Supply Chain Digitalization: Dennis Anderson on Fuller Speed Ahead

I'm doing great, Craig. How are you?

Sure. So first of all, thanks for having me on today, Craig. I'm excited to chat with you. As you said, Chief Customer Officer is a relatively new role, and it's a new role for our company as of this year. It really defines our customer focus and helps emphasize that we look at things from the customer lens. We have a customer experience function that I've been part of for the last few years, but more recently this year, the Chief Customer Officer role is responsible for sales, customer service, marketing, really our customer-facing functions, but also has a tie into our company strategy. At our company, we look at the customer to really drive our strategy, so I think that's contained in the Chief Customer Officer role we have here at ArcBest.

Yeah, I think that's a great point, Craig, and something we're really proud of, and something that's really helped us this year in particular. The breadth of services really covers virtually any kind of logistics offering a customer would need, from really managing a supply chain to being able to fulfill in different modes like truckload, LTL, air, and ocean. You name it, we can do it. We had our roots in the LTL industry with ABF, and over the last five to ten years, we've really expanded and grown those additional solutions. Now, ABF represents about two-thirds of our business, and the other third roughly is what we call asset-light logistics services. We have the opportunity now to integrate a lot of those services, and that's been really important for our customers to be able to have those services make sense together, not just work with us in a silo of truckload, LTL, ocean, or expedite, but to put together unique integrated solutions because supply chains are different.

It can be. We have more of a strategy of structures that's not a whole lot different than what you might see, but very collaborative across the company with different roles. As you said, we look at things from the customer perspective and put those things together that make sense for the customer. The other thing is to make sure we're delivering on what we say we're delivering. When we make a promise to customers, we need to understand how we're delivering on that promise and how we're impacting their lives. A lot of times, that's pretty difficult for a company to do, especially if we're thinking about our business from our perspective. It's not the same as what a customer is going to see. Being able to put ourselves in their shoes, empathize with what they're going through, know their supply chain, understand what they're trying to accomplish, and then get that accomplished is a really big focus of a Chief Customer Officer and our organization.

Well, I think that's a great question, Craig. First of all, I'd say 2020 has redefined the term disruption for most people. When we're talking to our customers, many of them are dealing with some level of challenge meeting demand. Either they've changed how their supply chain works, or it might be a retailer that is really leaning into e-commerce right now, which makes a lot of sense but creates a lot of challenge within their supply chain all the way back upstream and into final mile. Understanding where the demand is coming from and how much of it from where is one of the things we've seen. It's been really surprising and encouraging is the recovery since the first part of the second quarter when most people felt the impact of the shutdowns. Since that time, the discussion is really about where and how much demand is coming back on, and that's not consistent, and that's a real challenge for our customers to deal with. Whether they're a retailer dealing with consumers or a vendor dealing with a retailer, knowing what they can deal with when orders come in, or in the retail industry, you've seen retailers really dial up the ante on compliance, enforcing a higher standard. It's a challenge knowing as things come back and as things have improved from a business level perspective, how to deal with where that demand is coming from and then how to meet that demand, especially with an industry challenged from a capacity standpoint. Navigating all of those things and being able to serve customers well is really tough in the logistics space right now. Anytime you get a challenge like that, it presents an opportunity because the value of logistics has never been greater, and never been greater for us as logistics practitioners. The value of being able to deliver on promises is huge right now. That's driving a lot of the questioning: how am I going to serve this demand coming from places I've never seen before, or creating a pull from areas of my supply chain I haven't been as invested in before? A lot of the historical modeling or look back in history is really difficult to rely on. That's when it's important to have a partner that's really looking forward, understanding what kind of options there are, and being flexible and nimble. One of the things we talked about earlier is the capabilities our company has. We've been able to be in conversations this year with customers about their challenges and solving those challenges that I don't think we would have been in ten or even five years ago. That's encouraging. But to answer your question most directly, it's really about how do I serve this demand, and then how do I configure my supply chain to be as nimble and flexible as possible because I don't know where it's coming from and I can't rely on history.

