How to Solve Supply Chain Disruptions with Creative Solutions

As supply chain disruptions continue to impact shippers, now is the time to think through more creative and versatile solutions.

In this episode, Don and Bryan sit down with Anthony Fullbrook, CEO of OEC Group to get his thoughts on how shippers can think differently to solve their supply chain challenges.

In this episode, you'll learn about:

-Anthony's thoughts on the current market conditions and what his prediction is for the rest of the year.
-How NVOs have become a more long-term strategy for BCOs and how you can use them for space relief.
-Why MQC/52 weeks is an old model and what the new model for shippers should look like.

And much more!

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Transcript

Anthony Fullbrook: 0:02

You

Bryan Most: 0:02

are now

Anthony Fullbrook: 0:03

listening to the supply chain secrets podcast with Brian most and Don

Bryan Most: 0:08

Davis, everyone. I'm Brian, most SVP of retail strategy, not chicks and former VP of supply chain at

Don Davis: 0:15

Walmart. And I'm Don Davis. I'm the senior vice president of carrier strategy here at Nintex and former executive of CMACGM and happy Lloyd.

Bryan Most: 0:23

And we're back again with our podcast supply chain secrets. Don and I are very excited to announce. We have a very special guest on the show today, Mr. Anthony Fallbrook. He's the president of OEC group in New York OEC group is one of the leading NVO CC freight forwarding companies that was established in 1981. They have headquarters located in Taipei, Taiwan as well as regional headquarters in New York and branches throughout Asia, North America and Europe OEC group engine was a strong position and a rapidly growing market. Anthony,

Don Davis: 0:58

welcome to the show. Thank you, Brian. So Anthony, the last time we saw each other, I'll never forget the day because it was March of 2020, and we had met in your office and then we were going out to lunch. And the first thing I remember is that this place was not far away, but it took us forever to get there because there was a Costco over, off to the side that was just causing all this congestion. And at that time there was all this mayhem around Paper products and things like that. And then we sat at lunch and it was one of those days where the stock market had halted trading several times. The NBA had announced they're going to suspend their season and things like that. And it was just at the height of all this change with the pandemic. And it was, it was quite a day. How would you describe how things have evolved since then? And what would you say has been the biggest challenge over the course of the past year?

Anthony Fullbrook: 2:00

I mean, it's incredible to look back now and realize that it was only, only a year from, from then, until now, and how much has changed in that year. So we we've seen everything happen in that 12 months. So obviously after, after that was probably the last time that we met and country went into shutdown and obviously in New York, very severely. So. And we saw volumes go to record lows in that three, four, five months, and then it calls so you know, recovery at the end of the summer, we've seen amazing returns in, in, in, in volumes and record growth. So from record low to record high and I think for, you know, industry wise, what was really interesting was the whole world. Slowed down at the same time. And then the whole world sped up at the same time, which is something that I've never really seen before. And that put real challenges you know, on, on, on for the carriers and, and for, for the supply chain, but particularly the first country to come out of the lockdown w with China. So everything that came in and out of China to the rest of the world, it all hit at once. Is it typically. Well, when, when you pee, not everywhere peaks at once and carers are able to be smarter, move their fleet around to, you know, to utilize, to cover the hotspots. But there was no doubt. The whole world came, came on this very sharp sort of a V-shaped return globally all at the same time. And there wasn't there wasn't S the, the spare Slack capacity from another trade to really, to really balance things out. So we've been on an incredible crunch, really starting from, from September.

Don Davis: 3:52

Yeah. And would you say that the other noteworthy thing is with all these challenges on the carrier side is that their on-time performance has dropped significantly over the course of the past year. Has that been a significant impact for you? Or how has that affected OAC?

Anthony Fullbrook: 4:11

Yeah, I, you know, someone's just trying to describe it to me that the cane shape or the cane return. Well, if everything, the pricing is going up through the roof on the, on the, on the case, on the case side and, and on time performance and salvage is going, going down the other side of the cake. It obviously it's been very challenging. The, the biggest issues, you know, has this been the congestion's called caused, uh, vessel bunching and the bunching creates ripples down the supply chain. And that's the, that's the hardest part because everyone's off, you know, schedules are still forecasted, advance advantage. You booking on vessels where the vessels are, are still 10 days out. And, and so you're not getting your container for 10 days, but you've got to do your booking, you know, by, by a certain time period. And it's hard to understand, you know, where exactly your cargo is with within, within the, within the supply chain. And, and a lot of systems are not well, well, first in, in you know, in showing what, you know, when you call you is getting stuck. And so it's been a lack of visibility but from our side on, on the client side. And I think that's the hardest thing for people when people understand about delays. But it's getting that, that consistent clear message exactly where you can't go is. So you can say you can account for, for those delays and try and build it into your, into your supply chain model.

