 Welcome to MIT Supply Chain Frontiers, where we discover the future of global supply chain education, research, and innovation. Brought to you by the MIT Center for Transportation and Logistics, every episode features center researchers and staff who welcome experts from the field for in-depth conversations about business, education, and beyond. Today, CTL research scientist and sustainable supply chains director, Alexis Bateman, speaks with Ares Agmoni, head of supply chain warehousing and distribution America at Merisk. Take it away, Alexis. Today, we're really fortunate to have Dr. Agmoni with us. He is the regional head of distribution and warehousing for Merisk. He has a bachelor's, master's, and PhD from Assumption University in Thailand and 20 years in logistics and supply chains. Thank you, Alexis. As Alexis mentioned, I'm looking after the warehousing and distributions for Merisk for North America. I did a few different roles in the company. My previous role was supply chain design and engineering. So we were looking after supply chain of large customers and finding solutions for them to improve it. And that kind of gives some insight to the work I'm doing today and bringing quite a better understanding of what is it that we should do for our customers. Ares, thank you so much for taking the time to join us today. Thank you very much, Alexis. Really appreciate and honored to be here. And so what I'm about to share is a little bit an insight from the way Merisk seeing things right now and definitely the Merisk perspective is coming from a global supply chain. But today, what we're basically doing is an end-to-end supply chain for customers. And that's allowing us to basically get and support the customer's request. If we take 10 years ago, we had the volcanic ash cloud over Europe. In Iceland was an eruption of volcanic that basically disrupted totally all the flights into Europe. That caused a huge supply chain disruption. People that needed to move goods fast didn't have the ability to do it by air freight. And that's kind of created some disruption for the Europe continent. Just a year after in Japan Fukushima meltdown in that region, in that area of Japan, there is certain memory that has been produced. And that's created some supply chain disruption, at least for the PCs and computers and high tech industries. So similar to that in Thailand at the end of 2011 and the beginning of 2012, we had the floods in Thailand that Thailand is the capital of the world in terms of hard disks. That's created a huge disruption into the tech industries. A few years after that, 2014-15, the worst-cost labor strikes that shut down ports. In 2017, MERSC was one of the impacted by the not-pety-ass virus. All our system went down within a day. No more IT system to support the operation and that was MERSC as the largest carrier in the world with about 20-25% of the ocean containerized logistic. That's created a huge disruption in the market. It was not only us, of course, it was many other companies, but only that. And the ports that related to that, it's already was a huge disruption. Of course, COVID-19 that started the end of 2019 and we are in the middle of it right now. That's creating and bringing the awareness of disruption once again. With that in mind, you can see that, of course, it's pandemics, but it can be human-made problems, it can be natural disasters, it can be labor availability and strikes, it can be IT failure and IT related, which is also kind of a main made. Definitely bringing us to kind of, we need to get prepared. We need to be ready. If you're not ready, there is a huge potential for companies' corruption and I'm sure that some of the companies will not make and will not survive this current disruption. Those kinds of unpredictable markets' demand and volatility creates different needs for supply chains. You can get requests from customers to get cargo much earlier in their supply chain or in the DC. You can get requests that the warehouse is full, you need to actually change things. You can get requests, please bypass this disease and go directly to final customers or to the store. There is a lot of different requests that supply chain needs to be started to look into and become much more flexible than it used to be. You cannot just have a supply chain that is built on one set of rules and you don't have a backup to that. Flexibility is speeding up, slowing down. It's definitely a key to sustain volatility in supply chain. One of the things that can support such design of network is a promise of an end-to-end lead time guaranteed. A normal transit time from Asia to the US, for example, from the moment it's ready at the factory until it's arrived to the DC, it's around 40-45 days plus minus 13-15 days. This is a huge variation across the supply chain. It's very difficult to plan and decide things based on such a huge variation. Reduction of that lead time variation is definitely a key to the future of supply chain improvement and resiliency. Visibility all the way of your supply chain. 