Year in Review: Supply Chain Innovation 2020
Jimmy Shafer, SVP Integrated Design & Solutions
How would you summarize your experience with innovation and engineering in the supply chain industry this past year?
From an engineering perspective, it really was about discovery and design. If you think about customer challenges, there are a lot of changing networks. Customers are looking at rebalancing and trying to understand new requirements and new expectations they’re getting from their customers, and bouncing that off of what they have their network models built to achieve. That’s what our engineering team really felt this last year; we had more data and more unknowns that came into the picture, so we had to run a lot of iterations and that was where we became more consultative. A lot of times it’s supply chain engineering, it’s a solving process. We get requirements, we have certain inputs, and we’re able to optimize. This year was more about a very creative, engaging process with our customers to try to figure out what was the right answer as we look toward the unknown.
How did the pandemic affect customers who were already running optimization strategies with NFI versus new customers?
We have long standing customers who we saw surges in and NFI had to send a really proactive response. That’s a positive when you go through some disruption like this. If you take a look at what took place with some of the new customers, and some of the long standing customers in different verticals, they were in a much different scenario where they might be shrinking. If you were in the retail brick and mortar side of things, or fashion, or more retail specific goods that were not e-commerce centric, you were shipping into actual stores. These customers are trying to figure out how to fulfill orders in the future, versus figuring out how to flex to meet a new spike in demand, like our customers who are already growing.
We saw end-customer spending dramatically reduce in the services, entertainment, and food industries; and we saw a tremendous pickup of spending around essential goods, home products, and electronics. These are all the areas where we had surges. We had to be able to think outside the box during that period of time with some of our customers. Because the growth came on so rapidly and so fast, our team had to solve for meeting that demand requirement when there were issues with capacity or labor. How are you able to put things in place? Our ability to sense how to put things in place is a differentiation factor that NFI brings. Our teams can adapt to changes and bring assets, people, process, and technology to the table.
What do you think was the main challenge shippers faced in regard to their supply chains in 2020?
Dynamic requirements. If I go back to the first conversation of unknowns, what customers were planning for in December through February is dramatically different from what they were planning for in August, with a tight window of changing requirements. What we see on the design side is that typically our cycles can be several weeks, sometimes months, as we go into implementing networks. As we were going through those cycles we would see very large changes, whether we were designing a dedicated fleet with iterations of upwards of 10 to 20 scenarios for a single fleet operation, or trying to understand the best way to handle new requirements coming in for customers that were essential providers, beverage companies, or home goods giants. All of these new requirements coming in showed how they were responding to their new customer expectations and in some cases, that’s where we would find barriers, gaps, or constraints.
That’s when NFI brought creative solutions to the table for customers by introducing our real estate team, labor solutions, or by implementing our technology. In some cases, our customers’ technology had not been renewed enough to be able to handle some of the new requirements. As we were going to try to put automation in place to help support the labor at sites, there was a lack of infrastructure and planning systems to be able to do that. That offered an opportunity to have a wider discussion with customers about network design, versus wanting to have that being in-house like before.
Was there pressure to expedite those processes because of the pandemic?
Absolutely. Our approach has always been that we’re going to tell you exactly what we can do. The “Bleed Blue” culture at NFI assures that we will help customers get to that next step. It may be a 20-step process, but what we’ll do is break it up into phases, and interpret the data to figure out the right next step. That’s how we managed customer changes during the pandemic or during this dramatic change. Sometimes it’s not a full linear path, our customers might create a solution to fulfill an immediate need and then change strategic direction, so we as a provider need to be nimble.
The other thing I would mention that was a pretty significant challenge this year versus other years, that I don’t think is going to change, is the sheer amount of data. When we get information from customers to design a warehouse, a fleet, or assess and optimize their transportation network, there’s specific amounts of information they give us that we use that to do our design analysis.
We were able to respond this year with new partners, new technology, and focusing our strategy on being data-driven as a company. That’s really where the industry is going. If you think about challenges to the supply chain industry and the shipper, it was just two or three years ago that it was all about capturing data, visibility, transparency, getting real-time and more sensorized data, and capturing progressive points of process. Now, it’s how to become more data-driven to execute upon those data points. We’re seeing that the data that started back in 2018 is coming into our engineering for design consideration now. For example, we had many prior deals where over 2 million records of data were given to us that we can now try to optimize a solution around. We’re going to continue to evolve and take that leading step in data interpretation and execution, and invest in better tools to continue to support our customers.
What were some of the repetitive situations that customers were faced with?
Some of the repeating themes of customers were around the labor front. Whether it’s drivers or folks in the warehouse, it’s all about how we utilize our critical assets. In many cases, a common theme was taking a hard look at customers’ warehousing or fleets and utilizing the assets that they have in a different fashion across their entire network, whether it be by location or using their warehouse in a multi-service model. An omnichannel approach was a big conversation with a lot of customers this year. We created some of the scenarios that we’ve talked about by trying to manage inventory and assets differently to get the best outbound service level. We asked, “What if we did some type of e-commerce and B2B store fulfillment? What if we combine these fleets together, would we improve our utilization overall and be able to reduce some outside spend?” That’s the kind of scenario planning that was going on throughout the entire year.
How else has NFI helped shippers navigate this past year?
One of our biggest value propositions is capacity. If you think about our people, our assets, our technology, our ability to create and share assets across customers; that’s a huge value proposition we bring to the table. I’ve been in 3PL for over 20 years, and a distinguishing advantage for NFI before and during this last year with the pandemic is that we’re able to quickly enable and implement new facilities on the warehousing side in weeks because we’ve got the real estate capacity.
