Enrique joined The Connected Enterprise podcast to discuss what caused global supply chain disruptions and how the supply chain is improving.
Enrique Alvarez is the co-founder and managing director of Vector Global Logistics, a certified minority-owned supply chain and logistics company dedicated to world-class service, a results-only mindset, and social impact. Enrique is proud that Vector’s success and growing impact are built on its results-based culture, passionate team, and desire to truly partner with clients.
“We’re different from other freight or logistics companies,” Enrique explains. “There’s no nine-to-five here. We’ve taken time and space out of the equation and measure performance by results only.”
Enrique joined Carl Lewis, host of The Connected Enterprise podcast, to discuss what caused turmoil in the global supply chain and how it’s improving.
What Caused Supply Chain Chaos?
At the onset of the pandemic, there was an overwhelming demand for personal protective equipment (PPE) like face masks, disposable gloves, hand sanitizer, and other life-saving products. These items left Asia, mainly in ocean shipping containers, for ports around the world.
Enrique cites two main issues that arose from this demand. First, PPE was competing with other products like iPhones and computers departing from the same places. The second issue was simply a lack of space. U.S. ports became clogged with arriving shipping containers, and there wasn’t enough infrastructure and manpower to unload them for fast turnaround.
Steamship lines then sent their prices through the roof and slashed some of their services at small ports. They focused on the China-to-U.S. trade lines, creating a bigger mess.
“The average cost of a 40-foot shipping container from Shanghai to the US’s East Coast was $3,500 before the pandemic,” Enrique notes. “During the second year of the pandemic, the same container was $20,000.”
It's Slowly Getting Better
According to Enrique, the supply chain is improving due to inflation, lower demand, and less panic. Today, the average price of that shipping container is $12,000-$13,000.
There’s still a traffic jam of vessels at U.S. ports. As of this podcast’s recording, 34 were parked outside Savannah, 22 outside New York, and 12 outside Houston. Those numbers are a significant improvement over the 100 in Long Beach at the height of the crisis, but it’s still too many—vessels should berth, unload, and leave.
Ocean vessels aren’t the only mode of transportation involved in supply chain disruptions. “The U.S. trucking industry is challenging because there aren’t enough drivers, chassis, or warehouse space,” Enrique explains. “Every step of the supply chain needs to unclog. We’ll see it at the ocean level first, but we’ll have to wait a few years for the rest of the supply chain to catch up.”
Enrique says just-in-time (JIT) inventory is another factor contributing to the mess. JIT inventory is a form of inventory management that involves working closely with suppliers so raw materials arrive as production begins, but no sooner. It’s been a big industry trend for years.
“We made it efficient and tight, and it succeeded—until something unpredictable came along,” Enrique says. “No one could have expected a pandemic. It’s a live-and-learn situation.”
Some companies may return to JIT inventory if it benefits them financially. Others are finding a healthy balance between their inventory and their forecasting, so they don’t have to be as dependent on manufacturing from the other side of the world.
Focusing on the Positive
Supply chain issues aren’t all doom and gloom. Business owners and CEOs are more aware of logistics and what they entail—and consumers are, too.
“It took a pandemic to make us realize what we buy at the grocery store has many steps behind it,” Enrique says. For example, if you buy something in a glass jar, the product was made in one place and the glass jar in another.
In the Amazon age, where anything we want can be at our doorstep the day we order it, some folks realize they’re buying too many things they don’t need.
Enrique is optimistic about members of the younger generation and their purchasing habits. “They buy products from companies that are more responsible, more caring, more sustainable,” he says. “I see it in my kids, and it’s a good thing.”
Vector Global Logistics’s results-only culture isn’t its only differentiator. “We donate a lot through our Logistics With Purpose Initiative,” Enrique explains. “For every container we ship, we do things like donate meals to children in Kenya and help an organization for children with special needs."
The company is currently shipping containers to Ukraine for free. If you’re interested in learning about this initiative and helping Ukraine, visit https://vectorgl.com/stand-with-ukraine/.
Listen to the Podcast
For more insights from Enrique Alvarez, listen to Vision33’s The Connected Enterprise podcast. In each episode, host Carl Lewis interviews bright minds and industry thought leaders about enterprise technology and what’s coming next.