Bryan Most: 5:44

You know, Anthony, you've got a lot of experience in this industry and, you know, I just wonder when you think about the scale, we, we, we've all talked about going through things in the past, whether it be labor negotiations, port lockouts carrier bankruptcies, et cetera. I mean, How do you kind of rate this, you know, what we've gone through the past year? Is it visit truly the worst you've seen? And if so, like in what ways, what, what makes it the worst, you know, that, that we've seen in, in, in most of our

Don Davis: 6:14

careers,

Anthony Fullbrook: 6:16

I, I, as I said, I think we've seen the whole gamut. In the last 12 months, we've, we've seen the West coast port lockout where you've seen, you know, bankruptcy it's all happened. Not, not necessarily because. You know, a carrier has gone bankrupt, but the extremes of the bottom end and the top end of all happened at once within, within one contract cycle, within, within a 12 month period. And, and that's, and that's very hard to accommodate huge shifts in volume, especially if you're a carrier or a terminal, it, your, your asset base. Yeah, there in so many units you can do. And if they no more available land or available boats, it's hard to accommodate you know, the, the growth or the decrease in volume when it was, when it was very bad at the early parts of last year.

Bryan Most: 7:13

And it's one of these senses where I think there was at least a hope or a glimmer of hope that that maybe this would settle and be, be put behind us. I think coming out of quarter four, there was this urgency around Chinese new year, but then maybe a hope that things would settle in. It certainly doesn't seem as if that has happened. What, do you, what are you seeing now and what do you foresee for the balance of the

Anthony Fullbrook: 7:40

year? I, feel the, the US economy is still very strong. And we have yet to truly come out of, the Corona lockdown So I think it would be safe as to, imagine that the back half of the year will still be very strong. The American, population when it comes out of lockdown. will more fully go back to its, its old consumer habits that in the short term at the end of last year, I, think, internet, traffic and goods, were house based or garden based did extremely well because everyone's restricted to those two areas, depending on weather. But I, think there are other areas that, that, there there's been significant pent up demand that will release it the back end of this year. and I think we also have a traditional peak season that. Though vastly different in, recent years because of internet traffic, and some dumbing down of what happens during the holiday season, at the end of the year at slightly more balance. But it's definitely significant, but those two things coupled together should suggest that, we, we have a very good quarter three and quarter four. So on top of logistical challenges that are already getting baked in to assess them as in the interruptions because of the Suez canal and the current bunching and rippling effects from, what's happening on the, on the East coast. And particularly in, Los Angeles and long Beach and those bunching, of vessels and ripple effects take a very long time to, work their way through the, supply chain and, for carriers to both get those vessels back onto, back onto, their original schedules. And that's at least three, four months out coupled together with, with, you know, with a, return in the economy and an opening, up of society in America, I think has a very strong forecast for, for logistics, supply chain and, possibly retail as a whole.

Don Davis: 10:03

Yeah, I think that's one of the biggest challenges, right? That it's, it's based on what we know today, but then you have a ship gets stuck in the Suez canal and then all of a sudden, all these other issues that start to crop up and it takes a long time. So it's it's I think just based on the status quo, most predictions are that things will be strong through the end of the year that we'll see this normal peak season cycle, but. You know what happens on the other side, you know, could something else that we haven't even thought of yet happen? Absolutely. And I think that's the scary part because even without that there's potential that something else could happen, which causes these further delays or further challenges for the carriers.

Anthony Fullbrook: 10:45

Yeah. I think regular in an irregular situation, if you're at 80, 90% capacity, you have some Slack capacity. So you to make adjustments to when you're running, like we are right now at over a hundred percent, there, there is, there is no, no room for correction and any school and any small problem adds its impact because of that. And it's felt far, you know, felt throughout the supply chain. And I think that's that's probably in right now, which is so, so full. We have no room for error, no margin.

Don Davis: 11:25

W one thing that's emerged as part of what's been going on in the market are the carriers number of carriers have launched these premium products. So MSC has their diamond service. CMA has C priority. Hapag-Lloyd has a booking guarantee. How, how has that, what's your observations there? How has that impacted OEC and what are your thoughts around those?

