The coronavirus pandemic has brought supply chains to the forefront, whereas previously, many were accustomed to it running unseen in the background of everyday life. But for supply chain leaders, the pandemic has shifted focus from business as usual to crisis management, and planning for more robust supply chains in the future.
"What we've seen, for all of us, it's been unprecedented," Georgia Ports Authority Executive Director Griffith Lynch said Tuesday, when practitioners from across the industry came together to share insights with the U.S. Chamber of Commerce.
The group discussed how the pandemic has shifted what supply chains are focusing on. Here are three main takeaways from the conversation:
1. The need for storage surges
"We've moved from a just-in-time world to a just-in-case world," Lynch said, adding that a lot of the port's shipper customers are rethinking their supply chains.
Shippers will, in the short term, need ports and carrier partners that are able to provide extra storage, he said.
Much of the warehouse space available throughout the U.S. is being absorbed by e-commerce customers that have seen a significant increase in business since the pandemic, he continued.
Multiple shippers have approached the port asking for free storage, especially as carriers have canceled an increasingly large number of sailings in recent weeks, he added.
2. Container balance normalizes but issues shift to demand
Blank sailings resulted in an imbalance in empty containers throughout the world. When sailings were canceled, the empty containers did not return to Asia where they could be used for exports. West Coast ports have already dealt with the issue by bringing in megaships to evacuate empty containers, Mark Hirzel, the export manager for customs at American Honda Motor, said.
"The good thing is we got everything repositioned now so we can start the flow again," Hirzel said. "But what we have now is a delivery demand problem on our side."
As retailers open again, the issue isn't getting the inventory onshore, but finding someone to buy it. There will likely be other imbalances that arise going forward, and technology will play an important role in helping to smooth those out, Hirzel said, pointing to tools like the Port Optimizer at the Port of Los Angeles.
3. China + 1 garners renewed interest
Multiple panelists agreed international sourcing as it relates to China is likely going to change. No one was pushing for wholesale reshoring, but rather diversification.
"We can't have all of our eggs in one basket," Lynch said. "I don't think having a lot of cargo come from the same place makes sense for the future."
Lynch said the future will likely look like the China+1 strategy that has been tossed around in the world of think tanks for over a year, but is getting more attention as a result of the pandemic. Items that are especially important to national security would be re- or near-shored, he said.
The U.S.-Mexico-Canada Agreement will be an important part of the "plus-one or plus-two strategy," Bidwell said, adding that the legislation outlines details on trade facilitation and electronic manifests. "The USMCA can act as the quote-unquote easy button or easier button."
The pandemic is not the only issue as it relates to China. Some are also concerned that China "won't meet its end of the bargain" on the Phase 1 trade deal, Bidwell said.
Moving to China + 1 will be less efficient and more expensive for shippers, Hirzel said. "That extra cost is something we need to accept as reality and work hard to mitigate."