100% visibility is crucial to have it and you need provider or support from providers that have an end-to-end capabilities to actually execute the supply chain as such. For example, you need to come with a certain amount of days from origin in Asia to Memphis DC. The easiest way to do it is, of course, coming to the West Coast, enter over there and of course, truck from there to Memphis. You arrive to the destination, but is it the right way to do that? Probably for certain times, but not always. You definitely need the flexibility to say, hey, now I don't want to go from the West Coast. I actually want to delay it. I'll come from the East Coast or maybe I would first bring it into DC or a warehouse that can actually store it for a while and act on it only when I need it, or some places that can actually, a deconsolidation place that can actually give me the ability to go and distribute it to different destinations. That can actually be a cross-stop kind of capabilities. I'm sure that you feel that, oh, wow, with all this flexibility, definitely must cost me more to run such a supply chain, but my answer to that is not always. This is kind of just an example of an end-to-end reduction of our ability that we worked with one of our customers. Originally, it was about 40 days with a plus minus 13. So, anywhere from 27 to 53 days that they can arrive to the destination all the way from origin. We built a solution that is 29 days plus minus three. So, yes, in the origin solution, you can come 27 days. You have a good chance to come very fast, but at the end of the day, there is a lot of uncertainty when this will arrive, when cargo will be there, and that's creating a much more inventory acquisition. We're basically starting to build more inventories in a warehouse, which costing us definitely a lot of more money. So, reducing that inventory is the safety stocks in our warehouses basically help to actually reduce the final amount of money that we're spending on our supply chain. Another quick example on that is an example of a normal regular solution where cargo arrives at the port of these cases in LA. It basically goes to the inland port, so there is another move of the 40-foot containers goes to the surrounding of Memphis. And then from there, you have another provider come and take this 40 and bring it to the final here. It's actually Fort Worth Dallas. There is multiple handovers and your 40-foot container is keep moving around and actually this is the one that moving to the final destination. Because of the multi-vendors and multi-handoffs, the transit time from arrival to the port all the way to destination is something between six to 10 days, something that you have a variation. The cost of that is actually more expensive. An alternative to that is basically you're taking it into a warehouse located very close to the port. You convert the forties into 53 trailers. You can save on the environment impact. You can save on the movements of 53s that actually move to your destination. And you can create much better accuracy of the transit time. And we can see in this example that we have eight to nine days. So yes, it could be, it is still higher than the six to the six days that we have in the original example, but it's definitely much more accurate and you can plan much better around this. And of course, at the end of the day, it's also creates some cost reduction to the customer here in this case is $300 saving. Yes, it sounds more expensive to have flexibility and solutions, but there are ways to actually go around it and create some kind of measurement to actually that help you to save. Having all those type of preparation definitely help, but it's not all. You need to build solution in advance. You need to build ways to be flexible, but you also need to kind of things. What alternative do I have for certain things that I'm depending on? And as I mentioned before, one of the things that can create some disruptions, it's actually the human being. We have shortage of human being work willing to working in certain environments and I'm not thinking that people will disappear from warehouse anytime soon, but definitely we need to have alternatives and we need to have certain potential ideas. Just certain things that we are working on. This is autonomous vehicle that we are testing basically in the yard. And the idea of that is to create another set of pool. For example, in the middle of the night when people do not prefer to work in those shifts, we can actually rearrange all the containers in the yard and bring them into the right position that we can actually work early in the morning when people arrive. Another solution that we're exploring right now, it's container unloading. And there are different type of machines doing that today, going inside the container and starting to unload cartons and bringing them to a conveyor that wait behind that and start to sort. I'm calling this machine the Cookie Monster. It sounds like it's going inside and eating the boxes with sections and with other kind of equipments that bringing it in a much faster speed than we could do manually. Beside automation, of course, any company that would like to be ready for such a disruption or such a volatile time need to build a business continuity process. The number one is to ensure that safety of people and then you have safety of infrastructure. That's the second thing. If your infrastructure is still available, accessible, that's definitely help you to be able to work on solution and create solutions. Of course, there could be times that infrastructure goes under the water. For example, literally in Thailand, the floods or other different things that you just can't access those infrastructure, then you need to have some continuity planning where you're going to move people. Will they work from home? Will they work from a different location? So the crisis management is the next things that needs to be executed. Structure training crisis management team needs to be in place and needs to be the one that's handing everything. We call it the war room basically. People that are capable to give the right communication, ensuring that people getting one source of information and correct source of information. It's very crucial to success in managing any crisis. And then at the end of after this initial plans, the business continuity planning needs to take over, creating a business risk assessment, ensuring that all the offices, we have documentation of what you do, how you do things, what is happening with the operation, who is doing what. For example, what happened if you have somebody