On the fleet side, we could send some changes between different customer vertical markets and share assets proactively. For example, we might’ve had a downturn in a food service customer. We were able to take some of those trucks and allocate them to a beverage customer surging in order to avoid a plant being shut down. These are the types of things that happened weekly during most of the year. In engineering, our role is really taking a look at the data and seeing those things emerge. You have to give it to the operational leaders too, because they’re able to get that implemented quickly.
A lot of our customers are on multi-year journeys to renew their IT and this year, a lot more complexity came into play around what they have to do in the next two to three years to redefine who they are. For example, taking your network that’s designed for B2B fulfillment and pallet and case quantity, then finding a way to have success on the e-commerce front; sometimes those infrastructures and IT systems are not in a place to be successful and you may have a multi-year challenge. A lot of our conversations surround instantly giving that upgrade and renewal to a customer just by coming to NFI. With our ability to bring in Manhattan and our ability to bring in our automation partners, we really get people up to speed.
I think empowering people through automation is another big differentiator for NFI. One thing we’ve done very successfully is experiment and drive innovation to learn about new technologies and work with the right partners. It was a team approach, our ability to bring the right partners to the table and help vet business cases with our customers. In many cases, our customers haven’t started down this path yet so we’re able to share with them our insight, knowledge, and best practices around automation; whether it’s in trucking by using different types of DriveCam and optimizing how we’re positioning our fleets, or looking at Vision Guided Vehicles (VGVs) and Automated Guided Vehicles (AGVs) in warehouses to enable the labor that we do have to be a lot more meaningful, safer, and more productive. I think our continual experimentation makes NFI a unique value for customers.
How have the relationships with customers and 3PLs evolved throughout 2020?
The role of a 3PL tends to be a very prescriptive design. That’s no different than integrators, where if you go to a consulting company, you’re going to give them requirements that they will help you design, run scenarios, and solve for you. Engineering typically requires a lot of data and decisions along the way. What’s changed this year is that we’ve been a lot more consultative, it’s been iterative, and we’ve brought ideas to the table that we discovered as we were working through the process with the customer. For example, we may notice anomalies in the data, make some suggestions, share best practices, and let you know what the right fit is — whether it’s design planning or technology. That’s been a big conversation in the last 12 to 18 months, especially this last year, where customers want to take a bit of a roadmap approach and uncover what technology makes sense to address their problems.
Other things that evolved include speed and the need for us to guide customers down a path faster than normal because lead times are compressed. Ordering assets is another big evolution that was different than prior years. NFI has tremendous partners, quite a bit of inventory, and access to capacity of manufacturing. Whether it’s MHE, racking, automation, trucks, or trailers, a lot of our customers are approaching us as a partner now to help them gain access to capacity.
How do you feel like the past year will impact the industry for years to come?
I think the future of supply chain is going to be about ecosystems, partners, data, connectedness, and more digital. I think we’re all starting to feel that. If you think about the Electronic Logging Device (ELD) compliance we went through a couple of years ago and what that’s driven in the transportation world, now with the pandemic we are looking at eBill of Lading and ePOD in warehouses. Customers are looking to perform contactless-type deliveries and digitize paperwork so we can better improve the utilization of our drivers, reduce dwell time, and try to make the operation safer.
The warehousing side of automation presents huge opportunities for us to be safer and more efficient. That predictive ability of risk, preventative maintenance, and the ability to make operations and production safer by using automation that’s more intelligent is going to be a huge factor affecting shippers in the future.
If you think about what other shippers will go through, it’s going to be about network adjustments and network balancing. An omni-channel inventory concept will determine what inventory should go where, how to adjust for direct-to-consumer (D2C) shipping versus B2B, and what are optimal locations. You’re going to continue to see for the next two years customers taking a hard look at where they have inventory forward deployed, what would be ideal for last mile, and whether they should do some light manufacturing or assembly that might be closer to the end user. Our customers are setting this expectation while trying to compete with services like Amazon Prime. Two-day shipping used to be the bar, now it’s one-day for some products. Customers are having to figure out sourcing strategies around tight shipping windows. A lot of that is where we come into play, by looking at ways to implement the practical execution front and helping run what-if scenarios.
E-commerce is another big focus to call out. We knew back in 2019 that, statistically, every year we had more and more e-commerce demand, so we knew it was coming. What we didn’t know was that in 2020 we were going to see a significant multi-year jump in the amount of e-commerce activity. I think that demand will sustain, it won’t slip back. We’re also going to see a lot of customers facing new competitors and that’s going to be a big challenge for them. New competitors are going to be looking at supply chain as a potential offensive opportunity and a way for them to capture market share to gain more margin.
The last note would be from a systematic and a process perspective, 3PL partners tended to be on the execution front in 2020. Omni-channel, inventory management, reverse logistics, harvesting parts out of a postponement operation for reuse, and all the things that manufacturers typically do; I think you’re going to start seeing questions around who does planning and at what point in the supply chain. Is it better to have that out in the field and be more nimble, or is it more Enterprise Resource Planning (ERP) centralized? I think you’re going to see a blend. 3PLs like NFI are going to have more order management, edge-type planning and prediction that they can provide to their customers.
Jimmy Shafer, Senior Vice President of Integrated Design and Solutions at NFI has over 20 years of experience designing supply chain network solutions for customers of all sizes. He leads a team that pushes the envelope in exploring, designing, and implementing new technologies and solutions that provide greater efficiency and cost savings to our customers.