In supply chain disruption, resilience and transparency guide strategic account management to retain customer loyalty and prepare for more challenges in the future. In this episode, Eric Gantier, President of DHL’s Global Engineering, Manufacturing & Energy Sector, joins host Harvey Dunham to offer his insights and perspectives on the current state of the global supply chain in a post-pandemic world. He describes the significant impact of Western lockdowns on Asia, particularly the accumulation of cargo containers and skyrocketing jet fuel prices. Eric also talks about how DHL stood strong despite many pandemic constraints, sharing how their resilient workforce and focus on digitalization played crucial roles in overcoming the hurdles of the crisis.
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The State of Global Supply Chain With Eric Gantier
HD: We’re going to talk about a subject that’s been a real thorn in the paw of strategic account management over the past few years. I am talking about supply chain disruption. Thankfully, we have an expert guest with us here from DHL to diagnose what went wrong and offer insights into the current state of the global supply chain.
As the number one provider of air freight in the world, DHL has an up close and personal relationship with the global supply chain and is a key actor in it. I’m looking forward to this conversation. I’m pleased to introduce you to Eric Gantier, President of DHL’s Global and EME, which is their manufacturing sector.
Eric has vast international experience and a career spanning more than 30 years in logistics and transportation. In his previous roles, he transformed performance levels as the country manager for DHL Global Forwarding in Mexico and Argentina. He was responsible for the global forwarding business in the Eastern region of the US prior to this, including or in addition to Latin America.
Eric established three global forwarding sales organizations in Latin America and Asia. They’re all reporting to him. Finally, I’ll say that Eric is a member of the SAMA board. We’re so happy to have him. Eric, thank you very much. We’re delighted to have you with us. I’ve been looking forward to this conversation. I can’t wait to start.
EG: Thank you for having me.
HD: It’s a pleasure. Let’s jump right into it. From your perspective, can you provide a recap of the events and factors that led to the global supply chain fiasco during the pandemic? Remind us of what caused all of this in the first place.
EG: This is where we should start and put things in perspective. To do this, we probably have to go back to the end of March, mid-April 2020 when it all started. At that time, the Europeans, the US, and Canada decided to go for lockdowns, which at that time, Asia didn’t do. What that meant is that all the containers, and I’m talking about the boxes here, stayed in Asia for the intra-Asia businesses.
At the same time, the Europeans, the US, and Canada put some restrictions on international flights, which affected the capacity. From one day to the other, we went down by 86% on international flights. Just to give you an idea, United Airlines fly 1,100 flights a day, and overnight they went to 10. When you know that most of the air freight flies into passenger aircraft, right there, you see the impact.
If that was not enough, I’m sure you will remember this, we had this vessel that blocked the Suez Canal. Her name was the Ever Given. This vessel only had 20,000 containers on it. Not to mention all the others who were in line behind her. We knew right there that this cargo was not going to be delivered on time and therefore, had to fly them. In addition, people could not go to work and this affected as well the workforce in the shipyards.
An example to take is LA, where vessels to be unloaded had to be in line for 2 to 3 weeks, sometimes even more, which caused major delays. On top of everything, people like you and me and everybody else were buying eCommerce like never before. They could not visit their favorite malls, so they would buy online. The thing is that all these cargo flies as well. To give you an idea, the volumes of eCommerce cargo flying over the last ten years got multiplied by two over three months.Because of the pandemic, everyone was buying e-commerce like never before. Since they could not visit their favorite malls, they would buy online. Click To Tweet
We had these capacity restrictions both on air freight and ocean freight. Not to mention the priorities down from the PPR to the vaccines. On the other hand, we had this demand, which was still there. Plus, the jet fuel went up in a matter of ten months from $71 a barrel to $177. If we are talking about the perfect storm, we had one there.
HD: Demand exceeds supply. Costs go out of site. Not enough ways to move the freight around. It was a real mess. Thanks for reminding me of how painful it was. We’ve moved on now. It’s been 2 or 3 years past that point. What’s the current bill of health of the global supply chain? Is it fair to call our post-pandemic world?
EG: In many aspects, what we see is that we are somehow back to normal. What is important is what these companies are doing now. Frankly, over the pandemic, I didn’t see any customer doing much better than another. What I see some are doing much better than others now is to learn from what happened and try to be better prepared for the next disruption.
What I see is many companies are thinking about digitalization. What happened is that when COVID broke, orders were moving but they were not at the right place and at the right time. There is this need for visibility of transportation. I’m talking about air freight pallets. I’m talking about ocean containers, but they need to know as well at the item level where the shipment is.
