Episode 17:
Supply Chain Resilience:
Welcome to the Shortage Economy

Hello, and welcome to Episode 17 of Freight to the Point podcast by Zencargo. This week, we’re featuring another session from one of our Navigate conferences. This session was called Supply Chain Resilience: Welcome to the Shortage Economy. If you haven’t heard of Navigate, these are Zencargo’s virtual conferences at which we invite leading supply chain experts to talk about what is happening in the industry, and their predictions for the future. For this session, we invited Marina Lennie, the Director of Ocean Planning and Pricing at Zencargo, and Bjorn Vang Jensen the VP of Advisory Services at Sea-Intelligence Consulting. And they discuss the shipping industry and how visibility across the supply chain can bring value to shippers. Tune into this episode as they explore how shippers need to identify the black holes and gaps in their knowledge, and can use clean data to make better decisions.

Hi, Bjorn, nice to see you. I’m going to dive right in into our topic, which is really exciting. So about a decade ago, when I was working at MSC, Alan Murray, who’s actually the founder of Sea-Intelligence, who you work with, and I sat down together thinking of what things we could do within data sharing to help. And at that time, the main topic of focus was all around schedule reliability, which is obviously still a key focus, but it was such a huge element for shippers in doing their decision making on which carrier they would choose. We started looking into how today to data share more efficiently, starting from old age Excel, moving on to more advanced, and now more modern ways of sharing information. So now there’s more transparency in the marketplace on the topic of schedule reliability, but there’s still so many challenges that we face on the data front more broadly.

I think data is absolutely essential, but there are two elements to it. First is to make sure that the data you’re getting is right. Second is then to make sure that you use it. We said a couple of things here, and in our talks prior to this event, around visibility. And I think I made the remark that we’ve been talking about visibility forever. At least for the 37 years I’ve been in this industry, since I was three, that I said visibility, will only come of container movements the day every container is equipped with an actual GPS to OEIS transponder. And we laughed a little bit about that, didn’t we, a week ago and yesterday Hapag-Lloyd announced that they’re going to basically equip every single one of their containers, not just the reefers, with transponders. And so I went on LinkedIn and reshared that and said, “This is really cool.”

Finally, we’ll have visibility. The flood I got back of comments and debate, first time I’ve really sparked an actual debate in something that I posted. And it was really interesting to see the absolute spread in who wanted it, and who didn’t want it. People who were on the carrier, on the 3PL side were like, “This is overkill. The shippers can’t use it. Why can’t they just use the data they get from their carriers? Why can’t they use the data they get from their 3PLs. They don’t need it.” And of course, you had then people coming in from the manufacturer side, especially, but also the finished goods importer side saying, “We can’t wait to get our hands on this, and could every carrier please do this.” And I think every carrier will. I think it’s a very bold move. I think it’s could possibly be a game changer in the competitive landscape for the carriers who have it, versus the carriers who don’t. Data, you and Helena obviously kicked it around back then. Today we publish the, we call it the GLP, the Global Liner Performance Report.

And it’s dismal reading. We’re almost happy when, these days, when schedule reliability exceeds 10%, it’s a red letter day. It is shocking, down from the high seventies, just two years ago. There are all kinds of reasons for that. And that’s not the subject of your question. But what is lost in the debate is that there is more to a supply chain than the point where the cargo moves from port-to-port. There’s what happens before it gets to the port. There’s particularly what happens when it gets to the receiving port. And that data, I can guarantee you, everybody wants to lay their hands on. Ports, rail, and road are notorious black holes in the data chain for anyone, but can we shine a light into those black holes, and visibility will reach an entirely new level for those who are equipped to receive it and use it.

And that is important, because not everyone is. You mentioned how everything is on Excel. A totally unscientific estimate of mine is that 80% of the world supply chain still run on Microsoft Excel, simply because supply chain has not been popular, or in vogue the way it is today in any company. Progressive supply chain managers who’ve tried knocking on the door on the C-suite saying, “We’d like some IT, please,” have been turned away because supply chain, “Are you kidding? We’ve got other things to do and better places to spend our money.”

