The Covid-19 pandemic has shaken the world economy mightily with massive implications for global supply chains. “Covid-19 acts as a digital supply chain trend amplifier,” says Joachim Schaut, VP Global ISC Intercontinental Supply Chain Solutions, DB Schenker. But how can shippers and logistics providers respond to this trend? “To find the right answer to these trends, they need to strengthen end-to-end visibility in global supply chains,” says Schaut. Complete transparency from the beginning to the end of a supply chain makes it much more resilient and robust.
Joachim Schaut, VP Global ISC Intercontinental Supply Chain Solutions, DB Schenker
“These developments require more agility in the supply chain to make it more broadly based.”
After all, logistics does not take place in a void. Instead, the industry is heavily dependent on economic and political circumstances. The blockade of the Suez Canal a few weeks ago shows how sensitive global supply chains are. Geopolitical events such as Brexit, the disputes between the USA and China, or between China and India are also part of the development. Even the world’s uneven growth phases are changing the global flow of goods. The big stimulus package in the U.S. will lead to a lot of growth there, which is why trade with North America will be strengthened, says Schaut. One consequence is that this development will draw freight capacity away from other trades.
These factors influence sea freight
About ocean freight, Schaut names the factors that strongly influence the business today. For one thing, because too few containers are available, rates on key routes have risen sharply. In addition, the shortage of cargo space is having a negative impact on the reliability of the entire supply chain.
There are also infrastructural bottlenecks: worldwide, problems arise in getting freight into or out of ports. Hinterland traffic is taking longer and longer. For example, the poor infrastructure at the important U.S. port of Los Angeles leads to a situation where it often takes up to a month between the arrival of a ship and the delivery of the container at the final destination. The reasons for this are lack of capacity and transport facilities, but also overcrowded warehouses and congested infrastructure. Such bottlenecks affect ocean freight worldwide, binding containers that are missing from global supply chains.
Sustainability and digitization
Another important topic that will permanently change supply chains is the increasing importance of supply chain resilience. This is not just about political developments but also about sustainability, which will become increasingly important in economic activity, believes Schaut. “These developments require more agility in the supply chain to make it more broadly based,” says Schaut.
The digitization of processes is helpful here: It has received an enormous boost from Corona, and the amount of data available will multiply.
Digital processes offer immense opportunities for optimizing supply chains: A study by management consultants Roland Berger on the changes in purchasing shows that digital processes can reduce the time-to-market for companies by 40 percent – a real competitive advantage for many. Reducing working capital is also a benefit: Those who change their orders from monthly to weekly rhythms reduce working capital and time-to-market. In addition, intelligent consolidation concepts increase container utilization – which may, in turn, reduce costs.
“However, there is not too little data today, but rather many companies have the problem that they have too much data,” Schaut points out. After all, collected data would have to be converted into interactions. And that means, above all, that logisticians have to make decisions faster. “This shows: Digitization must not be tackled for its own sake, but must follow a clear goal,” says Schaut.
A cooperative partnership
In this context, DB Schenker offers its partners and customers the opportunity to improve supply chains with the help of digital tools. The logistics service provider takes a comprehensive approach: “We rely on close cooperation. This is because we need to communicate extensively with stakeholders, not only for greater online visibility, but also to convert results into concrete actions. For this, we need integration far beyond the individual broadcast,” says Schaut. “This encompasses many levels in the companies, right down to purchasing and sales.”
Schaut gives the example of procurement processes in Asia: “In the past, the goods were ordered, the transport was booked relatively simply with the shipping company, then loaded and that was it. Today, it is no longer certain that a customer will get a container. And if you have it, then the shipment out of Asia is delayed.” Appropriate planning well in advance of transport offers the possibility of making the supply chain more stable, reliable, and, in case of doubt, more calculable.
Customers benefit from DB Schenker expertise
The advantage for customers is DB Schenker’s great expertise in executing and implementing supply chain processes: “As a global freight forwarder, we are well positioned. Because we spread everything across the entire supply chain, customers share our cost advantages.”
DB Schenker is proceeding with the integration in three steps: The first step is to define a supply chain strategy. “Companies often start at the wrong end and look for the right technique: but technique is not an end in itself, it has to fit into the corporate strategy,” says Schaut. “We always ask: What are your goals? And how does the supply chain support your goals?”
The execution is then planned on this basis. Only now, in a third step, do logisticians and partners decide on the right technical ecosystem and the corresponding applications such as Control Tower, Internet-of-Things, Collaboration Platforms or Blockchain. “In the plethora of solutions, we keep track of them and connect them to the right partners,” says Schaut. “Sure, Corona is a trend accelerator, exposing risks in global supply chains,” Schaut says. “But this acceleration is also an opportunity to make supply chains much more stable and resilient.” For the next crisis.
“Disrupted supply chains? For greater resilience, companies need complete transparency. DB Schenker helps customers and partners do just that. #DBSchenker #SCM #resilience “Tweet WhatsApp
Joachim Schaut, VP Global ISC Intercontinental Supply Chain Solutions, DB Schenker, gave a presentation on this topic at BVL’s Digital Logistics Days 2021 online conference. The video can be found under this link on Youtube: