Worley Blog

THE TIGERS ARE BACK

Posted on: March 21st, 2022 by Clifford F. Lynch

The beginning of the Chinese Lunar New Year of the Tiger on February 1 may have gone largely unnoticed, but it is beginning to look as if this Tiger year will bring some significant challenges and opportunities to the supply chain manager. The third sign of the Zodiac, the Tiger is associated with braveness, strength, and the exorcism of evils. Those of us born in a Tiger year are competitive, unpredictable, and confident. *

So, what does this have to do with the supply chain? In my mind, it suggests that this will be a year to continue with the flexibility and innovation we have been forced to adopt during the trying times of the past 24-30 months. There still are plenty of “evils” to be exorcised.

Currently, one of our major concerns is the Russian/Ukrainian war. While not directly involved, many of us are dealing with the side effects. Those concerned with imports and exports already are experiencing greatly increased ocean and air cargo rates; and at home, both gasoline and diesel fuel prices are higher than they have been in 15 years. (On March 1, the price per gallon of diesel fuel was $4.104, up 25% from March 1, 2021, and rising.) Some European ports are closed, and others could follow suit at any time. Hopefully, this conflict will behind us soon, but it could take years to negate its effects.

In addition to higher truck rates resulting from increased fuel and other costs, there is every indication we will continue to experience capacity issues. The increase in online buying brought about by the pandemic has continued, and many consumers are viewing this as a practice they do not want to give up. As this volume increases, the capacity issue is further exacerbated by the ongoing, frequently mentioned shortage of long-haul drivers.

If you are involved with online purchasing and haven’t done so already, now would be a good time to review your inventory deployment. Many of us are getting exhausted with news of Amazon’s latest, but like it or not, they are a force to be reckoned with. They now have at least one major distribution center in 45 states. While competitors such as Target and Wal-Mart are making some progress in competing with this network, others are not. The last mile is getting increasingly competitive.

This year, we will see some of the Tiger attributes at work in the construction of multi-story distribution centers. Warehouse space is scarce and expensive in some major markets, and land costs are increasing rapidly. While it might look like a throwback to the 1960s, today we have the technology to operate these buildings efficiently and economically.

The continuing need for flexibility and competitive aggressiveness also suggests this could be a good year for logistics service providers. (LSPs)

Many firms will not have the resources to build a large network of privately owned and operated distribution facilities, but to compete in the last mile environment, inventory must be placed in strategic locations. A network of LSPs can meet the need without investment. Not only will it facilitate service and often reduce costs, but it will also provide the necessary flexibility. Adjustments in markets, volumes, modes, and techniques are much easier to make than in a “brick-and-mortar” system

Do you know what the Metaverse is? Facebook users are aware that the company changed its name to Meta to reflect the next generation of networking. In announcing the name change, the company said “the Metaverse will feel like a hybrid of today’s online social experiences, sometimes expanded into three dimensions or projected into the physical world. It will let you share immersive experiences with other people even when you can’t be together – and do things together you couldn’t do in the real world.”

Many of us haven’t even digested blockchain yet – and now this. I have no clue as to how this might affect the supply chain, but some people think they do. Already, we are seeing articles about the Metaverse and the supply chain. My strong suggestion is that we all try to understand its application if any. I think this year will see some lively discussions of how it may influence supply chain management techniques.

Finally, as if all this were not enough, the year of the Tiger will bring us the expiration of the contract between the West Coast ports and the International Longshoreman and Warehouse Union on July 1. The ILWU represents 20,000 workers at 29 ports, and these negotiations have often been contentious. With port conditions such as they are, this year probably will not be an exception.

By the way, if you are a lottery player, the lucky numbers for a Tiger year are 1, 3, and 4, as well as variations such as 13 and 43.

 

*Years of the Tiger include 2011, 2010, 1998, 1986, 1974, 1962, 1950, 1938 ……..