The Supply Chain Connection: Enrique Alvarez Discusses Relationships in Distribution and Logistics

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Show Notes

Carl Lewis: Welcome to The Connected Enterprise podcast. I’m Carl Lewis, your host from Vision33, and my guest is Enrique Alvarez from Vector Global Logistics.

Enrique, welcome back. Update us on yourself and the company. You recently won awards, right?

Enrique Alvarez: We've been working incredibly hard at Vector Global Logistics. As I mentioned during my last interview, we have a unique results-based mentality and a passion to give back. We've been supporting Ukraine and giving back in other ways.

We were recognized by several organizations recently—we received an award from the ALAN and made the Inc. 5000 list. Those awards validate that being a purpose-driven organization has not only allowed us to succeed—it’s allowed us to grow faster and more sustainably. I'm thrilled.

Carl Lewis: Congratulations to you and the company!

Enrique Alvarez: Thank you.

Carl Lewis: I wanted you back on the show to get an update on what's happening in the distribution world. Not too long ago, the price of a container was astronomical. What's happening now?

Enrique Alvarez: The economy’s slowing down. The demand's lower. We're seeing a quick reaction from all the steamship lines—they're dropping prices rapidly. Especially from Asia to the US and Asia to the main markets. This helps people who want to ship and import.

Carl Lewis: It seems like the big retailers already have the stock they need for the holidays because everybody but reacted to the circumstances and said, "Let's not take any chances." Is that what happened?

Enrique Alvarez: That's exactly what happened. Before and during the pandemic, many people had low inventory, and they've been replenishing it to where they might have more than they need. You're seeing that in the market with fewer shipments, and less demand affects shipment prices too.

Carl Lewis: There's a downside to that, but not on the large end of the marketplace. Our big retailers can move the stock and get it through their system promptly. And they're ordering for their shelves.

But the small and midsized manufacturing companies in between take orders from their customers and bring stock into their warehouse for those customers, even though sometimes those customers realize, "Uh-oh. I ordered too much. I don't have orders from my customers for all that stock."

And this poor mid-channel manufacturer is holding this stock but can't get paid for it or move it. That seems common right now. What do you think?

Enrique Alvarez: I agree. The midsized companies struggle because they're squeezed between the huge retailers and the smaller outfits. Unfortunately, it will probably continue like that for a couple more months.

Carl Lewis: Because they get squeezed, I think they're also the first to react to bad news. There's a recession on the horizon. What do these companies typically do now?

Enrique Alvarez: Some are strategic, and they react quickly. And they have to—otherwise, they probably can’t compete or stay afloat. They usually lay off people to reduce costs.

When your revenues are slowing and a gray recession cloud is coming, the natural reaction is to contract and wait and see.

Many people are careful right now. They're hesitant to grow or invest in growth projects. They're trying to be ready for what's coming and minimize costs as much as possible.

Carl Lewis: You said it's loosening up regarding Asia, but so many American companies have relied on China for 20-30 years. And China has put itself in the position of making everything for everybody. And many folks had only one point of supply. How do we reduce our dependence on China?

Enrique Alvarez: The pandemic showed us that nothing’s as reliable as we thought. That led companies to look beyond one source/supplier, diversify their risks, and hedge those risks accordingly.

Logistics companies are looking for other providers/suppliers/manufacturers around the world that can give them quality products and be good alternatives to China. That’s critical because multiple strategic partners make your supply chain more robust.

Carl Lewis: It's easy to say, "We need to diversify." But where do they go if they’ve been doing business with the same supplier for 20 years? How do they find somebody else? 

Enrique Alvarez: It's easier said than done. You and I can talk about it all day, and many people/experts/consultants say, "Well, why don't you just diversify?"

And it’s smart, but you're right—it's not easy. Your long-term relationships are valuable too. What's the right balance between finding a new supplier without burning your bridges? You want to continue those meaningful long-term relationships with people you work with while being mindful of what's going on in the world, especially in logistics and the supply chain.

And you must be smart about it because you're competing with other companies going through the same things. And some are reacting quicker than others. Those companies will be better competitors when demand comes back up.

Carl Lewis: One of the world’s dynamics is the geopolitical situation. It's like you need a specialist who looks at all the available suppliers and challenges. And depending on what happens where, you need to be extremely agile—especially compared to the past.

Enrique Alvarez: Absolutely. Technology is helping a lot. There's great technology, like AI algorithms, that allow corporations—especially those with an international manufacturing footprint—to make better decisions.

