Friday, July 1, 2022

We are the supply chain problem.


We can’t go a day without hearing, or sharing our own story, about a seemingly simple purchase that is taking eons to arrive, an impatience that has heightened in a next-day culture.

In casual conversations we hear people cite the cause as having something to do with lazy workers, politicians, Russia’s aggression in Ukraine, or myriad other heard-then-repeated explanations.

Turns out, we are the problem: Our business models, our disconnected systems, our labor practices, our personal shopping choices. We are the forces straining the system.

That’s why this WSJ video is so fascinating. It starts with the sobering truth, that global demand is greater than what supply chains can handle. From there it unpacks the thorny thicket of disconnected problems raging through the system – i.e., through factories, ocean shipping, ports, trucking, and distribution centers – all made worse by rapid changes in DTC business models and the resulting shift in consumer shopping behavior.

And, spoiler alert, this story might not have a happy ending. Our supply chains may be forever strained without a massive rethink of how we solve – and connect– the problems.

For those of us who don't have time to binge a 54 minute video, here are some key highlights:

Supply Chains scaled down when Covid hit (e.g., capacity, inventories, labor, etc), expecting that global consumer demand would contract.  It didn’t. 

Shipping ports are a fragile point of failure.  Our ports, most notably the Port of Long Beach here in the US), represent a singular intersection of the problems spanning ocean shipping, trucking, labor and consumer demand. 

We don’t have enough truckers in the US.  Nearly 10M people have a CDL license yet only 3.5M are driving. Why? They are poorly paid (new drivers barely earn minimum wage), are seldom home, and work 14+ hour days. 

Seismic changes in consumer behavior, acclerated by eCommerce and DTC models, are further straining supply chains, which must now deliver more products to specific addresses instead of mass deliveries to fewer big box stores. And as we know, more and more consumers embraced online shopping during the pandemic 

Distribution centers experience high employee burn-out. People working at these fast-paced, always-on distribution centers experience work-related injuries at a rate that’s nearly double coal mining, construction, and most manufacturing industries. (Turnover at many of Amazon’s distribution centers exceeds 100%.) 

We have a shortage of last-mile delivery drivers.  These are the drivers that more often than not are working for delivery partners subcontracted by Amazon and others. (This is why Amazon started its own package delivery company, which will in time be the largest parcel delivery company in the US.)

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