By Brian Moran
In a recent Small Business Edge podcast, I interviewed Kathleen Sullivan Garman, the Founder and CEO of Sully Garman & Associates. Kathleen is a top expert in supply chain and logistics, and someone who can help business owners run smarter companies. We discussed the state of supply chain in 2021 and what business owners can/should be doing this year with the lessons they learned from last year. To listen to the entire podcast, see the player above.
Brian: How would you describe what happened to the global supply chain in 2020?
Kathleen: It was a chaotic year in a lot of ways, especially for e-commerce. There was a massive surge in online shopping, which created a surge in demand for products, which created a surge in manufacturing (especially overseas) and a surge in freight forwarding.
The pandemic created disruption in shipping lanes that was unprecedented as container ships were diverted from ports that were closed, manufacturers had to close due to COVID-19 shutdowns and products of all kinds were delayed. In addition, some marketplaces like Amazon restricted what products they were going to ship out (fulfilled by Amazon) and that created a ripple effect for sellers that needed to find new warehouses to get their orders shipped out.
Brian: Did the pandemic expose our country’s weaknesses or dependence on other country’s for critical equipment, products, and services?
Kathleen: We have always been dependent on other countries for our products. A small percentage of products are made in the U.S. Even companies such as Coca Cola and Ford rely on foreign supply chains for components and materials. The pandemic exposed our dependency, but our political climate did as well. The “buy American” tag is a misnomer given how much of our raw materials come from other countries. We are a worldwide economy and it’s important to understand and respect that rather than creating friction against it.
The consumer goods industry rallied as much as possible. U.S. manufacturers tried to stay open as essential businesses, containers started moving again, but the entire chain was incredibly disrupted. Container ships had been diverted and were not on their usual shipping routes, ports for unload and forwarding were either feast or famine. The mega ships can only fit into certain ports and were on a specific schedule that ended up changing the entire shipping lane map. Ships would stay longer in each port for unloading and often it was cheaper to send back entire ships with empty containers rather than wait to refill them.
Although small local businesses struggled with the shutdown, online merchants were thriving, but were challenged to get products out to the customers in an efficient way. The sheer unexpected volume of shipments for e-commerce orders swamped our delivery services.
Brian: What are you telling companies about their supply chains for 2021? What would you tell our listeners – mostly owners of small and midsize companies?
Kathleen: Patience is the most important thing right now, and budgeting. Learn to look at long range plans both financial and practical. Due to the surge in shipping and the disruption in the chain, pricing is higher right now. In 2019 I could get a shipment on the ocean to the US at an average of about $1 per kg cost. In 2020 it ranged from $1.50 up to $3 per kg in some cases. Your shipments will take longer to arrive using the least expensive options and may sit at a port waiting for space to be loaded/unloaded. So long term planning is critical. As is diversification. If you can get your product from two different countries, you should always have a backup production source.
Brian: What are you telling your domestic clients right now about the next 90 days?
Kathleen: Things are stable right now as products were efficiently coming into the U.S. near the end of 2020, but once here there were drastic slowdowns in logistics from USPS, UPS, FedEx, and other final mile carriers. It seems to be easing as consumer purchasing does its usual Q1 slowdown, but given how unpredictable the virus is, it’s critical to keep inventory and products available to make sure you can fill orders should people continue to be stuck at home. This may mean paying surge pricing for inbound shipments and outbound fulfillments. It’s the “cost of doing business” and right now e-commerce is one of the few businesses during the pandemic that are thriving.