The global supply chain faces uncertain times in the wake of natural disasters, contentious trade agreements and international conflicts. The JLL article, Build resiliency in the face of supply chain challenges, emboldens businesses to build strategies to prevent the disruptions and risks that make headlines. Whether it’s human error – like the cargo ship that ran aground in the Suez Canal in 2021 – or extreme weather like the Panama Canal’s driest years on record, being proactive in assessing supply chain strategies can make all the financial difference.
In conversation with Rich Thompson, International Director, Supply Chain & Logistics Solutions, Americas, JLL, Thompson discusses tips for businesses to optimize their supply chain networks, determine the best locations for warehouses, and the strategies needed for mitigating risks and saving money along the way. Read below to learn more:
Optimize Your Supply Chain Network
“When evaluating the necessary components of the industrial supply chain, you have to consider customer service requirements and the big operating costs such as transportation and labor, among the more important factors,” Rich Thompson of JLL says. “And in terms of costs, specifically transportation and labor, we’re seeing an increase in these areas.” Future proofing your business portfolio is the primary takeaway when building reliability, as JLL evaluates the recent events that have impacted the global supply chain.
“Covid put a spotlight on the risks of the supply chain,” Thompson says. “As the U.S. government put travel and transport restrictions to and from China in 2020, this only further incented businesses to establish manufacturing or sourcing roots in the United States.” There is a rise in reshoring, as the JLL article discovered, which makes finding solutions for optimizing the supply chain network an essential amidst disruptions from climate events or tech innovations. “Building resilience is key,” as Thompson says. “Duplicating sources of supply and ports in particular is a gamechanger,” Thompson emphasizes when considering the various consequences that could block shipping if disaster hits.
Determine the Best Location for Warehouses
Business-to-consumer (B2C) companies are faced with fierce competition as they struggle to keep up with the high operational speed of Amazon services. As the JLL research indicates, Amazon is unlike any other competitor. “The ability to deliver within two days is always a priority as ‘The Amazon effect’ promotes the standard for faster deliveries,” Thompson says. “Customers are now geared to expect two-day delivery – and anything more than 5-7 days of wait time is less than ideal and not competitive.” Research finds that Amazon has an estimated 1,400 facilities and warehouses nationwide and in secondary and tertiary markets, such as Salt Lake City and Denver, completely changing the game for consumer expectations around service. Thompson weighs in on what sets Amazon apart: “Scale and technology is what lends to Amazon’s largest advantage. Amazon is an e-commerce giant with their biggest advantage being scale. Only so many companies have that kind of scale and can compete with those demands. Not to mention, Amazon’s other advantage is their understanding of predictive analytics as well as access to high-speed, high-efficiency technology.”
The JLL report says that businesses can help reach this two-day shipping standard by choosing sites closer to customers and suppliers, thus speeding up last-mile delivery and boosting customer loyalty. “Customer expectation with The Amazon Effect promotes these standards,” Thompson says, “which is why choosing a location that is natural disaster resistant, has the needed labor, power, transportation infrastructure, and within close proximity to customers is imperative.”
Mitigate Risks and Save Money
When looking at the recent events that have impacted the global supply chain dynamics, like the March 2024 collapse of the Francis Scott Key Bridge which blocked all shipping from the Port of Baltimore (costing $15 million per day), one thing is clear: Businesses need to be proactive. JLL’s article emphasizes that “companies can’t take a set-it-and-forget-it approach.” Establishing a strategy is all part of this plan, research suggests, as being proactive for any threat that can break links in a supply chain must be top of mind for companies.
Thompson corroborates this point: “When rethinking the industrial supply chain, you have to consider these disruptions and risk factors. It’s like that saying, ‘Don’t put all your eggs in one basket.’ This applies to where you source – don’t rely only on one port or one source of supply – because what happens if something happens to that port or supplier?” JLL’s research also states that insufficient preparation is another factor that can lead to disaster, including inflated costs, longer shipping periods – and not to mention, longer wait times for customers.