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The Importance of Logistics Planning

January 8, 2021

As we prepare for recovery, it's important that businesses focus on more than just big picture goals. Catch our newest TrendsTalk episode with ITR Economist and Speaker Lauren Saidel-Baker to learn more about the importance of logistics in 2021.

 

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Transcript by Rev


Hi, I'm Lauren Saidel-Baker, and welcome to this episode of ITR Economics TrendsTalk. Now, I want to talk to you today about logistics. It certainly is a common business buzzword, but it's getting all the more attention recently. I'm certainly seeing that word in a lot of headlines, given the ongoing rollout of the COVID-19 vaccine. I had the opportunity recently to speak with someone who's involved in the vaccine distribution planning here in New Hampshire, where ITR is based. And I was, to be honest, very surprised by the conversation that we had, by her concerns and the challenges that she's facing, trying to get this vaccine into arms here in New Hampshire. Nationwide, to date, as I sit recording this in the week of January 10th, less than 9 million doses of vaccine have been administered. That number compares rather unfavorably to more than 25 million doses that have been distributed, that are ready to be administered.

So only about one-third have actually made it off the shelf and into humans' arms. That's a far cry from the 20 million dose goal that the US had back in 2020. And to be very clear, we had the time to do this logistical planning. Think back just a few short months ago when we weren't even sure that there would be an effective vaccine or when it might be approved. And we were certainly much more concerned about manufacturing, about getting those vaccines produced and ready than we were with actually administering of that last mile of reach. So we had the time to do this planning, but only now are we reaching some of these questions. Do we hold doses on the shelf so that everyone who got their first dose can get their second dose on schedule? Or do we prioritize vaccinating as many people as possible for that first dose?

What about the phase tier system of who gets this vaccine first? Should we be sure that every single person in group one A receives their dose before we start on one B and subsequent groups? Or do we open that guidance up? Just this week, some loosening of the guidance went into effect that maybe we will start to open that availability to those aged 65 and up. All of this really just goes to show the importance of logistics and the importance of planning. It's always that roadblock that you don't see coming that hampers you the most in the end. So I want to remind listeners today, this is your reminder that logistics matter, they are important, and they are something that you can plan for. I hope you learn the lesson that we're learning now as a country, don't wait to run into this yourself later 2021.

To be clear, it is not enough just to set a big picture goal. We had a goal in the US of vaccinating 20 million people in the year 2020 and that just didn't happen because we didn't have the concrete steps in place to make that goal a reality. So find those roadblocks in advance. I want you to plan today to be proactive, not reactive. To further my analogy to the vaccine, now is your downtime. Now is your period of drug development. We're sitting here in the first quarter of 2021. This is the low of the business cycle for the US industrial economy. We expect the 12/12 rate of change for that industrial production index to be rising imminently.

Recovery is imminent. It will happen just any month now, so be ready for it when it does. And to those listeners who are more correlated to gross domestic product than you are at the industrial side of the economy, maybe those of you who have a clearer focus on the US consumer, rather than the industrial or manufacturing economy, you need to move even quicker because GDP is already in a recovery or phase A trend, as we call it here at ITR. So now is when you will have the most downtime of any time in the near future. Consider what you need and consider what you can do to overcome those hurdles in advance. Maybe labor is the roadblock that you'll be facing down the road.

Hiring certainly has been difficult, even though the unemployment rate did rise in 2020, and still is moderately elevated from the pre-pandemic level. It still hasn't been easy to find talent, let alone qualified talent in very niche sectors. So consider what you can do either to attract new members, new employees to your organization, or just to expand the labor pool that you have. Maybe you can use increased training to expand skillsets of your existing employees. Cross train, do more with the same number of people. Maybe capacity will be your roadblock in 2021. This is a great time to be installing new equipment, to be finding new efficiencies in your process. You likely have the downtime, the ability to get things installed, to get people trained up on how to use this new equipment.

And to be very clear, I don't just mean that big picture capacity, I don't just mean the top line. I was having a great conversation with a client just last week about their capacity needs for 2021. Now, we have a forecast in place for this company, and I told them what unit demands they should expect, and they said, we can absolutely do that on the big picture. But what we can't do is necessarily meet the more granular level of demand. They have one particular machine and it used to account for about 10% of their total product demand, but now that metric is growing closer to 30%. So even though they could deliver the same number of units that we would expect them to have demand for this year, they couldn't necessarily meet demand from that one particular machine.

So whether it's buying another machine that makes those products or finding efficiencies ways to do more with the same amount, they know that they need to make some capacity gains in that one niche sector. Maybe what you need more of is inventory. Maybe this is the time to be stocking up, or maybe this is the time to look at your distribution network, really get that rubber to meet the road. Be ready to expand throughout this recovery sector. But whatever it is, I would encourage you to look back, calculate your rates of change, find that last example of your 12/12 rate of change rising. What we call a phase B accelerating growth phase of the business cycle. And put yourself mentally back in your shoes that you were at that time.

What did you want more of? What were your roadblocks? What was hampering you from doing even more and going even further? Find those same challenges, address them right now. I know it's hard to be out ahead, but we certainly expect these bottlenecks to be rising throughout 2021 and I imagine you'll wish you had done so back in January. For this episode of ITR Economics TrendsTalk, I'm Lauren Saidel-Baker. Thanks for joining me.

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Since 1948, we have provided business leaders with economic information, insight, analysis, and strategy. ITR Economics is the oldest privately held, continuously operating economic research and consulting firm in the US. With a knowledge base that spans six decades, we have an uncommon understanding of long-term economic trends as well as best practices ahead of changing market conditions. Our reputation is built on accurate, independent, and objective analysis.