Anthony Fullbrook: 11:49

I, to be honest, originally, I w when, when Kara's first launched their, that priority products I wasn't that keen on it. I felt it was very much a competing, a competing service against the the, the, and freight forwarder. I think obviously I, as the, the situation is continued to get worse than priority products I think are, have become a more useful tool. And looking, you know, looking into all what's, obviously in the last 12 months been been extraordinary market and then looking forward another 12 months again, it's, it's going to be an extraordinary market. I think we have to approach our, our supply chain our supply chain problem, with as much creativity and versatility is as you are allowed. And so I think there is a place. For the premium product in a long-term basis. And you know, if you, if you are selective with it and you use it in your hotspots to fix a fix otherwise unfixable problems, this allows you to keep cognitive flooding. The most, the most dangerous thing could happen to you right now is to assume that next month will be better. When all the signs show is that there is not slowed down on your supply chain, you lose velocity, and then you get a backlog that you're unable to relieve. And, and this is, this i, this is a big, big thing that we encourage all our clients, just, just to keep moving aggressively forward and keep, keep the velocity that to keep the supply chain moving because any, any interruption now is going to be very, very hard to fix.

Don Davis: 13:32

Yeah. And my observation with these, these premium products has been that carriers are trying to be a little bit more deliberate as we go into the next contract season, that they're being more thoughtful about how they manage MQC, but they're also trying to allocate some capacity to these premium products. I know a lot of people have told me that. You know, they might've been held back on their MQC or maybe they went to a different carrier who said, I'm not trying to take new customers now, but I do think that there will be capacity available. It'll just be part of the, some of these premium programs that the carriers.

Anthony Fullbrook: 14:09

Yeah. I think there's a fine line between being creative, strategic and, uh, being overly expensive. And, and that's the, th that's the difficulty had that everyone. But, you know, that everyone's trying to navigate around. But I think the, the carriers, the carriers in the past have never really tried to be very creative with their product. And this is this obviously signs of a different approach. And I think, You know, we've never seen the market last 25 years. It's healthy as is. So the characters are approaching this problem from a very different from a very different mindset. I think maybe it's a little painful today. But maybe as they become more familiar with, with with a better market and, an, long-term recognition of a priority product, then they will start to balance a balance more products in the, in the market, not just priority, not just your regular uh, FAK and long-term fixed deal, but there may be other, other other, uh, products, the same issues around equipment availability, you know, on time rail and, and other guarantees. That, that that makes, that allows you to build a more in a more diverse uh, solution with the carrier to fix your supply chain needs.

Bryan Most: 15:38

You know, I think anything with any kind of product or premium product or differentiated service, the key is just can, can the carrier deliver on it right. With, with a high degree of success. And as you said, Anthony, there, some of the premiums that are being charged are, are pretty significant. And I think it's tough for a shipper to kind of make the determination as to whether this is a good return on my investment, but. I think so many shippers are just desperate right now that it, it almost doesn't matter what the price is to pay. And, and I'd love to talk a little bit more about, about your customers. You talked about some of the advice that you're giving a customers. I've talked to more BCOs this year. Who have said I've engaged in NVO for the first time in my career. And not because they didn't want to, but just because of, of the overcapacity that's been in the market because of the commercial flexibility, they've historically gotten because of their size. And, you know, I'm talking about medium to larger size BCOs that went to NVOs for, for the first time to, to get help and get access to, to capacity in times of need. And. I'm just curious in terms of what have you seen, what kind of customers, how has your customer base changed? What are they looking for and how are you helping serve them?

Anthony Fullbrook: 16:59

I think probably from a NVO's perspective. There's always this crossover area between that, that the, the usefulness of having an NVO to serve a BCO who feels that they contract for their their entire volume with a carrier. I think having a NVO in your portfolio gives you a in the past, it was, it was looked at as a versatility move. It's a backup. But I think in the last couple of years when we've had a space shortage, then it's a lot easier to go to an NVO to fix your, your long-term space, modern problems. And I think you know, a lot of this, it relates to the number of carriers in the marketplace. For years. If I look back 25 years, we've talked about overcapacity in the market and too many carriers in the marketplace and we encouraged. You know, mergers and consolidation and lo and behold, 25 years later, we now have seven major carriers. East-west and it's not, it's not hard to, to guess what the signaling is between the, between the carriers as they separated the three major alliances. So, and, but that was the only way to stabilize to, to stabilize the market. So I, I think, sorry, I kind of slightly lost the question there. No,

Bryan Most: 18:34

you talked about now, you know, the structural change in the marketplace has created this now need, right. Instead of just having an NVO from a versatility's perspective, There's now this true need that you're starting to fill. And again, it might be a different customer coming to you now than it has been before, and maybe requiring or requesting a different solution. And I was just curious, you know, are they looking for just space? Are they looking for, to leverage rate, you know, access to maybe carriers or services they can't get on their own? What are you seeing them asking for? For the most

