Guest Blog Post: Aaron Brown SVP NFI Industries / California Cartage
In 2019, amidst a strong economy, shippers were facing supply chain challenges such as tight truck capacity, near full employment, and a developing trade war with China. These factors caused companies to focus their supply chain efforts on capturing efficiencies and mitigating rising costs.
Fast forward to today, and the world, as well as supply chain priorities, are very different. In an environment presenting simultaneous health, economic, and political crises, shippers are now focused on eliminating risk within their supply chains and serving customers in new ways amidst significant uncertainty.
These changes include some structural changes to supply chains at a macro level. Companies will likely diversify sourcing away from Asia. Essential goods will be increasingly manufactured domestically, and items will be imported from more diversified geographies, places like Mexico or India. Over the long term, this should create a better balance of imports between the East Coast and West Coast ports, and more demand for domestic transportation.
Also, with more people working from home, there is an accelerating focus on developing e-commerce shipping channels and speed of delivery to end consumers. I would expect shippers to shift away from just-in-time inventory management practices and keep greater levels of inventory in stock to off-set risks of lack of supply. This should continue the demand for more industrial real estate, keep warehouse vacancies low, and accelerate growth opportunities for 3PL’s in e-commerce fulfillment, final mile delivery, and reverse logistics.
In the near term, the summer is likely to be slow as the backlog of supply from Asia mostly hit U.S. shores in April and May, and the rising unemployment and falling consumer demand caused many shippers to pull back their order log. However, now in June, more states are slowly reopening their storefronts and offices. Barring a significant health setback, this is a trend that should only build through the rest of the summer and straight into the holiday season. This will push unemployment back down, accelerate the release of pent up consumer demand, and I’m optimistic that it will set up supply chains for a very busy peak season.
While the changing landscape is requiring shippers to develop new methods and routes for both sourcing and delivering products, partnerships with 3PL’s with diversity in services and geographies can help navigate through these changes.
Aaron Brown oversees all drayage operations for California Cartage and NFI, which include both asset-based and asset-light operations, and consists of over 1,200 drivers across 15 marine terminals and inland ports. Aaron and his team specialize in connecting customers’ international and domestic supply chain networks.