In a time marked by unprecedented disruption and rapid technological advancements, JC Renshaw, head of supply chain consulting at Savills North America, shared key challenges, emerging trends and predictions for the future at the I.CON East conference in Jersey City, New Jersey this week.
“The biggest issue in the supply chain is labor,” Renshaw said. If a company doesn't have the labor to deliver their products, that's a big risk. Rising labor costs, retaining and compensating staff are all supply chain issues. Labor is a factor that can't be ignored and needs to be a priority in facility planning.
Companies are turning to automation to mitigate that, but not in the way you might think: “Automation is used to maintain headcount or minimise growth while making employees more productive,” explains Renshaw.
He also stressed that thorough training helps retain employees, saying, “Employees are happier when they know what they're doing.”
Global trade disruptions are also a challenge. “During COVID-19, global supply chains have been completely disrupted because so few companies had business continuity plans in place,” Renshaw said. Add in other events like the drought in the Panama Canal, unexpected outages like the one this week at the Port of Charleston, South Carolina, and possible labor union disputes at eastern ports, and “there's always something going on,” he concluded.
A related question is that companies need to strike the right balance in inventory management: What are the right inventory levels that will keep costs down and remain resilient as business conditions change?
Over the past few years, Renshaw’s clients have been working on developing their business continuity plans and have a strong interest in predicting the future of their supply chains.
E-commerce has been growing for a long time, accounting for 15.6% of total retail sales in the third quarter of last year. “E-commerce growth has slowed somewhat since COVID-19, but has picked up in the most recent quarters,” Renshaw explained. Renshaw expects this trend to continue, but with it comes a need for smaller warehouse space and locations closer to customers for faster delivery.
Port volumes, which had previously been increasing, are also trending downward, with all ports except Baltimore expected to see declines in 2023. He expects volumes to normalize to 2019 levels. The audience asked him about the ability of ports to change the dynamics.[Changing] “This is a big decision. For example, if you change your port from New Jersey to Charleston, but your facility is in South Dakota, you'll likely have to change your facility because you have to take shipping costs into account,” he noted. It's not as clear-cut as it seems.
Renshaw also believes onshoring and nearshoring efforts will accelerate.
“Even if there are short-term regulatory headwinds, the horse has already left the stable. But onshoring and nearshoring will progress slowly. Companies won't just end their manufacturing relationships with China. As they develop new products, they will diversify suppliers and direct manufacturing to other facilities to shorten lead times,” Renshaw said.
Renshaw models its clients' entire supply chain networks and runs their business under different scenarios and configurations to determine how best to gain flexibility. Modeling your business network can help reduce inventory and capability redundancies.
Renshaw is seeing an increase in the use of third-party logistics (3PL) companies, as well as 4PL companies, where companies that don't have core capabilities in logistics hire a 3PL to do the logistics on their behalf and assume the risk.
Artificial intelligence (AI) allows companies to use all their data to their advantage. Companies can feed all the data they have accumulated into AI, which can predict incidents before they happen and develop insights and improvements without any special programming. Digital twins allow companies to digitally map their entire supply chain network and test it against different scenarios and disruptions to make better decisions.
“This tool will continue to grow significantly over the next few years,” Renshaw predicted.
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