We see a lot of work and discussions on sourcing as well. It’s no secret that many companies realize how they were China-dependent. I was reading an article saying that about 10% of the company sourcing from Asia are now considering buying somewhere else. It’s yet difficult to measure. What is clear is that this is part of what the companies are thinking.
It could very well be that over time we’ll see other sourcing countries. I’m thinking about Vietnam and Mexico which could get some benefits from this. There’s something that I like about people as well. I see a lot of our customers who saw that what they needed over a crisis like this were resilient employees and people who loved their job.
God knows that you had to love your job to be working in an environment where nothing would work. Everything was costing ten times the price. You have to be in love with your job, but I see that some companies are integrating this aspect of their people into their recruiting and training. I think that goes in the right sense and the right way.
HD: That’s an interesting point. Did DHL run into this? I would expect you to run into the same issue. Did you do things with your employees?
EG: We did. It could have been a depressing moment for many of us. We normally try our best, like everybody else, to give the best service to our customers and to stick to our commitment, our contracts, and our rates. When you’re committed to servicing best your customers and eventually, nothing works, all prices are gone, and you can’t deliver something on time, it is very frustrating. We’ve been doing many different things. First, we were very close to our people to cheer them up somehow. We integrate as well these resilience, sharing, and what we could do best for our customers into our training.
HD: I’m sure they appreciated it. It’s very difficult when you’ve got a bunch of unhappy customers. I don’t need to tell you. While things have improved, how is DHL providing solutions for the supply chain challenges of today? Maybe there are some that were left over from the post-pandemic era and what’s facing you today.
EG: That’s a very interesting point. What we’re trying to do is around two major ideas. One is having to do with the supply chain. The other one has to do more on sharing information. Let me come back to the supply chain. What we need to do is we need to give more visibility to our customers, as well as to try to give them information on the possible disruption that could happen. At DHL, we have these tools where we send alerts to our customers of any potential disruption because of the weather, a strike, something regional, or something that has to do with transportation vessels and aircraft. We do these things to help our customers.
The second part is on the warehouse network that our customers have. We are here to help our customers with our engineers and consultants to look at what would be best. Do they need a distribution center at that place? Should it be in another place? Should they have multiple regional warehouses or not? This is working on the supply chain. As I mentioned, the second part for me which is important is about sharing information and best practices, and everything we could to help each other.
HD: We’ll dive into that in a few minutes and how you’re doing that. Before we get there, let’s talk about the prices. The prices went over the moon, so to speak. What’s happened now? Have we come back to something near normal from your perspective?
EG: Yes, we are, but it’s worth mentioning. In the great introduction you gave about me, you mentioned that I worked for 30 years in this industry. Frankly, I have never seen that. To give you an example, if we’re talking about a TU, twenty equivalent unit, that’s a 20-foot-long container. You would buy this container pre-COVID from Shanghai to Long Beach for around $1,200. During the crisis and at the peak of the crisis, you would buy it for $9,000.
If I take 1-kilo air freight from Shanghai to Frankfurt, Germany. Before COVID you would buy it for $175 a kilo. During the crisis, it went up from $500 to $600. Think about a charter. To put things in perspective, a charter for a cargo of 60 tons out of Chicago into Sydney went up in price to $1.5 million. That’s typically 2.53 times the price.
It went to the roof and affected the cost of our customers. As I was saying before, the worst part is that it didn’t even work well. It’s not because you would pay something 6, 7, 9, or 10 times the price that you would have your cargo delivered right on time at your door. This is what everybody had to go through and it was painful. Everything is back in order. You could say that all together globally, we are back to rates which are pre-COVID rates.
HD: That’s good to know. We’re all pleased to hear that because the consumer behavior of still wanting to buy things online hasn’t gone anywhere but up. I’m waiting for a few packages myself as we speak. I’m wondering now when I’m thinking about your strategic accounts. How are you helping your strategic accounts reconfigure their supply chains for their strategic customers? Helping them be more resilient in the face of the geopolitical unrest that we’re facing, which is the new problem of now is this unrest in the world.
EG: It is. I mentioned already what we can do in terms of visibility, warehouses, and automation. We do all that for our customers. What I believe is even more interesting is what we’re trying to do in terms of information, sharing ideas, and best practices. We started early on to share with our customers ocean freight and air freight market updates, and we still do, by the way. In all these documents, we go deep dive in terms of capacity alternative routes on rates, as well as the projection of all sources of sorts. I mentioned we all suffered, the customers, just like us. We found that sharing ideas is the way to go. We organized round tables. We organized many calls with our customers to tell them, “This industry is doing this. Some think about doing this.”
