Imposing Edifices

Yellow Corporation had feet of clay.

Supposing disruption is the future of supply chain, supply chain managers, tasked with adaptation, will want to acquaint themselves with the future or at least an approximation of it.

That’s no easy task. Purporting to know the long-term outcomes of interdependent and heavily globalised trade markets as volatile as they are right now, is a fool’s errand in any period, language and, for that matter, industry, whether it’s rare minerals, the NASDAQ or the Asia Pacific Poker Tour.

Predicting outcomes are notoriously the realm of clairvoyants, con artists, and economists, but I repeat myself.

Preservation and preparation are historic bed mates. But when adding the capacity for growth, at scale, things get tricky.

Being big doesn’t any more insulate against vulnerabilities.

Under the current economic climate these will be tested time and again. Withstanding cyber-attacks, as DP World discovered, doesn’t necessarily avert 48-hour work stoppages.

Being as that preparation is guesswork in foreseeing the way things might eventually be based on the knowledge of events past and how they came into being, the next best response is to fortify systems so that they are relevant for the appropriate moment in time.

A system not yet obsolete is going to be one that works.

Any governing body looking to attach weight to its state of readiness, bets on technology. Long-term investments are another.

Transport companies take out mortgages and build multi-million-dollar facilities to accommodate what their throughput will look like a decade down the track. Transport hubs such as ports must take this, without putting too fine a point on it, a step further.

Through extensive research and stakeholder consultation, the Port of Brisbane is embarking on imagining what the supply chain and its future challenges might look like in the year 2060.

To do this it is creating what it deems will be a global model for maritime sector innovation and growth. Inputs from other partners and stakeholders is crucial, so the current consensus goes, to any futures-based thinking to achieve a sustainable and robust business model.

One potential solution put forth, again, is an increased collaboration between carriers and shippers.

By working together, carriers can better understand their customers’ needs. A better understanding of needs will provide, in the vaguest sense, more efficient transportation services leading to reduced costs for both parties.

Last year Amazon surpassed FedEx, its former shipping partner, as the biggest parcel delivery business in the US. It, too, was after a better understanding.

Cost reduction, especially as an end goal, creates dangerous blind spots. It served as the basis for the reborn Yellow, a 100-year-old truck company with a remit in less than truckload specialisation, reliant on manufacturers and retailers combining various loads into one single trailer.

For this they were the market leader in North America. But several costly acquisitions that Yellow failed to integrate into its network brought about a collapse which happened in two ways, to borrow from Hemingway, gradually, then suddenly.

While Yellow’s financials were in dire straight as far back as 2009, escalating debt payments and a union workforce in desperate need of appeasement forced it to financially reengineer to inject liquidity under its revolving credit facility.

As increased competition from Amazon and FedEx, rising fuel costs and a shrinking work force brought the blowtorch to its bottom line, leadership at the time convinced bondholders to swap their debt for equity in the company that by this stage was, to quote Ernst Jünger, “nothing more than a colossus with feet of clay. The more imposing the edifice, the more terrible will be the fall.”

Seldom is the past not also the future. Not all history, however, is worth repeating.

Send this to a friend