I dare say that attitude has changed a lot. So what can you do with the data? Well, since you really can’t do anything about the dismal reliability levels of the carriers, what you can do is keep your buffer stocks up and running or in place at the various points, but also eliminate the buffer stock that sits in those black holes, at least to a large extent. But it requires you to be able to see what’s inside those black holes, and that requires those transponders on containers.

So you’re saying gain better visibility and more insight into those black holes. And then with that quantity of data, being able to clear out the noise, and to then be able to have nice clean data, make your analysis.

Precisely, precisely. And getting that kind of data is not so that you can present in a really nice looking management report that my vessel is somewhere in the middle of the Pacific. Look at how clever I am. I know exactly where on the water my container is. It’s so that you can predict, you can forecast. You’re probably going to need a different kind of IT to filter that data for you, to look at it with hindsight, with experience, bear, hold it up against big data and start making predictions on given this, do we know when these boxes are going to arrive, right? Let’s be careful that we understand each other, that a lot of these boxes are not washing machines and then vacuum cleaners, or skateboards or Nike shoes. A lot of these containers contain components that make a difference between whether a factory is running or not at the importing side, right?

And if it’s not, that can cost. I don’t know? When I was with Electrolux, we had a rule of thumb that said it cost 400,000 euros a day to shut down a plant. Right? So a little bit of IT to make sure that you don’t, I think, is especially, in today’s world, not a terribly difficult sell. But it would be a difficult sell if the underlying information doesn’t come in. Well then you just have a very nice looking piece of IT with no data in it, or garbage data. I’m going to be very harsh share and say the data we get from our carriers and forwarders is not up to speed by any stretch of the imagination.

Anyone who thinks otherwise should come and spend a couple of days with our analysts when they work on the monthly Global Liner Performance Report and see the absolutely appalling state of the data that we get from many carriers, even carriers that would surprise you. And some that wouldn’t. So it’s just not good enough. Those transponders are required, or some other similar kind of data to make the whole thing sing. But with that, you can eliminate buffer stock. You can keep your plants running. You can plan your storage space better, which in many countries is at a premium, and you can become much better at planning upstream in the supply chain, all the way to your suppliers’ locations.

So interesting that you talk about the upstream element, because I’m a strong believer that yes, the carrier, of course, has a part to play, but the better the quality of the data incoming from the customer on when to expect those volumes, et cetera, also plays a big part in planning networks, and et cetera. So what advice would you give to people or to customers who are in that situation to encourage them to look into ways of improving their own forecast on their side?

So a lot of companies, I’m sad to say also, still operates in the silos that we’ve been talking about for at least as long as we’ve been talking of visibility, ever since the notion of a silo was created, and I’m ashamed to say, forgot who did it. I had a meeting with a client only yesterday when we, for the first time introduced the revolutionary notion of having supply chain people sit somewhere inside the S&OP, the sales and operations planning process. That was uphill, to put it mildly. And I was not shocked, but sad to see that that still wasn’t taking place. And that’s the case in many, many companies.

That everything happens in a bubble. Maybe sales, marketing, finance, and S&OP forecasting sit and talk together. And then they come up with the plan. And then they just throw it over the wall to the people who are actually going to execute on it. And that needs to change dramatically. The transport people need to have a seat at the table in sales and operations planning, and in many cases they don’t. So that’s one thing you can push for.

So definitely, more cross functional integration.

Cross functional, particularly in your sales and operations planning. To me, it is patently absurd that transport and logistics people do not have a seat at the table in the operations planning stage of a company. I don’t get it. And it shouldn’t be like that.

A hundred percent. Hundred percent. So I also know that you are a strong believer in the relationship between customers and service provider. So how do you think that that relationship has been redefined by the recent market situation, and what role can data play in that?