We don’t want to sound pretentious here but trying to inspire customers and share the knowledge. I do video interviews, which are called logistic talks. They are available on LinkedIn and I would imagine on YouTube. This is what we do. I interview logistics managers of major corporations and we talk about this. What is it that you did? What didn’t work? What do you think you should change? What are the ideas that you put in place to be better prepared for the next disruption? Most likely, we’ll see one again.
HD: The way things are going, I don’t think it’s going to end anytime soon. From your strategic accounts perspective, how does the SAM engage with their customer and then engage with your CSI experts in your innovation centers and the various DHL business units to help co-create value on a scale? What role does this SAM play? How do they do what they do?
EG: The role of our strategy accounts was critical, 1.1 is to be close to your customers, understand them, and be transparent. This is what we need to do. It would’ve been easy to hide behind the sole disruption. It was like, “Too bad, not much I can do for you.” We tried to be as close as we could and help our customers.
We wanted to share ideas, interview, share knowledge, and connect customers with one another. A lot of times, what we did is to get logistic managers together and talk about what was possible. What we are trying to do with our strategy accounts as well is to innovate. This is a big part of what we are trying to do. To mention a couple of things, maybe circularity, which is more important for many industries, or what we are doing now for battery logistics. With all these batteries for any vehicle, we are very innovative in these things.
This is what we’re trying to do to be strategic. We help our customers to implement strategic decisions throughout their own business units. Sometimes it’s difficult but we are here to help them to simplify what they’re trying to do. This is nonstop work. We’re about now to be finished and we have this COVID disruption behind us, but new challenges are coming.After the COVID-19 pandemic, new challenges are still coming. Everyone must work on sustainability. Click To Tweet
Now, we’re working on sustainability. This is close to 100% of what I’m doing now. We’re trying to push our customers with the savings that they guard on transportation and to invest in sustainable energies to impact positively their carbon footprint. As soon as we finished with one challenge, it was another one. This is what we’re trying to do. We’re getting close to our customers and be ready for the next challenge.
HD: I was trying to think, it’s almost beyond my imagination how powerful your information system must be within DHL to keep track of all this information and keep your customers all over the world up to speed. That seems like it’s turned into not just a competitive strategy but a must. It’s a must-have service for your members. Is that what you’re hearing from them?
EG: Yes, and to be honest, this is what our customers value most in what we’re doing. Transportation is one aspect of what we provide, but helping and discussing with our customers, and trying to help them share information that we have gets a lot of value for them. During the pandemic, I remember the information that we would send to our contacts. They would use our documents to explain internally in their own companies what was happening. This brings a lot of value.
HD: Perhaps, this is a leading question, so to speak. Didn’t you experience too much churn in your strategic customers during this period? You were able to keep the customers, by and large, that you had and manage to satisfy them.
EG: The answer is yes. This is the reward of having been present with our customers. We never hide even when it was difficult that we could not deliver on time and we were charging ten times the price. That is frustrating. They don’t have an issue there. You’re present and you show your face. We are talking about strategic account management 1.1 here. It’s nothing different. Probably, when it’s the most difficult for the customer that they value who you are and what you do.
I believe we did this all right and what we see now is that the customers are staying with us. We still have this discussion moving now to other subjects. This COVID comes back regularly because there were so much to learn. The customers who did that work or this inventory of everything that happened and could learn from it are better prepared for the next disruptions.
HD: You managed to keep your SAMs as well for the most part because they had to be under a tremendous amount of stress and pressure.
EG: I was thinking, at some point, people would say, “I changed jobs and I’m doing something different” or maybe, “I go to operation or something which is going to be a lot less stressful,” but we haven’t seen that. I don’t know if it is because the strategic account management as such are people who like this stress or just because we had the feeling that we did something right or something that had value, but we didn’t see much changes at all, to be honest.
HD: It’s a real credit to DHL, to people like you, your leadership and experience, and the quality of your customers and employees. I’ve come to know DHL fairly well because you’ve been members of SAMA for quite some time. We appreciate you spending some time with me to talk about this and help us understand what’s happening and where logistics is headed in the future. Thanks so much.
EG: Thank you, Harvey.
HD: We wish you all the best and success going forward.
EG: Thanks again.