But I sometimes question experts because you never know. The more I know, the less certain I feel about what might happen next. For example, the war in Ukraine. It's critical to supply chains worldwide: natural gas, microchips, the automotive industry, grains, minerals, etc. But it feels like the media has already passed it by.

So, experts are helpful, but you should be careful about how much attention you pay to them because the world will continue being variable and dynamic. 

Carl Lewis: Many people coming out of the pandemic have said, "We need to make more things in the United States. We need to find more US suppliers." But that’s harder to do than one would think. We got out of the manufacturing business decades ago, and you can't just fire it back up.

How does somebody who wants to do business with US suppliers find them? It's like you have to create your own in some circumstances.

Enrique Alvarez: You’re right. And it’s hard. But the US is perfectly capable of manufacturing anything in the world. The question is, “At what cost?” How do you compete? And the answer isn’t making everything here or outsourcing everything—it’s somewhere in between. 

And it's not just my company competing against yours—my supply chain is competing against your supply chain. So, you have to broaden that view and consider your product, suppliers, company, and the supply chain conditions to succeed.

Carl Lewis: As a manufacturer, I need to know my competitors and where they got their stuff. Is it the same as me, or different? Is theirs performing better or worse than mine?

You need someone who studies these things as their job. I know executives sometimes think they do this, but there's more information than they can keep up with. Who are our suppliers, and how are they being supplied? We need to know because amid all these storms, there are opportunities.

Enrique Alvarez: Absolutely. Most opportunities arise when times aren’t as good as we’d like, when disruption comes in, when creativity makes a big difference, when good cultures can change the world. Companies with strong teams make a difference.

So, I agree with you. You must be mindful of the overall geopolitical aspects of the world and employ or contract an expert as part of your market intelligence division.

My company has agents worldwide, and we’ve selected our partners carefully. Our long-term relationships with them make a huge difference. I can call someone in Brazil for their opinion, and they're on top of what they need to do in their markets.

Carl Lewis: I like that: Market intelligence.

I think we forget sometimes, because we do so much with data and technology, that there are people on the other end. It’s people working all the way down our supply chain. Good relationships with them are essential.

Enrique Alvarez: In my experience at Vector, people are the reason we’ve succeeded. Sometimes we have too much information, and it's too complex. So, relying on smart, trusted individuals is key. That will continue.

Carl Lewis: Absolutely. For every company.

You've built a good brand and have an identity people see—for example, your charitable work and commitment to Ukraine.

Other companies try similar things, like "Made in the USA." How do you leverage something like that? How do you make a brand you create work for you?

Enrique Alvarez: For us, it's more than the brand. Everyone at Vector believes we just happen to be in logistics, moving products around. But what we're passionate about is changing the world.

So, it's not about a brand. It's about why you do what you do. Why do you wake up in the morning? Why do you want to do what you're doing? Is your product benefitting people? Do you enjoy it? Are you happy?

When everyone in your organization knows why you’re doing what you’re doing, and when everyone shares that culture and values, the rest falls into place.

The other big component is working extremely hard. We're working our butts off. There's no overnight success—no easy ways of doing things.

And again, the successful companies will be those willing to put in the effort.

Carl Lewis: I like that: It's not what you do, it's why you do it.

You've talked about the importance of people and culture, the culture in your company, and the relationships you have with people throughout your supply chain. Is there a direct connection between the supply chain and employee satisfaction?

Enrique Alvarez: In my experience, there’s a strong correlation between empowered, happy, driven employees and a company’s success. There's a ton of literature that agrees.

Carl Lewis: Everybody's awakening to the importance of customer and employee retention. How do we keep the people we've invested so much in? They're the best because we made them the best, and now how do we keep them?

Enrique Alvarez: Absolutely.

Carl Lewis: How do you do it at Vector?

Enrique Alvarez: After a conversation with someone last week, I’d say “retention” is the wrong word. It has the wrong connotation. At Vector, we're not retaining people. That’s not our objective. We’re welcoming them.

Employee welcoming is critical. Understanding how employees feel, their goals and mindsets, and putting everything together to work as a team—that’s what makes a good culture. welcoming employees to work under the same goal, culture, and values will be critical for companies.

Carl Lewis: I like that a lot. Enrique, it's always good to connect with you. Take care, my friend. And for everyone else out there, until we meet again, stay connected.