Supply chain expert, Rob O’Byrne, is the founder and CEO of Logistics Bureau, a consulting firm that advises top 500 companies across 25 countries. He has over 42 years of experience in managing, advising, and teaching on the topic. He is a go-to person on all aspects of the supply chain and is sought after for comments on TV, radio, and print media. He is recognized as a thought leader and a passionate speaker on all aspects of the supply chain and received the 2018 Industry Excellence Award winner for his contributions to the supply chain industry. Rob has personally led projects that have delivered millions in bottom-line savings and improved customer service levels.
His passion for knowledge and sharing is quite apparent as he runs four YouTube channels plus a weekly blog. He has released a series of books on logistics and supply chain called “Supply Chain Secrets to Help Australian Businesses Be More Competitive.”
On the most recent episode of the Suuchi Podcast, Rob talks with host Irina Kapetanakis about his thoughts around the retail and fashion supply chain. Below are the highlights from their conversation:
Tell us more about the work you’re doing at Logistics Bureau.
I started Logistics Bureau back in 1997. We are a very traditional management consulting firm, so we do not sell software and get into all kinds of things as the big consulting firms do or a pure-play consulting firm. We started in Sydney, Australia, and then expanded to other cities in Australia. From there, we branched out to Southeast Asia and the Philippines.
I guess we provide just good, down-to-earth, practical consulting support for a lot of businesses. It ranges from developing supply chain strategies down to designing warehouses and renegotiating freight contracts. We are very practical people. We have a remarkable client base that takes us all over the world. So we have been doing lots of work, well, pre-COVID we were going a lot of work in the Middle East and some fascinating places like Mongolia. Our team loved that! They get to travel around a bit and help organizations all over the place. It is a lot of fun and we enjoy it.
How did you get your start in supply chain and find that it is your passion and your niche? Where was it in your career path that you felt that that connection?
This could be a very long story. When I left school, I decided to join the army, and we will not go into that because that is a bit of a sorry tale. Anyway, I ended up in a branch of the military that focused on logistics. It is now called the Bra Logistics Core. That got me interested in how a product was moved through a supply chain to those who need it. It was a very different sort of logistics and supply chain, of course. After this, I then went off to Cranfield University to study for a master’s degree. That was a real eye-opener because I had been operating in military logistics. Now, I suddenly saw that logistics was like in the “real world,” which reignited my passion and fascination.
So, I ended up teaching supply chain and logistics in the army for a while, and then I immigrated from the UK to Australia. So I turned up in Australia with a letter in my pocket and went down to Melbourne to interview with a guy named Mark Dawson who ran a consulting company and got the job. On the spot. So that was a great 2 or 3 years with that company, and then I started to think I would like to do this in a slightly different way. And that is really how Logistics Bureau began back in ’97.
What do you think are some of the most critical issues you identify in the retail space? Do you think that these will be long-term shifts in retail as we knew it pre-COVID?
I think that there are probably issues on a couple of levels. There are the traditional issues that retailers and retail supply chains have always grappled with around availability. I am based here in Australia, so predominantly we are importing products. So extended supply chains and multiple supply points are a challenge. That has become a much more significant challenge during COVID.
I think as we are coming through this, there is light at the end of the tunnel. We have to ask ourselves how our supply chains will operate and look differently as we come out the other end of this.
Availability is still going to be a big challenge. I think a lot of companies are now diversifying their supply. There were many talks in early 2020 about how this will be the death of offshore sourcing. I disagree; that is too big of a ship to turn around. You cannot suddenly have 20 factories in China producing a product and then say, let us do it in Germany. So I think we are seeing a lot more caution now in supply. I would say there will be a lot of diversifying of the supply points. So, in the past, 90% of the product was from China for a particular company. It may now be 80% in China and 20% from India or Vietnam.
I think some of the most significant changes are probably in what everybody calls The Last Mile Logistics. I am one of these people that in the last 12 months, has not been to a retail store much. Why is that? In the early days, our government advised that we do not go out unless we have to. But then I think like a lot of people were comfortable shopping online for most things. We realized how much more convenient it was to buy online for things like office products and groceries. And so I think that is one of the changes that is probably going to stay.
