Demand is high, supply is low, and shipping is experiencing challenges that extend to manufacturers, retailers and others along the supply chain.
The sudden and dramatic spike in demand for medical products and many consumer products due to the pandemic is affecting nearly all aspects of the industry. “Shippers are facing huge challenges to ensure that they have the tools and have capacity,” said Lily Shen, CEO of Transfix, which matches shippers and freight carriers and aims to reduce empty miles. Shipping costs are rising, and it is hard to quantify overall increases since the U.S. market is so fragmented, with over 18,000 combinations of routes, Shen said.
Anshu Prasad, CEO of freight contracting firm Leaf Logistics, pointed out the difficulties facing manufacturers and retailers. Items like toilet paper, he said, have a low margin per unit, so normally retailers inventory only a few weeks of demand. “When demand spikes unpredictably, it takes weeks for manufacturers to crank up production at multiples of the volumes they’re used to producing, and for retailers, transporters, etc., to deal with getting those products to the shelves and into homes.”
Another problem on the production side is that some manufacturing plants and warehouses are understaffed. Prasad said that truckers who expect quick turnaround for loading “could wait as much as 15 hours for their cargo.” There is also a shortage of truck drivers, due in part to health impacts. Distribution centers are having staffing problems as well, Shen said.
Despite market uncertainty, both Transfix and Leaf Logistics plan to pursue growth. Shen joined Transfix two years ago as Chief Operating Officer. Last year she was promoted to President, and in March became Chief Executive. On her third day, “the entire company moved to working remotely.” Shen described the transition as “seamless,” which could not be said of the shipping sector itself, The New York Times notes. Once the crisis is over, she plans to increase automation.
Forward-looking pricing agreements are a focus of Leaf’s platform, which helps to prevent manufacturers and other shippers from being surprised by unforeseen increases in shipping costs. Having spent many years in the logistics sector, Prasad co-founded Leaf in 2017 to bring more predictability to prices and terms and to reduce empty miles, referring to the return trips made by empty trucks after cargo is unloaded.
The supply chain already presented challenges for manufacturing and e-commerce entrepreneurs before the pandemic, said Laurie Yoler, a General Partner with venture capital firm Playground Global, which has invested in Leaf. “The shipping of freight has been fragile in this country,” she said. “There’s a lot of room to improve reliability and stability.”
