs. ERPs are still very, very manual, right? They're very, very siloed. And it's how do you make them better? How do you make these technologies automated, intelligent, scenario-based, predictive, and/or how do you bring in new technologies that are actually those things to save you time and save you money?

And then, lastly, it's about connecting the entire stack. Jenny, you were just kind of mentioning this. But if you do have manual processes, even fragmentation in your technologies—which truly is the Achilles heel. How, as a supply chain practitioner, do you connect all these things together? Leaving an email is no longer acceptable. And I remember doing this early in my career, everything was through email. And once I left, everything was lost. You can no longer do that today. And that's why there are great solutions like Flexe and Convey and others that you can go and use and partner with that are thinking through and helping these things.

Dave:

You're lucky you got to use email! We started out doing faxes, faxing orders to booksellers and then we got a fax server which allowed us to change the faxes in to send an email which turned it into a fax and set it to their fax number.

Rodney:

Surely enough, we have some large, large brands that still do that today.

Matt:

I think what brands like Shopify have done on the order-platform side, logistic tech companies will do the same for the supply chain. I think more and more operators today grew up in the smartphone age, right? I'm becoming one of the old geezers here as a millennial. Now it's kind of Gen Z starting to take over and being in positions, and they have certain expectations that things will work a certain way. At the tap of a button or two things will just work, right? That's not the case in supply chain as we can all attest.

But, there are tools that rid you of much of the manual processes that you once had to do, you no longer need to do. So, it's creating repeatable processes and gaining access to logistics technology companies that enable visibility so you can make business decisions much quicker. All the automation will become absolutely table stakes in the next couple of years.

Jenny:

Carriers are finally getting their data together and stopping the manual processes. There are so many manual processes, but shippers will finally be able to be predictive. So, we're finally seeing some companies make use of predictive technology.

So when a whole truck is off track, what can I do to make some decisions—even at the per-package level to prevent some downstream effects?

Also, we didn’t really get to it, but sustainability. Companies will be forced to figure sustainability out. And so, some of that is, how do I even understand what my environmental effects are as far as my carbon footprint and how do I layer that into my decision making? The world-class leaders will have figured that out and optimize their packaging and reduce their carbon footprint. So, that'll be a huge topic.

Dave:

The world has been very batchy for a long time and supply chains in particular in terms of big warehouses with long-term leases and only going to one trucking company and having containers worth of goods. And a lot of that is because the complexity of having smaller batches and moving from batchy to single-piece flow is too hard.

As technology comes along and allows folks to handle that, we've seen it with Airbnb versus hotels, and AWS and Azure and GCP versus renting or building your own data center or a co-location facility. All of these trends that we've seen outside of supply chain where you can go to smaller and smaller batches will come to supply chain, which will allow you to put inventory close to customers and track that inventory and use smart technology to make better decisions

We're at time. Hopefully we got to all or at least most of your questions. And big thanks to Jenny, Matt, and Rodney for joining us. Thanks, everyone.

You may also be interested in: #

• Article: Supply Chain Disruption Q&A: A Bias for Action
• The Wall Street Journal: The Rush Is On to Secure Holiday-Season Warehouse Space

About Anvyl

Anvyl is a cloud-based supplier relationship management platform that allows companies to manage suppliers, oversee production, and house historical product data from procurement to delivery of inbound goods. The collaboration engine easily integrates with most ERPs, providing teams with better visibility, operational efficiencies, and smart automation for every part of the supply chain.

About Convey

At Convey, we believe the world’s supply chains need reinvention. As channels, carrier networks, and consumer demands become increasingly complicated, pressure is mounting for logistics and operations teams to become more dynamic, agile, and customer-centric.

Our cloud-based platform connects disparate data and processes, giving shippers better visibility to make smart decisions, and the tools to take action.

From parcel to freight, and first to final mile, Convey helps the world’s largest brands reduce costs, improve visibility and transform transportation into their next competitive advantage. Founded in 2013, Convey is based in Austin, Texas.

About Second Marathon

Second Marathon works with eCommerce brands to develop and improve their shipping and fulfillment operations. Whether you’re looking to scale your operation with a new 3PL or save money by improving your shipping rates, we can help. For a complete list of our services go here.