And when I talk to a lot of consulting clients, they see this as well. I think that is one of the incredible things that has happened over the last 12 months. Some industries, some businesses have suffered terribly through COVID. Businesses have closed down. Sales have dropped by massive amounts, but some have stormed ahead. Some have increased their topline sales 50 to 100%. A lot of companies have seen their home deliveries jump a 100% or 200%. And the general thinking when I talk to those guys is that this will not dissipate post-COVID. It Is going to stay as online delivery. So there is a significant shift to bolster up that online capability where it may not have existed previously. If retailers think that it will go back to the way it was, you might be fooling yourself. The exception might be particular industries where people will be crashing through your doors again because they love the store experience.
What do you think will happen with brick-and-mortar stores, or what do they need to do to stay relevant? Do you feel that this is the death sentence for a lot of these retail stores? How will someone survive if that is their model?
Look, I think some will not survive. Many have already switched from brick-and-mortar to online, or they have cut back significantly on their brick-and-mortar presence. You, of course, have this challenge then with the shopping malls. I am not sure what it is like in the States, but in Australia here, there have been quite big battles around retailers not wanting to pay the full rentals for their space. Because maybe they have not been open at all. They open but in minimal periods. And of course, the shopping mall owners need their rents. I wonder and worry to a degree what these massive shopping malls will look like in the future. I think there will be fewer of them, and we might have to consolidate that a little bit. Some retailers will not be back in those malls at all. It is a massive challenge. I guess you have to think, what is the consumer want?
There will always be items that people will not buy online, no matter how much their mindset shifted during COVID. I’ll take a personal example. One of my passions is ultra-long-distance hiking, and I need to get a new hiking shoe. I could order those online, but there is no way I will because there are too many brands, designs, and features on these shoes, let alone size and width fittings. I will continue to go to a specialist footwear retailer who does sportswear or outdoor wear and talk to the specialists and try them on. We will continue to see the need for a physical retail space for customers to come in and shop for specific industries.
As you mentioned, there are going to be changes and shifts to supply chain networks. What are the costs that companies face to get their networks to an ideal state? Let’s take the example of a company looking to potentially onshore and offshore their supply chain to diversify their network and be closer to the end-consumer. What does that do to cost?
The obvious one that people will think of is inventory investment, which depends on the supply chain’s length and the reliability of that supply chain. Many companies are now talking about holding a little extra inventory into the future if there was disruption. I think that is probably a short-term reaction as things settle down. I think the diversification of sourcing could increase costs slightly, particularly if we start to erode that economy of scale. Picking on China is an example where you know, maybe today I can fill up a whole factory’s production run for the months with my product. If I am diversifying, I will not get that economy of scale, and my unit cost might go up a little bit, and if I am sourcing from multiple countries, that could also increase the price a bit.
Shipping, particularly ocean shipping, is a little bit of a challenge. So all of that is going to take a while to settle down. But I think one of the things that companies have to embrace and improve on is information flows and visibility of cost through the supply chain. I have been talking to some innovative companies who can easily plug into companies’ ERP systems and give them that visibility up and down of the supply chain. And an old favorite topic of mine is the cost to serve. Understanding your product’s price flowing through your supply chain at every point in the supply chain is just so essential and even more so now. Also, the visibility of a product. Where is it? How much have we got? The accuracy of our inventory. All of that. And so there is going to be a significant reliance on improved systems. To give us that visibility that we need and that cost reporting through the supply chain, we cannot manage our supply chains effectively without that sound data.
The companies that did were the ones who could put their finger on the information, and they could manage their supply chains much more dynamically. I think it will probably be the visibility of product and costs and performance which will mean system improvements for many companies.
Do you see that digital transformation taking effect? Or is it something that is still in a lot of minds conceptual and something that they need to do but have not yet really put forth?