infected with the coronavirus in your facility, what is it that you're doing, how you return to normal operation and making sure that the operation is really capable to do that. Of course, the process needs to be planned with the business continuity planning. You need to document and ensure that you have the right infrastructure. People know how to do things even they are not in the office. IT needs to be supported. The first few days of this coronavirus, we saw that IT bandwidth started to get heated by all this conference call and video calls took about two days to execute the plans and we back to normal operation that people could actually do all those video conferences and video calls over the internet without disruption. That is definitely one of the key things in order for us to success in mitigating those kinds of situations. Great. Thank you so much, Reza. I was really insightful, really interesting and brought some good perspectives. My question is, how do we deal with this when it's such an extended situation where it's not a few days long, it's not a few weeks long, it's going to be months long to a year long. How do you see mayors responding in that way and in general, any suggestions you have for those on the line? Definitely, the number one thing, as I mentioned, is definitely ensuring the safety of the people, both our own employees and the people around and everybody in the community. That's the number one priority that we have to take care of. The second thing is communication. We have to build some communication methods and skills that ensure that the visibility kept going and people understand what is it that's happening. The whole chain needs to be communicated constantly, even daily or multiple times a day. Definitely, if it's becoming an extended impact and situation, I do suggest and I think that we are also taking the same approach is delay unnecessary projects. You will need a cache very soon, things will change and in order to free cache, any unnecessary project delay it or stop it for now. One of the things that we see with our customers, the feedback that we get from them is that they're really happy that they're working with a logistic provider that can give them the flexibility and the solution on the end to end. Alternative routing, alternative solution, different ways to do things and make sure. I think one of the important things to remember is don't panic. Everybody learn about the bullwhip effect. When it's reached to a point that we're starting to react with no control, we're creating a huge supply chain's effect and that's definitely something that needs to be kind of been taught and planned and see do I do it because I'm panicked or do I do it because this is the right thing to do. Supply chains were largely invisible to the lay audience, to the public, to many people and now they're in the limelight. We're seeing the critical role of supply chains. Can you talk a little bit about what you think emerging role of the supply chain professional will be? I do advise people to keep search and explore for alternative out-of-the-box thinking and ensure that the business continuum plan exists. It's crucial to have it and make sure that you and your provider have those kind of planning around. Are there things and you've alluded to these but maybe pinpointing them some future oriented practices that companies can think about now to internalize as we enter a period of recovery? I think there's a lot for us to do to build for the future, to be ready. One of the things will be to build a cross-functional team, senior management and experts in different fields just to be sure that we are addressing all the supply chain risks and we're preparing for them. We call it war room in the bigger scale and when we talk about different locations we call it cockpit. So definitely that's kind of an important thing to do and to plan for. Decision that you make definitely make those decisions to protect the bottom line, not the procurement cost. I will challenge you guys to think about the bigger picture, the bottom line and protect that one. Definitely this is important. Another point is definitely to develop supply chain visibility. Without the visibility you cannot take action. You are basically causing the dark and we see that certain companies that do not have the visibility, they have no clue where the cargo is, where the PO is, when it will hit this location or that location. So in order to actually have actions you need to have the visibility. So that's definitely something to be prepared for. Use more integrated supply chain providers, as I mentioned before, it helps with the flexibility, the visibility and they reduce the time to market. Of course, if you can, consider multi-country sourcing or different locations to be sourced from. Not always easy but definitely something important to think of. Definitely request your supply chain providers to share their plans for destruction time. So if they have any plans, that's definitely need to be shared so you can actually work together to come up with solutions for that. This is great. Thank you. One question from Amanda is, is the Cookie Monster also available for pallets? Yeah, I saw solutions that are available for pallets. It's not exactly the way the Cookie Monster work but it's going to be, I don't know, a mini Cookie Monster. There are solutions to unload pallets from containers. Is the Cookie Monster doing damage to the packages cartons that are moving through? So the testing that we are looking after, there's basically so far was no damage or less than 1% of damage in the one that we tested. We are testing a different one right now that is basically zero damage. It's moving as fast as the Cookie Monster but in a different way and that's definitely zero damage for now. Great. Thanks. So Crystal asks, what