Amid ongoing unexpected events, supply chains continue to readjust and adapt

The tragic collapse of the Francis Scott Key Bridge in late March served as yet another reminder of how vulnerable, or fragile, the supply chain can be, in a time of crisis, or an unexpected calamity.

Expecting the unexpected going back to the onset of the pandemic in March 2020 has really been a part of supply chain and logistics lexicon. As we know, there were many logistics and supply chain “lessons learned” coming out of the pandemic, which clearly still remain intact today, especially including the need for supply chain resiliency and preparedness, as well as flexible and nimble deployment of labor, assets, and technology, among others.

Of course, the Baltimore situation is not the lone event we have seen to have an impact on the supply chain. There are a whole host of others such as the Panama Canal drought, the hostile Red Sea situation, various weather-related events, and the ongoing wars in Ukraine and the Middle East.  

While these situations are each unique, in their own ways, in terms of the effect they have had on logistics operations, they have occurred at a time when there has been a common theme among various industry stakeholders that despite these occurrences, supply chain operations have clearly found their footing on a path to what could be viewed as a return to a more typical cadence, or rhythm.

In a recent conversation I had with Tom Nightingale, CEO of AFS Logistics LLC, a freight audit and payment company, explained that the concept of supply chain resilience really goes back to the dramatic flooding in Thailand in 2004, which compromised the hard drive industry.

“That really got a dialogue started that has continued and probably accelerated, as people have realized some of the associated risks with a lengthening of the supply chain and the concentration of supply bases,” he said. “Which is a natural outcome because you have a concentration of resources, whether they be people or natural resources that can provide certain services.”

What’s more, he added that the talented supply chain professionals these days are looking at sourcing risks and trying to mitigate those risks with multiple strategies, including things like nearshoring, supplier diversification. And Nightingale also observed that, from AFS’s perspective, there is an increase in the diversity of traffic in the form of a shortening of the overall length of haul, as people will try to get production and consumption closer to each other. That is evident in things like domestic length of haul and reshoring to Mexico, with Nightingale pointing out that previous financial decisions, when, for example, a company may have saved a “penny per widget,” is no longer worth the risk.

“I think the pandemic really put an exclamation point at the end of the sentence that started all the way back with flooding in Thailand years ago,” he said. “There is definitely a trend back to more localized production and consumption than we have seen in years past. I think that will continue as logistics and supply chain services providers help people assess those risks and find ways to work around them.”

Chris Rogers, director of research for S&P Global Market Intelligence, noted that there is a general sense that supply chain and logistics operations have returned to normal—but that sense, he said comes with one major exception, in that “normal” for supply chains means that there is always something going on.

As for the pandemic, he explained it was more of a demand-driven event than a logistics event.

“We all wanted everything, and we wanted it now and that's why the system got gummed up,” he said. “In any given month, there will be somewhere in the world, like a labor strike, a fire, something's gotten blocked, something's gotten dropped, somebody's gone bankrupt. There's always something going on, and logistics always finds a way around it. There is now a focus on being more predictive in terms of assessing where the next problem will occur, and if something starts to break, knowing where the downstream impacts are going to be. That is what many shippers are investing in so they have the tools for contingency planning.”

The fact remains, as Nightingale and Rogers point out, that, at the end of the day, logistics and supply chain operations continue to adjust and adapt to the unexpected to keep the engines of commerce moving across various modes. That is something which will never change.