I think in some pockets, yes, people are adopting it. In others? I think it is a little bit more pedestrian. People are still trying to grapple to a degree with the enormous peaks and lows of 2020. Now that is not to say that they are not on top of their supply chains and managing them effectively, but they are, on the one hand, waiting to see what the “new normal” might look like in terms of demand patterns before they do too much more. In other sectors, I see massive investments in facilities to cope with the additional demand. By that, I mean new facilities to cope with the enormous surge in home deliveries and those sorts of things. So I think a lot of the pressure at the moment is very much at the operational level. I think the next phase over the next 12 months, we will see much more focus than on the longer-term about managing this going forward.
You mentioned something in your first comments about a company not necessarily going directly to Germany and making all their products in Germany automatically and onshoring. Do you see that companies are shifting, albeit slowly, towards onshoring, or is it specific to the type of product they are selling? Where do you think that onshoring is going to play a role?
It is very slow. I choose my words carefully here. We have become somewhat complacent with offshore low-cost country sourcing, and we have become used to it. And to change that and to bring much of that onshore is just not practical.
I can remember saying on a radio interview sometime back when everybody was clamoring here in Australia about “let us have homegrown products and homemade products.” And I said at the time, but do you want to pay three times the cost for your kid’s school uniform? Because that is what it means. And how long will that last? Everyone will be very patriotic for a few months, and then they’ll be like, “no, no, no; where are the $3 socks and $2 shirts?” I think you have to be selective when considering those things, and perhaps it is the high-end markets again. Maybe it is the specialist products. I read a fantastic story here in Australia where a South Australian company was 3D printing ships propellers. We are talking giant propellers. They had made it much more cost-effective through a local company. People were prepared to pay more for a higher quality product delivered faster, built locally, and do not have to wait for something coming from overseas.
All of this is to say that you have to be very selective when it comes to onshore production. We can never make some products cost-effectively because you do not have the economies of scale. But when it comes to high-ended, branded, and specialized products, that’s where onshoring has the potential to be very lucrative.
I would love for you to tell me something that surprised you in 2020 and a prediction that you are making for 2021 in terms of the supply chain. I know obviously with COVID, there was a lot that happened but was there anything that surprised you with the way things panned out?
Most things surprised me! Let me pick something a little bit left-field because the obvious things would be online retail and so on. I think what a pleasing surprise was the level of collaboration amongst companies. We saw things happening here in Australia that we never thought we would ever see, like big retail chains collaborating, which was government-led. So as I understand it, the Prime Minister rang up the heads of three major grocery chains and said, “Will you guys please talk and make sure that we are not running out of toilet tissue or bread or rice in the same stores in the same suburbs at the same time?” and they did.
Previously, I think that was illegal? It was anti-competitive and all that kind of stuff. They were not allowed to do that. But during the height of COVID, they would share information about the truck of availability. Because when things went nuts and everyone was buying six months’ worth of toilet tissue, you could not get enough trucks to carry the stuff. We made it in Australia, but we could not get it to the stores quickly enough. A lot of companies then would collaborate and share information on truck availability and that kind of stuff.
It was great to see not only the supply chain in the global spotlight but supply chain people were recognized by running that supply chain. Of course, the healthcare workers are heroes, but supply chain people are not far behind because they kept working on getting products to the stores and end-consumers.
From now on, I think there is a similar opportunity. We have to be aware of the anti-competitive laws and all that kind of thing, but what can we do in collaboration with sharing transport resources and storage and stuff like that? Particularly when we are looking at issues like sustainability going forward. It can make a lot more sense and make our supply chains a lot greener and so on if we can collaborate more. Some of that was happening pre-COVID. I cannot say what industries because it was all a little bit under wraps, but here and there, companies were collaborating on distribution and things like that. Why not? Everybody gets lower costs with better utilization, and at the end of the day, the consumer does not really care which truck carried the product.
So again, we used to say supply chains compete. I am not sure they do so much now. I think they do in the service sense. Absolutely. But it is really about the brands, the products, and the service offers.