The coronavirus pandemic has triggered a cascade of changes in global trade patterns ranging from regulatory issues to customs compliance, but personal expertise and relationships are just as important as technology in preserving performance and profits, transportation and third party logistics (3PL) provider C.H. Robinson said yesterday.
Eden Prairie, Minnesota-based C.H. Robinson has been tracking those evolving conditions as part of its efforts to acquire personal protective equipment (PPE) for health workers in its home state during the Covid-19 crisis.
Together, recent changes triggered by the pandemic add up to costly transportation and logistics trends that present budgetary challenges for states in need of PPE, especially as they deploy reopening strategies, the company says. Specifically, logistics professionals have seen a raft of evolving hurdles, such as: a proliferation of counterfeit products, enhanced FDA regulations of medical supplies, rapidly evolving customs compliance guidelines, and a sharp drop in passenger plane capacity.
In response, C.H. Robinson says it has applied its experience, data, and scale to move shipments of PPE—which are largely produced in China—to its home state of Minnesota as quickly and inexpensively as possible. “Covid-19 has created unprecedented logistics challenges across the global supply chain when the rapid movement of PPE is more essential than ever,” C.H. Robinson CEO and President Bob Biesterfeld said in a release. “With our teams based all over the world, including over 20 offices in China, where the majority of PPE is sourced, we are tracking regulations that change weekly and leveraging our vast network to help our customers strategically manage the mounting risks the pandemic has presented.”
According to C.H. Robinson, that approach has helped to mitigate massive supply chain disruptions that have affected over 90% of internationally sourced PPE shipments. Those disruptions can include:
- compliance issues: cargo inspection rates of PPE out of China have dramatically increased, lengthening the average waiting period prior to transportation from 3 hours to 2-3 days. Increased import customs delays and shipment refusals add even more time to the process,
- longer transit times: normal delivery time for air freight from China to the U.S. has doubled or tripled from 4-6 days to 8-14 days,
- higher transportation costs: the price of expedited shipping out of China for PPE has gone up to 3-4 times the average (and at times, as high as 8-10 times the average) amid unprecedented global demand all hitting at the same time, and
- other rising costs: Increased commodity prices (e.g., the price of face masks has increased 2-5x the average) and transportation disruption are creating the need for more cargo insurance policies and at higher rates.
While many logistics operations are outfitted with cutting edge technology like digitalized operations and the internet of things, those approaches are insufficient for tackling such complex problems when shippers and carriers are facing a crippled infrastructure, Biesterfeld said in a phone interview.
“Technology alone or digitalization alone aren’t enough to solve these problems,” he said. “Do you need a global control tower? Yes, absolutely. Do you need real-time visibility over inventory in motion and at rest? Yes, absolutely. But you can’t just provide visibility to a flawed process.”
Instead, logistics providers striving to do business during a global pandemic also need personal assets such as: expertise on the ground, awareness of governmental restraints, relationships across multiple providers in both air and ocean, and the scale to achieve appropriate pricing, he said.
According to C.H. Robinson, it has leveraged its global logistics network during the pandemic to shave a few cents off each transaction through strategies like consolidating shipments from multiple parties, capturing space on air freight shipments, using expedited ocean freight as needed, or turning to traditional ocean freight when more time was available.
Those approaches helped the State of Minnesota save more than $1 million in transportation costs associated with procuring more than 72 million pieces of PPE. “A fraction of a cent doesn’t seem like a lot until you’re charged it 72 million times, and then those pennies turn into dollars pretty quickly,” Biesterfeld said.
In that context, every detail counts in the effort to build a sufficient supply or PPE and other crucial goods for health care workers, hospitals, and afflicted communities. And yet, various regions of the U.S. have been scrambling to master their own global supply chains, Biesterfeld said. “All 50 states were sort of left on their own to handle procurement, warehousing, fulfillment, distribution, and purchasing. So they faced a fractured supply chain and increased costs at the same time that they had a lack of expertise on how to navigate the global supply chain.”
Looking further down the road, logistics providers must transition from just “battening down the hatches” during business shutdowns to planning a transition to a new era when a Covid-19 cure or vaccine helps enable an economic recovery. “This crisis has brought supply chain so far to the fore, that supply chain is no longer just a functional conversation; it’s a C-suite conversation,” Biesterfeld said. “Now there are discussions happening everywhere about supply chain performance, resilience, efficiencies, redundancy, and investments.”
As states distribute face masks and other PPE to COVID-19 testing sites, some hidden costs are rising. Learn how to minimize these costs and how we saved the state of Minnesota more than $1 million dollars on PPE transportation and logistics: https://t.co/KMxuaucqkT pic.twitter.com/6fWuyjtyKD
— C.H. Robinson (@CHRobinson) June 18, 2020