This is the inaugural article in our ask-the-expert series, where we will delve into the intricacies of supply chain essentials with the insights and perspectives of supply chain experts at Toyota Tsusho.
We hope these perspectives will help shed light on the intricacies of supply chain management and optimisation for your organisation.
Today, we will be speaking with Tracy, our inhouse manager, with 14 years of experience in supply chain operations, currently overseeing freight & logistics operations in Toyota Tsusho Asia Pacific. Tracy’s experience with logistics has made her an important decision maker in helping the team at Toyota Tsusho to overcome challenges in supply chain management and logistics particularly exacerbated by the COVID pandemic.
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Q1. What do you believe is a pertinent area of supply chain management which organisations should place greater focus to optimise, moving forward from the pandemic?
From my personal experience, I believe that streamlining freight arrangements and operations must be a key area of focus for companies across industries now in this post COVID world. It is common knowledge that supply chains faced significant disruptions during the pandemic but across its various segments, freight saw the toughest obstacles. I remember during the height of the pandemic that it became clear many companies had taken seamless air, sea and land transportations as granted but the pandemic revealed many vulnerabilities in freight arrangements globally.
For instance, freight rates became highly volatile and companies had to quickly adapt to changes in shipping modes. At the start of the pandemic, many companies switched from air shipping to sea shipping due to border controls on flights. Restricting air travel was the first measure of border control for many countries. Later in the pandemic however, shipping became the more unreliable form of freight as routes were increasingly disrupted by port closures. Some carriers were even unable to return from destination ports, resulting in shortages. Companies then had to yo-yo back to air shipping. Toyota Tsusho responded to these challenges by implementing regular updates on freight rates and the latest news on various trade routes. This allowed them to provide customers with greater visibility of their shipments and pre-empt delays.
Q2. What weaknesses or vulnerabilities of freight were most /exposed in the pandemic based on your experience?
Probably the most significant was the sudden onset of closures and travel restrictions. In some cases, transportations across borders were made impossible overnight because the destination port had closed or the place of rest did not allow transport out.
A notable example of this was the Evergreen incident on the Suez Canal route in 2021. The incident placed huge pressure on global supply chains because it also occurred at a time where shipping was trying to recover from earlier lockdowns. The blockage added around eight days to the immediate journeys of ships, and many businesses globally were affected. The true cost was even greater however because the blockage led to an increase in pricing in the shipping industry, especially in air freight pricing, and companies had to urgently reorganise time sensitive supply lines in that period. The impact of the incident in Toyota Tsusho’s case, we had cargo aboard the Evergreen en route from Thailand to Russia expected to arrive in March of 2021 and it eventually had 5 months of delay, arriving only in August of 2021.
Today, organisations are more sensitised to the possibility of such disruptions amounting from a myriad of possible causes such as natural disasters, port strikes and shipping accidents which explains why I find that nowadays stakeholders in the global supply chain such as TTC are taking more initiative in encouraging transparency on global supply chain affairs through newsletters and publishing insights. The concept of safety stock is also being given more weight in many companies as they try to balance between supply chain efficiency and resiliency.
Another vulnerability faced was that organisations did not have sufficient visibility of their supply chains. This really led to many operations and logistics departments essentially going blind during the height of COVID. Changes on the ground to cargo and freight situations were occurring daily but many companies did not have the measures in place to receive this information and deal with these changes effectively.
For example, as holding ports became over congested with shipments that could not leave, some cargo had to be moved out to other holding areas on an emergency basis. Companies without robust tracking systems in place essentially lost sight of their cargo in the supply chain as a result. There were also frequent breakdowns in communication from suppliers due to sudden changes in transport arrangements. This means companies could not plan inventory levels anymore because so much information was missing, from lead time to arrival dates etc.
Q3. Do you believe these vulnerabilities in freight have been sufficiently resolved by organisations coming out of the pandemic?
I believe that organisations have made some progress in addressing these vulnerabilities in freight. Particularly in relation to port disruptions and the reliance on air transportation, but more needs to be done.
Recently, many organisations have tried to address the risk of air and seaport disruptions by working to localise their supply chains. This means moving their suppliers closer to their manufacturing facilities and customers. There is a belief that this can help to reduce the risk of disruptions caused by port delays and other transportation issues in other countries. However, localising the supply chain is actually very difficult for most organisations.
For starters, when a company has local suppliers, its reliance on air and sea transport is reduced but it gains a significant exposure to trucking and last mile logistics in order to move goods quickly from one location to another. While the distance of travel is reduced, the accident risk per mile in trucking and land transport is many times higher than air and sea. Furthermore, when companies switch to local suppliers, it is difficult for them to maintain the same precise standards and specifications in their ordered products.
Q4. To conclude then, what are further measures you believe organisations should take to secure their supply chain against sourcing and freight risks?
Most importantly, strong supply chain visibility is a must. Organisations should make sure that digital and technological solutions are being made full use of to achieve this. Many organisations, especially older or smaller ones may feel that certain processes such as getting courier updates and order generation should still be done manually or offline because that's how it has always been done. But I think leveraging diverse technologies such as supply chain management software, IoT devices and blockchain help improve visibility and traceability within supply chains very significantly. This makes it easier for companies to identify areas requiring improvement in their supply chains and has a knock-on effect in allowing companies to identify the right technologies and solutions to implement in future. Organisations must realise the value of having real-time updates on a strong platform to integrate and view all of their container and cargo information. Today, being reliant on carriers to provide all the information elevates supply chain risks significantly in the long run for any organisation.”During the pandemic, tracking technologies also improved significantly due to the increased demand for all kinds of features. For instance, nowadays you have multi server GPS tracking, IoT tracking etc; that refine container tracking services in all kinds of ways to suit the specific needs of different industries. Companies should take advantage of these periods of technological advancements and be the earliest adopters because this is a productive way to gain a competitive advantage over slower players in the industry.
In the case of Toyota Tsusho, our adoption of real-time container tracking technology has received great review by clients and partners as well. With our tracking services, customers receive real-time updates on the location of their containers, allowing for better planning and coordination of their supply chain activities at no added cost. This leads to reductions in lead times, improved inventory management, and better decision-making. From this experience with our clients, I have come to recognise that reliable tracking often leads to savings and improved efficiency that outweighs immediate added costs.
We would like to express our thanks to Tracy for her time and valuable insights on the freight industry supply chain challenges brought on by the pandemic. We hope her expertise has provided you with a deeper understanding of the industry and the optimisation opportunities present.
As mentioned, the necessity of supply chain visibility was vividly highlighted during the pandemic. Many organisations are starting to utilise visibility technologies such as tracking to develop a production advantage within their industries. In response to this, Brivge has developed cutting edge tracking and visibility solutions.
If you have any queries on container tracking or would like to enquire if your company could benefit from it, please do not hesitate to reach out to us at BriVge. We would be delighted to assist you in your journey towards a more efficient and resilient supply chain.
If you would like further insights on supply chain optimisation and its value, we invite you to explore our other resources on digitalisation and the common misconceptions surrounding it. Do also look forward to more insights and interviews from a diverse range of supply chain experts here at Toyota Tsusho!