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Issue 5 2020 - FBJNA From the Editor


Fast Changing Landscape


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MATT WEIDNER Tel: + 1 610 486 6525 matt.weidner@fj-online.com


JOHN SAUNDERS - PUBLISHER Tel: +44 (0)151 427 6800 Mobile: +44 (0)7932 102026 john.saunders@fj-online.com


EDITORIAL


KAREN THUERMER-EDITOR karen.thuermer@fbj-online.com CONTRIBUTING EDITORS: PETER BUXBAUM MARK CALDWELL HANK DONNELLY JOHN JETER AMANDA LOUDIN


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By Karen E. Thuermer


COVID-19 is changing the world as we know it, and that includes all aspects of logistics. Companies around the globe have demonstrated creative solutions to dealing with COVID-19. The airline, for one, found ways to retrofit some of their grounded passenger aircraſt to cargo aircraſt. Freight forwarders joined with carriers to help fill their aircraſt. Icelandair Group and


DB Schenker, for example, signed an agreement earlier this year to use Icelandair aircraſt for 45 cargo flights between Shanghai and Munich to transport medical equipment for health care providers across Europe. Additional flights from Shanghai to Chicago through Iceland were also part of the agreement. The agreement resulted in passenger seats being removed from three B-767 aircraſt to accommodate nearly 7,063 square feet of capacity on each converted airplane and the DB Schenker logo being slapped on the side of the Icelandair aircraſt. In mid-July, the Federal Aviation Administration (FAA) finally agreed to allow U.S.


airlines to remove passenger seats and transport cargo on the aircraſt floor of the cabin if they are cargo-only flights. The FAA also extended the time through which passenger carriers could fly cargo strapped to passenger seats from year’s end to July 10, 2021. The industry indicates, however, that demand for air cargo, however, has slacked off from its high in March. Consequently, air cargo carriers now have ample space and forwarders do not necessarily need to turn to other means with passenger aircraſt. Nevertheless, as the pandemic grows strength inside the US, the National Association


of Manufacturers, one of the strongest trade association groups in the United States, is warning manufacturers that they should expect continued weakening links in their supply chain, as some vendors and suppliers will likely face operational or financial struggles of their own. “Brace for continued supply chain bottlenecks both nationally and internationally,


especially in those jurisdictions hardest hit by COVID-19,” NAM says. “The deeper into the supply chain, the greater the impact of the outbreak is likely to be. Manufacturers with global supply chains are likely to find that Tier 2 and especially Tier 3 suppliers are most affected by disruptions related to the pandemic.” While many large manufacturers have instant online visibility into top-tier suppliers,


the challenge grows at lower levels, NAM warns. A big problem is the fact nearly 75% of US business have reported disruptions to


their supply chain due to CVOID-19, according to the Institute for Supply Management. Related issues included longer lead times for China-sourced components, production slowdowns or stoppages due to staff reductions, and delays in moving or loading goods. Such trends are expected to continue into 2021. Experts suggest this could result in


major changes to industry practices. At the core of the problem are the millions of jobs lost, and those that may never return as companies innovate to meet the demands of the new normal. What might come to fruition is the acceleration of what has been dubbed the Fourth


Industrial Revolution which the World Economic Forum predicted in 2018 would result in humans accounting for only 48% of the workforce by 2025. Digitalization plays a tremendous role in the Fourth Industrial Revolution. Efforts to digitize are already being seen at some seaports (e.g., Port of Rotterdam), distribution warehouses (e.g., Prologis), and air carriers (e.g., Luſthansa). In fact, COVID-19 may well likely push forward the timeline for the Fourth Industrial


Revolution, whereby, according to predictions by the World Economic Forum ‘humans [will] account for only 48 percent of [the] workforce by 2025’ due to changing business models and increasing digitalization and virtualization of industry. The pandemic demands immediate innovation; digitalization will help to maintain workflow, enhance productivity, and create new revenue streams as it tempers the unpredictability of COVID-affected supply chains. Enter Big Data fueled by artificial intelligence (AI). Jonathan Wright, Global Head Cognitive Process Reengineering, and Jim Lee, Partner,


Distribution Sector, - both with IBM Global Business Services, suggest that COVID-19 drive home the need to reduce global supply chain vulnerabilities through intelligent workflows. “The pandemic has revealed the vulnerabilities and fragilities in global supply


chains across most, if not all, sectors and industries,” they write in a report. “Today, organizations are in reaction mode, focused strictly on maintaining supply and meeting customer needs, oſten through hands-on rigor and hard work.” They warn, however, that at some point, leaders must analyze the current pain


points to better prepare for tomorrow. To avoid perpetual reaction to future “black swan” situations, leaders need to evaluate how they can proactively get ready for future unpredictable, yet inevitable, disruptions. “Understanding supply chain risks requires gaining visibility into tier 2 and tier 3


suppliers that, despite their relatively small size, can quickly and significantly disrupt production,” their report says. Most disturbing, recent reports indicate that over 90% of Fortune 1000 companies


utilized Tier 2 suppliers in China, particularly the regions of China most affected in the initial phase of the global pandemic. Simultaneously, Wright and Lee have found that there has been a heightened premium on accelerating or driving greater agility into supply chains to better manage rapidly evolving situations. “Perhaps the most resilient course of all may be teaming up with supply chain


partners to establish a coordinated crisis-support system,” they state. “In such situations, partners will likely rise or fall together, and sharing information, ideas, and response strategies in that climate becomes highly valuable.” Wright and Lee point to ai technology to build smart supply chains. “Tomorrow’s


leading companies will be those that continue optimizing their increasingly global supply chain networks, while also positioning themselves to effectively respond to the next black swan disruption,” they say. In the meantime, companies continue to work together to find ways to fill


immediate needs for this ever changing COVID environment. Where we land this in one year will most likely look quite different from what many envisioned at the start of 2020. Who will survive? Who will not? What companies will succumb to mergers and acquisitions? My guess is there will be many changes and quite a few players lost. But key will be innovation and a willingness to embrace change, be it for short term


advantages such as the Icelandair Group and DB Schenker example, or a longer-term view.


///NEWS


Freight Business Journal North America - FBJNA reaches out to the decision makers and influencers involved in international freight transport and logistics. FBJNA boasts the most informative and authoritative source of information with unrivalled in depth knowledge of the rapidly changing freight business environment. Our complimentary website www.fbjna. com provides the most up to date news and analysis from within the international shipping industry.


If you have any stories or letters which should be of interest or any feedback on FBJNA, please contact our editor Karen Thuermer - karen.thuermer@fbj-online.com


next issue >>


Our next issue will include a Peak Season Preview, features on EC Ports and Freight Audit plus a new section on Freight Software.


For further details contact: Matt Weidner - T: + 1 610 486 6525 E: matt.weidner@fbj-online.com


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