do you see about the trend for, and we're going to try not to get too political here, but de-globalization. Is there a trend for dual supply chains to cope with these global trends and your perspectives on that? Definitely it will impact the supply chain prices, will change, people will have to rethink where they're sourcing their goods but that's bringing us back to the idea of let's create more than one locations that we are sourcing because even if we want it or not, we cannot just eliminate China or eliminate Mexico or eliminate somewhere else around the supply chain. There is going to be always a need both from supply and from demand to keep working with the whole work. I know that there is a lot of different voices nowadays that we need to definitely look at our own people first but if we want to keep the way of living that we live today and all the accessibility that we have to product, we definitely will have to keep the ability to work globally rather than just locally. So then we have a big question from Sumia. How does Maersk incentivize supply chain partners to share data? I think the best way to incentivize people that can share data is to give them data back. So that's kind of the best way to do that. We have to also remember that a lot of the data that we have is actually generated from within the company because we own both supply chain management so we have all the information from our customers on the PO level. We're helping with the vendor management, we have that information, we have the ports with the APM terminal ports, we have the vessels themselves. So many different type of information is already coming within the company itself. Of course, it's limited for our own kind of capabilities so when we need the effort type of information or other carrier information or trucks information, definitely the number one is give and take. The second one is of course you pay per use when needed. Right, thanks. So now this one's going to really press our our brains here which is we have this ongoing crisis with COVID-19 and now in Southeast US we'll soon have a hurricane on top of the COVID situation. Does crisis response or planning take into account multiple emergency events at one time and what are your thoughts on that? Definitely multiple things needs to maneuver and take care at the same time. I think it will impact the way we work. It's going to create us, look at things in a different way. The way we are handling that is as I mentioned before is having a war room plus cockpits in the different sections within the company to ensure the flow of information, the flow of communications is coming and going from the different angles of the business that is moving around. So Musas asks are you seeing a difference in how companies are moving their goods? Are there certain trends you're seeing there? Definitely, there is a huge change under the 80 degree change of the way people used to do things until a month ago and how they're moving today. The number one things that we see is a huge request for air freight and charter, air charters, operations. This is everything that needs to be done fast for all the medical support and sanitarian equipment, etc., etc., is today moving by air freight. There's no ocean involving that there is, but the number one thing is going by air freight. So huge constraint and remember that most of the capacity in the air freight world is in passenger aircraft. I would estimate it to be 60-70% of the world's capacity is actually in the belly of passenger aircraft. When those aircrafts are not moving, we are moving to charters and there is a certain amount of charters or freighters available in the market. So we see airlines that taking the seats out of the passenger or other airlines that putting cargoes on top of the seat and putting nets. So that's number one thing that's happening. When we're talking about oceans, a lot of the distribution centers are full and closed and they cannot take more cargo anymore because all the stores are closed and there is no release from the DC. So people are looking for store containers for us. Can you reroute it via different locations so it will arrive later than before? So cargo that used to go into the west coast now been requested, please route it into the east coast. Let gain another 10 to two weeks time on the water so we don't need to find solution for that and by then hopefully things will change. People are asking to, they want to reduce the detention, the marriage on the containers. So they're asking for solution to get off cargo and put it in temporary storage in warehouses. Get different requests of can you now break the cargo, take only the emergency goods or the things that needs to be used for emergency, bring them to the final destination and the rest you hold for now. So there is multiple different requests nowadays to change supply chains of the customers. Right now, super interesting thinking about all the different changes going on right now. So David asks, is mares making agreements with third parties for increasing capacity or is that managed internally any additional advice related to flexibility? The simple answer in terms of do we do capacity management with others? The answer is yes. There is alliances in the world today and definitely each carrier has backups including mares with other carriers and increasing capacity. But the main flexibility is not coming just because of you get more capacity. A lot of the time actually the carriers would like to reduce capacity because it's impacting, you cannot operate a capacity if it's not bringing a certain amount of income because otherwise you're actually losing money for every voyage. So there is a lot of times that you actually reduce capacity just to maintain certain rates. But the real potential thing in order to create flexibility is