Well, I dare say it’s been redefined. For the first time in recent memory the carriers are really, really in the driver’s seat. The closest I can think of was 2010. But if I look back at some of the rates that were closed in 2010, when rates went, as we call it back then, through the roof, and compare them with what rates are like now, and the longevity of that upswing and the doubt around when it will ever normalize is a phrase I particularly hate, but is the best one I can think of. It’s unprecedented. And it has not improved the relationship in any way. It’s simply the pendulum that has swung from one extreme to the other. I guess the good news is, we know that pendulums, when left to their own devices, have a way of returning to the middle, eventually. And the big question is when that happens, because until that happens, I think it’s going to be quite difficult to have constructive dialogues.

There’s a lot of anger out there right now, especially on the shipper side and most particularly on the BCO side. A lot of heaped up anger, and I am afraid of what’s going to happen when pendulum swings back. Some carriers are now inviting you to have broader supply chain discussions, and also considering offering broader supply chain services. I think that’s worth entertaining. I’ve helped clients do it as well. I would say some carriers have more constructive approaches than others, realistic approaches than others to it.

That’s probably the only forum where you can sit down and have at least a civilized debate around how do we manage our supply chain going forward, but carriers will insist that those initiatives involve them. So, I don’t know that there’s a positive answer to this question, I really don’t, I really think balance of power, in any relationship, this balance of power is terribly unhealthy. And when the pendulum swings the other way, it’s equally unhealthy. So I guess I can’t answer your question. That was a very long way of saying I can’t answer your question.

So it’s interesting, because obviously this entire conversation was around data, the quality, the visibility, forecasting, et cetera. But what I heard a lot from you was that the human element is actually more important than ever.

It’s dramatic, but let me just maybe finish off on a slightly positive note on the relationship, because it segues very nicely into the issue of the human element. As a ship, as cargo owner and I’m not even excluding forwarders here from that. Becoming what I call shipper of choice is very, very important. And the interaction with that carrier has to start sooner rather than later. I saw dramatic results when I was on the BCO side, I see good results now, they’re not quite dramatic yet, because it’s still starting, but I have every faith in it with my clients when we try and help them into the shipper of choice position. And so what is a shipper of choice? And here comes the human element. First of all, you need to have really strong connections with your carriers. Depending on your size, you need to have connections as high up as your size will allow you to get. You find a very, very different approach.

This is not about finding the big boss, and because now I know the big boss, you will treat me nicely, or I will call him and get him to whip you back in line. It’s the relationships that matter tremendously. And an awful lot of shippers have not leveraged that. They don’t punch according to their weight. They certainly don’t punch above it on the relationship side. So I’m not saying, go see the top of the company wherever he or she may be, but go as high up in operation as you can. At a much more informative level, you’d be shocked, and you know this from your own background, how many carriers at certain levels, really don’t see shippers, and are desperate to meet and understand your business. And are desperate to explain to you beyond rate negotiations, how their business actually functions. But few take the chance to do that. So that human element is massively important.

I, this is probably seven or eight years ago, was invited to give a presentation at a carrier who shall remain nameless’s head office for their key account management or key client management department. There were about a 150 people in the auditorium. And they were only from the key account management department. This was when I was with Electrolux. I spoke for a couple of hours, and it was in a terrific event. And I learned later that 80% of the people in that room who work in key client management, I was the first actual shipper they’d ever seen.

Oh wow.

We’re talking about big carrier. Okay? We’re not talking about niche carrier. And so the change in relationship that we experienced with that carrier afterwards was absolutely monumental.

Okay. Let’s say to wrap it up, the essential point is the relationship, and around it, whatever data and cleanliness of it you can pick up is great.

Yeah.

So I think we have just about five little minutes open for Q and A. And there’s a super interesting question that I’ve picked up here, which I know you will love and that I’m going to read out to you. How can you make a case for people in logistics to be at the table when making the plan for operations? How can you make a case? So how can you justify that?

