Logistics Experts Say Supply Chain Unbroken

Dan Sanker, CEO of CaseStack in Fayetteville
Dan Sanker, CEO of CaseStack in Fayetteville

The American consumer culture and the supply chain it depends on have both been put to the test by the restrictions and safety precautions of the ongoing COVID-19 pandemic.

Experts say the supply chain system has recovered well from the initial shock and proved its value.

Brian Fugate, the chairman of the supply chain management department at the University of Arkansas’ Walton College of Business, said criticisms of the supply chain because of sudden shortages in goods — think toilet paper and hand sanitizer at your local store — are misguided. The pandemic is a once-in-a-century phenomenon, Fugate said.

“Lean supply chains have been designed to hold 10% extra [inventory] in case there is a surge in demand, not the 50 or 100 or 200% demand [increase] that we saw,” Fugate said. “It doesn’t mean you fundamentally change in the future how we manage supply chains. You’ll hear that lean supply chain is dead and lean supply chain is why we are in this place.

“Lean is about making flows faster and smoother and cutting out excess waste. The more lean you are, the most responsive you are going to be to these situations.”

CEO Dan Sanker of CaseStack, a Fayetteville logistics company, said the supply chain was stressed by a combination of factors. Chief among those were workers worried about getting the virus and unpredictable and unfulfillable surges in demand for certain products.

When the virus first became a concern, Sanker said he was amazed that orders for beef jerky soared by a multiple of 25. The runs on toilet paper and hand sanitizer were well documented.

“When you run warehouses, you get pretty good at modeling,” said Sanker, whose company manages warehouses across the country. “You model how many people you need by the minute, what they are going to do, where they are going to go. Then you come to work one day and there is a 60% increase in volume demand. There’s no product and not enough labor.”

‘Ripple Effects’

The upending of the expected supply-and-demand market was felt in the trucking industry.

PAM Transport Services Inc. of Tontitown, which handles a large amount of automobile products, had idle truck drivers on its hands when the pandemic hit and automobile manufacturers shut down. CEO Dan Cushman said in an earnings report in April that he reached out to other trucking companies to help them with their deliveries to keep his drivers working and products moving.

ArcBest Corp. of Van Buren, a less-than-truckload company, had to close several facilities temporarily because of the virus but quickly shifted service to other plants to keep things moving. ArcBest spokesman Josh Havens said the pandemic made the previous supply chain modeling “obsolete overnight.”

“For transportation providers, that can mean shipping product in different quantities or to different destinations, which can cause rapid shifts in where equipment and personnel are needed — particularly in a less-than-truckload network like ours,” Havens said. “Often these supply chain shifts will require using different modes of transportation like air or ground expedite. Our expedited service has been a benefit in this case. We have years of experience responding to customers’ needs at a moment’s notice.”

Sanker said supply chains are based on intricate historical data. For example, Walmart Inc. plans its orders based on exacting data on sales from previous years.

“Even during regular economic and health situations, the supply chain is a very complex, living thing with a lot of moving parts,” said Shannon Newton, president of the Arkansas Trucking Association. “Any little glitch in the supply chain has ripple effects. Now you insert this huge overlay that is not just in one region or in one industry — it’s the entire country and virtually the entire economy — there is really no way to have planned or prepared for this reality, but [the supply chain] is incredibly resilient.”

The ripple effects caused dislocations that had to be addressed, Sanker said. Imports to West Coast ports dropped off, so truckers were reluctant to deliver to the area because they would have little freight for their return trips.

A truck stopping at a warehouse to fill an order had to deal with social distancing. A 1 million-SF warehouse might seem like a spacious place, but workers were slowed by having to maintain sanitized equipment such as scanners and forklifts.

“The hardest part for us is picking up all the product fast enough and getting things in and out,” Sanker said.

A Growth Opportunity?

Fugate said the pandemic may well be a growth opportunity for transportation companies that have invested heavily in technology and “final mile” delivery services that bring merchandise to individual addresses.

One company that fits that description to a “T” is J.B. Hunt Transport Services Inc. of Lowell, which made its final mile division a separate reporting segment this year. J.B. Hunt declined to comment for this story, but CEO John Roberts talked about the effects of the pandemic during a quarterly earnings conference call on April 14.

“In all, we see the environment showing near-term disruption and turbulence, but expect the longer term to present opportunities to capitalize on many of our existing priorities, including our efforts with 360, our final mile and private fleet outsourcing businesses in both our highway services and intermodal,” said Roberts. (360 is the company’s digital logistics platform.)

Fugate said final mile delivery was a growing trend in the transportation world, and the pandemic has left little doubt it will assume an even more pronounced role in the future.

“It was happening, but it is going to happen way faster now,” Fugate said. “Consumer behavior is going to change because of this. There is going to be a fundamental shift in consumer behavior, which then fundamentally makes us redesign our supply chain.”

Food Supply Strong but Paths Are Changing, Experts Say

The food supply was in the news last week after Tyson Foods Inc. Chairman John Tyson wrote in an ad placed in multiple newspapers that the food supply chain was breaking because of processing plants being forced to close.

On Tuesday, President Donald Trump ordered plants to remain open under the Defense Production Act, which classified meat production as critical infrastructure.

The supply chain experts interviewed by Arkansas Business said the food supply isn’t in danger, but the path to the consumer has changed. America still has plenty of food, but less of it needed to be routed through food-service providers like restaurants than before the pandemic.

And switching isn’t simple. Food sold to restaurants, for example, isn’t required to list nutritional values and may not even have a bar code. Farmers may end up dumping piles of potatoes or onions or pour out gallons of milk because perishable produce intended for restaurants and school cafeterias can’t be salvaged in time.

“When is the last time you made onion rings at home?” asked Dan Sanker, CEO of CaseStack, a Fayetteville logistics company. “There is a lot of dislocation in the supply chain.”

Brian Fugate, of the Walton School of Business, said the food supply hiccup is also because of the labor needed during production and transportation. “It is a human labor problem,” Fugate said. “It is not really a supply chain problem, but it affects the supply chain.”