2022 International Logistics in Review: A Former Mega Forwarder's Perspective

Written by Jeffrey Plumley , ASF Chief Commercial Officer

I wrote the following two blogs in 2011 and I had not read them in the intervening years. 11 years later and I happened upon my old blog which I had allowed to go dormant when I joined with one of the Mega Forwarders I referenced in my earlier writing.  

In the intervening years we have dealt with the normal unexpected natural disasters, wars, and a rare vessel blockage of the Suez. But of course, the big events were a series of tariffs levied against China by President Trump and the global Covid-19 pandemic.  

In 2018, during the China trade tariff period I had the opportunity to handle Just-In-Time Ocean freight imports both directly for a major automotive manufacturer and for an OEM supplier to another very large automotive manufacturer.  Inbound logistics teams panicked when containers got stuck at both West Coast and East Coast ports, not to mention containers that got stuck at inland rail yards in places like Atlanta and Birmingham. I received countless panicked calls from highly stressed logistics managers at 2:00 AM hoping for containers to show up at a facility 8 hours inland from the port of arrival because they were within a short window for when a production line was going to go down due to lack of parts. While I absolutely understood the panic of penalties and costs for shutting down a production line, I also had to wonder who thought it was a good idea to go to an extremely lean JIT inventory using ocean freight coming in from Asia to the East Coast of the USA?  

Now, one might well think that large freight forwarder would easily be able to pull the strings needed to get these containers delivered on time by working with the best truckers to get it done. But that would be wrong. You see the majority of the large to “Mega” size freight forwarding and logistics companies now hold their trucking vendors out for payment to 60-90 days. Would you expect a drayage company with all their power units fully booked for the foreseeable future to accept bookings from a Mega Forwarder they will struggle to collect their payment from? Or from a Mid-tier freight forwarding client partner who pays their bills on time, every time and at 30 days or less? 

The results of the COVID upturn were an even greater strain on trucking capacity, coupled with a workforce largely unwilling to return to the office. This was especially difficult for the larger and less nimble logistics providers to navigate, and we again saw the mid-tier freight forwarders outperforming the big companies at almost every single turn.  The more integration we see among the top 5 global logistics companies the more success stories we hear from mid-tier freight forwarders rapidly expanding, while the “big guys” struggle to integrate disparate legacy operating systems and conflicting company cultures. 

My words from 2011 still ring true: “…chose a couple strong technology and service based global logistics partners and truly partner with them to help you in navigating the inherent issues encountered in managing more complex supply chains.”

Is Your Supply Chain Too Complex?

Originally published November 3, 2011

This year, like every year, we have seen natural disasters, political unrest and other unforeseen factors greatly disrupting global supply chains. It seems that you need to think about when your supply chain will suffer from the disruptions, not if.

Many companies source their products far afield in the name of always getting the lowest cost components and combine this with a "Just In Time" manufacturing philosophy and you may have a recipe for disaster. Many US companies have been hit most recently by the floods in Thailand. I know of at least one very large electronics company with multiple Thai factories spending significant time under water for these last several weeks. With no backup plan in place to source components from other origins "Just In Time" has become a disaster. They have placed all their eggs in the Thailand basket and are suffering from the pure easily predicted "Cost Minimization Flu."

Still this cannot stop a company from working to minimize costs, so how do you deal with these disruptions? Many will call for more "near sourcing" or ""re-shoring" of procurement. Certainly that seems to have some logic or place in the plan, especially as true landed cost of foreign sourced goods increase to a near median point with domestic sourced goods. But, this cannot be the only answer in our global economy. Further, is simplifying your supply chain really going to address these kinds of issues? What about the next Hurricane Katrina, Andrew or Hugo? Are you going to avoid any transport coming in to the US Gulf and East Coast? Not likely if you located East of the Mississippi.

So what do you do?  Sure, supply chain managers need to consider "what if" scenarios, but if for nothing else than to develop points of discussion upon which to collaborate with your Logistics partners. Notice I said partner and not vendor. Your Customs Broker / Freight Forwarder / 3PL needs to be looked upon in a collaborative light and not simply squeezed at every turn to eliminate every last penny of cost from the supply chain. These professionals are happy to be your lifeline in times of trouble and will gladly, in a team atmosphere, formulate "what if" scenarios and contingency plans.

In the end, it is not so much a question of how complex your Supply Chain is, but rather "how nimble are you and your logistics partners able to be in reacting to disruptions in your supply chain" be it simple, or complex.  

Supply Chain, Sourcing & Global Logistics Partners

Originally published November 11, 2011

I have been following the developments in the Western Digital Thailand saga quite closely over the last few weeks. The fact that the single source for supply of hard drives for Western Digital will have wide ranging cascading effects on prices. Analysts at Gartner are logically predicting higher prices due to this reduction in supply and this will cause wide ranging issues in prices to consumers and/or profits to manufacturers.

So again, as a company puts together their global supply chain, should they single source such valuable components in the hope of reducing supply chain complexity? Or should they instead have redundant supply choices and instead choose a logistics partner nimble and strong enough to help them in negating issues stemming from moving goods along multiple paths along the supply chain?

As a long time Freight Forwarder and Licensed US Customs Broker I may be a little biased in saying I believe manufacturers need to go with redundancy of supply and rely on their logistics supplier(s) to minimize issues arising from any additional complexity. Nonetheless, I will also say that so often the "Mega Forwarders" with all the resources to service such complexity in moving goods along the supply chain, are also inadequate in providing the nimble service needed to address fast moving disruptions in the supply chain. In the end, this is likely the reason we continuously see the emergence of mid-tier logistics companies better able to invest in state of the art information technology and more efficient responses to change, as well as why we see some of the less forward looking Mega Forwarders falling on hard times in reaction to these same changes. So manufacturers, chose a couple of strong technology and service based global logistics partners and truly partner with them to help you in navigating the inherent issues encountered in managing more complex supply chains.