to be able to have your own capacity and control of every element in the supply chain. So if for example the ocean port to port is being slowed down because of whatever reason and there's always something can happen. You cannot create a bulletproof point-to-point supply chain. You can create a much better resilience end-to-end supply chain by being able to actually control everything in the supply chain and mitigate those problems along the way. So if you have all the end-to-end capabilities and you have the ocean portion is actually being delayed right now or alternatively arrive earlier you can actually slow down or speed up when you move things through the warehouse or through the trucking or through... So that's basically the way we're creating flexibility and on top of that you have to have the visibility. As I repeatedly again visibility is the key for everything. Do you have a prioritization or a classification that prioritizes humanitarian cargo and how do you deal with that? Yes definitely. We have a government and aid section within the company that supports FEMA and all the other kind of global organization that definitely gets a number one priority for this type of equipment and goods that needs to support the life of people we are prioritizing. Jose now asked could you say something about the current shipping container shortage? Definitely a lot of the cargo is as I mentioned before has been stored in containers nowadays. People are asking to find solutions for the yard and impacting the ability to move containers into the location. Certain companies that need those containers for exports we see them willing to pay money to move empty containers from the ports into the inland portions of the country. Certainly something that you don't see in normal days. Normal days they are taking advantage of the empty containers being in those places. But nowadays when you have a shortage people get creative and find a solution to get that but the more cargo will be stuck inside containers the more we'll see shortage with that and we'll have to find alternative solutions. One of the ways could be to move things in the 53 trailers bring them into the port if you need to export and basically convert it back to 40s in the port area. That could be an alternative solution that we're working with some of our customers nowadays. Thanks for that. So another question for Sovren is asking about oil prices right now and the fluctuation. How is that impacting you know Maersk's strategy in any way? So I'm not an oil expert but I know that the way we're dealing with oil is based on on the market. We're not bankering any oil or fuel in advance because that's kind of becoming more of a gambling exercise to understand. So we take and push back this up and downs with the customers and we work with them to ensure this is sustainable to all. Carlos asked do you think this global situation will create new business models for the supply chain? I'm sure it will. I'm sure it will. As we spoke before people are looking for different ways to move the cargo. I think at least the way we see it internally one of the key things to enable companies is the end-to-end supply chain guarantee of transit time or reduction of variation. So Rui asks in Maersk is there a team or any individuals fully allocated to emergency response crisis management? Oh yes definitely. There is a team that dedicated to that. We have the protocol of these people are not sitting idle the whole year round. They are coming from the different businesses and they are part of a disaster recovery team and the moment that something goes on basically we initiate this team and bringing them back to the war room and ensure that there is an execution of the plan that we set in place. So those teams are fully aware what they're supposed to do. They're part of regular discussions and building up the recovery plan during the year. So yes. Great thanks. So we're coming to the end of this awesome session. I just want to thank you so much for taking your time. I know you are managing a million things right now so I really thank you for taking the time. Final final question any words of wisdom as we sign off? I can only offer wisdom when in supply chain. Definitely see the bright side of things. Supply chain is being disrupted but it shows that it's necessary to plan and necessary to build things. So in the last 10 years we repeatedly have different disruptions maybe not in this magnitude that the whole world is shut down but there are constantly things that are disrupting our supply chain and when it happens people yeah we need to do that we need to do that and then the moment it's over yeah let's go back to normal we forget about this. So definitely encourage you to work on that make sure that you have this protocol in place and you actually refresh them within time and checking that they're still valid and workable. People that might be impacted in the short term in terms of work I believe that you definitely going to find yourself in a good situation after it's all over when more and more company will want to have those expertise and capabilities in place so definitely remember that keep doing the good stuff that you're doing because I think people that are in the supply chain are the number one crucial to make sure things are moving and flowing so definitely a good job for everyone that's involved in supply chain. Thank you so much Reza. Those were great words of wisdom to sign off by thank you and everyone stay safe and healthy. Thank you guys. All right everyone thank you for listening I hope you enjoyed this edition of MIT Supply Chain Frontiers my name is Arthur Grau communications officer for the center and I invite you to visit us anytime at ctl.mit.edu or search for MIT Supply Chain Frontiers on your favorite listening platform until next time