Well, it depends on your level and your level of confidence? I dare say the case makes itself. If you go to, where is the head of the head of sales and operations is, it’s quite interesting how somebody’s planning operations and I’m the operations person, and I don’t ever seat at the table. Can I have one please? Right? I don’t know how there’s such a strong, how that would be difficult to make that case? But if you want, I’m very sure it would take you a very short period of time to find a few examples of incidents that occurred because you didn’t have a seat at the table. And that’s even more pronounced. Now we see clients of ours who work with ungodly number of freight forwarders, relative to their size. And I’m talking in the fifties. And you sit there and say, “Well, how are you operating with 68 freight forwarders? What kind of sense? And on what planet does that make sense?”

And the supplies chain transport people sit there and go, “Well, we just got the planning. And we don’t have the space for that. We don’t have the allocations for that. We’ve never known that this route existed. No one’s ever told us that we’re about to open a new plant somewhere, or a new production, or a new product line. Nobody’s ever told us, we were just told to get the space for it. And we can’t. And that’s how you end up working with 68 freight holders, because you have to beg, borrow and steel space at astronomical prices. Whereas if we had had a seat at the table at that S&OP meeting, maybe three months ago where this first came up, we would have had time to go out and try and procure that space for you.” I think it’s an excellent way to convince anyone. And if they’re not convinced by that, then I would suggest you start thinking about finding another company to work for.

Brilliant. I’m sure that anonymous person who ask the question will be at the table next time. There’s another question here, which I find quite interesting. And I’m curious to know your take on it. Are carriers looking to improve the quality of their data?

Yes, they are. But they’re all looking to do it in a vacuum. Every carrier is convinced that their system is the best, and everyone should just adopt their standards, their system. Carriers have funded, mutually, a digital standards association, and none of them has signed up to actually use it. They’re now up trying to pressure shippers into pressuring their carriers to join the standards that the carriers themselves have funded the organization they developed. So what that really means, I think is that everyone wants to understand what standards are being developed and they want to go back and put it into their own systems, because they see it as a competitive advantage to have a better system than others. It can be.

If you’re a very large customer, I don’t want my people to log onto… I know last I was with Electrolux, we worked with, I think it was 19 carriers. I don’t want my people to log into 19 different systems every morning to see, “Oh, where my boxes are?” Right? Standards that can be used. So lots of us went out and bought umbrella IT that could aggregate everything. But this idea that a better system is a competitive advantage was a great idea. Today, it’s the price of entry anyway, why can’t we work together on finding something that works for everyone? Because it is no longer a competitive advantage. Unless you go to the extremes, like Hapag-Lloyd has now done, but I’d be super surprised if that didn’t set off an avalanche of me too, excuse the phrase, but me too initiatives from other carriers. They will.

And then that will no longer be a competitive advantage. Data is the price of entry, or should be the price of entry. But also here, maybe if I may finish on this note, data’s not a one way thing. BCOs and other shippers, in fact, owe it to carriers to send back data and share data. And now we’re back at that shipper of choice thing, and the human element, and making sure that you interact with your carrier, not just one way. That you also share that data with carriers that plan from your S&OP department. Okay, maybe it’s not shared in detail, but if it includes closing a plant or opening five more, you really need to communicate that to your carriers so it’s a two-way street. That will always improve any relationship when there’s communication both ways.

And I think we couldn’t have finished on a better note, on that notion of it’s a definitely is a two-way street and the quality of data goes both ways. And obviously, the more frequent and the more often and the more conversations, then the better that’s going to get. So Bjorn, all I can do is thank you so much for your time. And I think I’m going to hand back to Helena now.

Cheers. Thanks for having me.

Thank you for tuning into our episode this week. It was a super interesting conversation, especially as the ocean rate market is so volatile at the moment. If you have any feedback on this week’s episode, please reach out to us on LinkedIn. We would love to hear from you. And don’t forget to like, and subscribe to our podcast. And until next time, goodbye.