Anthony Fullbrook: 19:09

part, I think most of them are looking for, or for space relief. And they're looking for some consistent service out of areas that they really struggle to service, that they have small, small lanes on. I think it's, it's kind of a two-part problem. I think the sweet spot for a BCO to work with an MVO is an example. If we take a 10,000 to you a client that ships 10,000 T who's a BCO traditionally science with carriers direct. The best advice for that person would be to sign across three alliances so that you have every setting schedule. So then you reduce a 3000 to you equally, or a close variation up and down from that across three alliances. Do you only sign three carriers or do you sign six? You're you're now reduced to 1,500 F with one carrier, or if you split it again, 750 AF. If you divide that by number of weeks and port passes, everyone wants to, to narrow down your allocation to, you've got very small allocation by load port. If a port pair becomes congested, you completely out of options. And this is why go into a larger NVO like, like someone like OEC, where we have a significant volume and significant commitment to multiple carriers, you're able to buy. What you don't have to, you know, to relieve to relieve flow and keep this, this this continuity in the supply chain not allow a backlog to build up. That becomes very hard to clear when the market's very, very congested.

Don Davis: 21:01

And Anthony, you touched on it a bit, but, but I want to talk a little bit about this whole idea around MQC and what that means in terms of capacity. And I think that this is something that has been a topic for a number of people that we've talked to at NYSHEX about, you know, what it, what it really means. And what has been your experience, what are your thoughts on the way we've been contracting in terms of this MQC divided by 52 equals your capacity. Is that really the way forward or, or what's been your experience with that, that model as it stands today?

Anthony Fullbrook: 21:40

Well, the, the, the old model was no model. The new model now I think is, is trying to shine some light on accountability. And, and, and this is what I think ultimately the carriers are really looking for is really determining each week what the accountability is because for them, the hardest part was operating equipment and vessels, not knowing what was going to get booked each week, not having effects, commitment. And that's obviously from the asset based side, as you've known your days at, at, at halfback in CMA, the difficulty you run into is, you know, week to week to week, you never know what your commitment is. And this is what's truly unique about also what you're offering on the NYSHEX is it's a meeting of minds between both sides, both as a shepherd and a consumer that that you have something you both agree to and you must then commit to, I know on the broader side if you commit to large volumes, it's hard to break down exactly to the container by port pair. Exactly. But perhaps as I, I, as I mentioned earlier, you know, as we become more and more creative with our products, you will end up, it may be like an insurance, you'd have a general cover, and then you have a specific catastrophe cover to cover certain things and guaranteed space priority products. Uh, port pair allocation, would be a way of adding consistency back into this supply chain to make sure that your product is continued to, to able to move, but it comes at a price. And I think that's something that everyone has to realize, you know, going forward if we remain This busy on a consistent basis, then, then the products and the approach has to change both by, by the consumer and by the vendor from the carrier and shipper side what what's required of each other you know, to, to, to make, to make this as, you know, a successful relationship.

Don Davis: 23:49

Yeah, thanks. And I appreciate you saying that because I think Brian doesn't always believe me when I talk about how difficult it is on the carrier side and, and being an asset based company that in one of our prior shows, I talked a little bit about the challenges of being a carrier. And to me, it's more difficult than what the airlines do because. An ocean ship is a little bit like if you took a plane, but you decoupled the seats from the plane because the plane might be there, but they're like, Anthony, sorry, we don't have a seat for you. You didn't bring your seat with you so you can't get on the ship. That's the challenge. The carriers face is that they're managing two things. They're managing where their ships are, but they're also managing the container inventory, which is why. At night shifts. We've seen a lot of interest from, from carriers to say, Hey, this kind of makes sense because now I can plan better because I can see upfront what my customers are looking to do.

Bryan Most: 24:44

Yeah. And this speaks to the, to the challenge and the difficulty in this industry. Right. Because, you know, without a doubt, the carriers have an unbelievable challenge to manage their networks. And then we, when you talk on the shipper side right there, they're dealing with a customer base as well, where. Sure. There's an underlying business. That's usually fairly stable that you can count on. There may be some seasonality that you can plan, but at the end of the day, it's really hard to predict what consumer demand is going to be. And, you know, things like stimulus and all those have a huge impact as to what volumes are or aren't. And so you have these constant moving targets for both the shipper and the carrier to, again, try to meet on. What exactly is going to happen in a particular week. And it can become really, really challenging. And Anthony, you touched a little bit earlier around visibility and other things. I wonder if there's, you know, any kinds of technology or standardization or things that we can learn from this period of time that that really need to become a focus for the industry. Are there things that, that also customers have come to you for space requirements, but maybe it is to get. Access to recording or visibility or other things that maybe help us as an industry kind of collaborate and get closer together to predict maybe what could happen in the future.

