AKRON—What's the difference between peanut butter and carbon black?
While one doesn't taste very good on a sandwich and the other would be highly questionable for use in rubber and tires, they do share a common bond, according to Matt Angell.
As vice president of logistic operations at Jarrett Logistics Systems in Orrville, Ohio, Angell said he has seen the domestic supply chain for many products seriously challenged during these times of COVID-19.
Jarrett, based near Akron, provides supply chain management functions for a client base that has more than 500 locations. Many of those customers are members and customers of, or suppliers to the rubber market.
"The first three quarters of 2020 have certainly been a roller coaster for all of us," Angell said during his keynote address for the International Elastomer Conference, organized by the ACS Rubber Division. "The pace of change this year has accelerated to unimaginable levels. ... We must adjust to this changing pace in our lives."
This year's conference, instead of being conducted in Knoxville, Tenn., as originally planned, turned into an online event.
There once was a time when a supply-and-demand cycle in the trucking business took place over a matter of several years as transportation firms expanded to meet growing needs, then contracted when oversupply resulted. That cycle accelerated over time and this year occurred at breakneck speed, Angell said during his Oct. 19 talk.
This impacts all goods being shipped around the country.
"Whether you are shipping peanut butter or carbon black, we are all fighting for that same capacity," Angell said.
Historically, as transportation capacity tightens in a growing economy, trucking firms raise their prices. This increased profit allows them to invest and expand to restore an equilibrium to the market. But once that capacity supersedes demand, prices fall and contraction occurs, he said.
That's just how the market works.
When Angell joined the business in the late 1990s, this cycle took about seven to eight years to complete. Around 2010, the cycle shorted to about three to four years. Now, thanks to market forces created by COVID-19, it's happening lightning quick.
"We've seen the full cycle take place in less than a year's time—a truly remarkable set of circumstances," he said.
When COVID-19 essentially shut down large portions of the economy early this year, transportation firms acted quickly—laying off workers, selling vehicles and closing terminals to survive.
When the economy rebounded over the summer, those same companies found it difficult to meet the transportation needs of their customers. In a simple case of supply-and-demand, freight prices jumped dramatically.
"You can see that rates are higher now than they have been previously in the last four years," Angell said. "Rates are at record levels today."
Trucking companies, which were quick to furlough workers as the pandemic hit, are finding it difficult to attract the drivers they now need. Some furloughed workers have seen the advantage of staying off work with this year's enhanced unemployment benefits.
Transportation demands driven by an explosion of electronic commerce also are pushing some over-the-road drivers to local parcel delivery. Those are jobs that allow them to be at home every night instead of making long journeys, Angell said.
Those in the rubber supply chain, however, do see solutions.
"No. 1," he said, "is strategic partnerships. Develop strategic partnerships if you haven't already. Leverage them if they are already in place. Engage with a supply chain management partner if you don't know how to do it or don't have the time to do it. These relationships will be a significant competitive advantage to you and your organization," Angell said.
If supply chains have an arch enemy, it is poor communication, he said.
"This applies both inside your organization and outside of it. Many of you are working in organizations where you are wearing more hats today than you were at this time last year, and it makes it more and more difficult to communicate. But it makes it more and more important that you do," he said.
"Talk to your transportation partners, let them know how your supply chain has changed. Let them know if your lead times, your purchasing strategy and/or your supply base has changed. Reset your mutual expectations with each other given the current market conditions. Meet with them regularly," Angell said.
Taking such a proactive approach is crucial in these rapidly changing times, he said.
"Stay engaged and be flexible. Our work environment will continue to change rapidly. The transportation industry will as well. Be ready to pivot," he said. "These are challenging times. They require challenging solutions."