Anthony Fullbrook: 26:08

I think we're slow to recognize change in markets and in our industry and the looking back 25 years ago in the days of an era, I think the up and down movement was significantly less. Obviously I think technology has spent the market up. Consumer consumer habits have changed, as you said, and say that the peaks and troughs get bigger and bigger, but we still, we still didn't say, Oh, the market still the CS on, on year long year long contracting in America, I think many markets around the world have now moved away from from year long contracting. So I think the commitment versus the price, I think it's okay to have a year long commitment, but I think pricing probably needs to change too to quarterly, if not monthly. And that allows the carriers and to adjust their product and adjust their service based on, based on what you know, what the market's able to, to deliver or pay. And that kind of flexibility forces them to accommodate the peak markets when it, when it's there to make some adjustment in the down markets and not having to, to, to to put on the same service throughout all of it. And but, but you'd want to rob Peter to pay Paul, taking the money out of the peak market to pay for deploying empty vessels during, during, during the off season. And if you're going to have a less tile approach to supply and demand we need to have a versatile approach to, to how we price it and how we commit as well.

Don Davis: 27:59

I do appreciate that you brought up a era. And um, I might, post a quiz for some of our listeners to see can you define what a naira is or TWRA, or TACA and these things that used to exist? That that's super fun. So I, I know we're runnin, here at, towards the end. What what's going on with OEC and what, what would you like to share for our listeners as far as what's going on with, with your company?

Anthony Fullbrook: 28:27

Well, we were obviously. You know, we're, we're, we're very busy as in the market that the TP trade has been our predominant focus, but we all, we all noticing changes in trends. Are we noticing a lot of, are they actually, a lot of our client base from, from the far East is shifting their buying patterns. And we, we're also looking to follow our clients into, into new markets. We've seen a lot of development in, uh, Uh, North, South, or particularly in this case, South North from the South American market northbound. And also we're seeing a lot of, uh, renewed activity that, that was uh, typical 20 years ago coming out of the med coming inbound into the, into the, into the U S. And so these areas, these are growth areas for us. And and also we're, we're specializing in other. Specialty products, such as flexi tanks and Ickx and other things also are outbound as well as inbound. And so I think these these, uh, particularly, areas of focus, with us, um, and also the air freight because of e-commerce is um, again, it's risen from the grave and, and becoming becoming very fashionable again with, with just-in-time. And also picking up a lot of the, you know, a lot of the, the Slack has been left by inconsistent station supply chain. And the only way to fix that is is also again by, by yet. So these have been particularly predominant, areas for us. Plus, you know, we're continuing to invest in and technology is, I think ultimately. That that, that that's going to be the ultimate tool to try to, to try and bring more and more clarity to problems as they occur could only be resolved through tagging.

Don Davis: 30:31

Yeah. And you see that there's a number of startups and companies that are developing in this space. And there's been quite a bit of I think investment there. So I think it's, it's a sign that, that part's needed. And it's a question of, you know, who's going to do that. How much does the, what the DCSA standards help the industry evolve in this space? But I think it's, it's very noteworthy to say. The technology is improving and there's, there's quite a bit of investment there and it'll be interesting to see how that evolves over the next few years.

Anthony Fullbrook: 31:05

Yeah. I think that's going to be the fastest growth area. I think we've seen now a glass ceiling on, on vessel size. I think it will get stuck for a little while at 23,000 TEUs. I would definitely say that obviously it immediately jumps to next year, but I think we think carries by. By buying build well, vessels, one slides down as people are worried about. But you know, about near shoring, long shoring volumes, moving around to different countries. So everyone needs a practical approach on what size of vessel can get in and out. So I think a lot of the carriers will, and, and also freight forwarders will be looking to develop more and more tech products going forward to better serve the majestic world. Oh, I know.

Don Davis: 32:00

Good. Well thanks a lot for participating, Anthony. It's been a great discussion. We really appreciate your time and your thoughts and hopefully we can meet, maybe meet again in a couple months and see how things have evolved since we last spoke.

Anthony Fullbrook: 32:17

Thank you guys. Thanks Don. Thanks Bryan. Thanks for listening to the supply chain secrets podcast. Make sure to subscribe to the podcast on your favorite

Bryan Most: 32:29

podcast

Anthony Fullbrook: 32:29

network.