Yeah, Craig, that's a great observation. Volatility is something we all complain about when it happens, but if you look back at history, it's never not been there. Our industry in general is very cyclical, but as you mentioned, especially this year, those cycles tend to get deeper. My view, and I don't have a crystal ball, is that it's best to be prepared for volatility because you don't know when the next pandemic, hopefully never, but when the next pandemic or something like it might hit that really causes a shock. Another thing that's emerged this year is the discussion of just-in-time supply chains, and those don't deal with volatility very well. When you look at the future and think about volatility being there, we've heard some discussion about whether we need to increase safety stock or think more about how supply chains are laid out and not make them so lean, which has been a principle in supply chains for decades. I think the volatility is causing people to think differently about how they structure things and how they partner with different supply chain providers, and just having flexibility because when things are volatile, you're not going to be able to pull your normal levers to get product moved. Being prepared for that volatility involves being flexible and having a lot of options at your table, which probably requires a little bit more investment than you would have made in a lean type environment. As we move into 2021 and think about the next few years, supply chain managers are really going to have to consider that and make cases to their C-suites about investment in supply chain. This year has definitely served as a wake-up call on what volatility can do and the risk it can put to a supply chain, and the risk that a supply chain can put to a business if that volatility is not prepared for.

Absolutely, Craig. First of all, I totally agree with you. It's really exciting and gratifying to see professionals in the supply chain industry that have worked for decades on these things that are thankless in a lot of organizations, and then to see that celebrated when it matters and when the chips are down, and to see those folks really rising to the occasion. That's just exciting, and I applaud everyone working through that right now. But I think you're right, supply chain has never been more relevant, and supply chain leadership is really getting a lot of focus from that C-suite. This year, absolutely, we've been in more conversations with the higher levels of the organization than we ever have. From customer examples, it's their first time talking to a logistics company to manage anything for them. Normally, they've had all direct relationships with carriers and approached it from a DIY perspective, but having their C-suite in a conversation say, 'How can a logistics company really help us be strategic about what we're doing here?' That's been really gratifying because it's an attention-getter with the business when you understand how much supply chain is a competitive weapon in business. That changes the game. I think it changes our relationships with shippers going forward. Permanently, it's a totally different conversation when leaders of companies really understand what supply chain does for them in their business and what the risk is if they're not paying attention to it. Unfortunately, a lot of times it takes the risk and the downside to really get attention, but that's happened this year. Either way, it's great to be in that conversation, and I think it's great for the supply chain professionals in those companies that maybe haven't received that recognition ever but are in those conversations now with their C-suite.

I think a little bit of that is changing. There will always be cost pressure. I don't see a day where all of a sudden it's just, 'Take as much investment as you want and go get it done.' Some companies, the cost of failure is greater than the cost of anything else, but I do see there's still a cost conversation, but I think there's a better conversation in that people are really recognizing supply chain as a competitive weapon. When you look at it that way, it's similar to what's happened with technology over the last few years. A lot of companies have looked at technology as a budget line item, but people have realized that when they make the right investments in technology, they can really do some exciting things competitively. I think that's what you're seeing in supply chain. Maybe some of that is very early innings conversation, but definitely when you look at it as a risk or a cost that you just have to deal with, that's one perspective. But when you turn it around into that competitive weapon, it really leads to different kinds of conversations that we're in this year. That's really exciting. As people look ahead and turn the page to what's next, it's not a new normal, this is what's next. I think that is definitely something we're starting to hear: companies view supply chain as more of a competitive weapon than a cost center.

That's exactly right, and that's the way we talk to our people about engaging with customers. We're there to be a trusted advisor for them, somebody that can really help them navigate those kinds of conversations within their organization. That's really important. It's an important part of what I talked about earlier: stepping in the customer's shoes. Those supply chain managers have a job to do every day, and being able to report to their C-suite effectively is something we can really help with because we understand broader industry dynamics. What's going on in our industry is not contained to a single mode. The impacts of this year have been really broad. We were on a customer conversation a few days ago, just reflecting on the types of impacts, the breadth of impacts, and going mode by mode, thinking about how each mode has been impacted through this pandemic. It is really difficult to try to absorb all of that and understand all of that. I think it is important to have strategic partnerships that allow you to come together with those organizations and provide a better picture of what's going on so you can make smarter investments.

That's a great question, Craig. When we look at all the indicators that we look at, there definitely seems to be some legs for some period of time on the demand pieces of this. For us, we look at the industrial economy quite a bit, we also look at retail inventories. Those things tend to indicate that there's some runway here. As I said before, it's dangerous to look at history and try to predict these things, but those are encouraging signs as we look at those kinds of indicators. I think it really does come down to how consumer behavior ultimately settles out. There's been a lot of debate about continued consumer spending on goods versus a reversion to spending on services. That's a great debate to have, but when you look at where we're at as we progress through 2021, the indicators we look at, even look at restocking, a lot of the goods that have come out, the other thing that's happening is the housing market is really in a different place than it's ever been and very hot right now nationwide. People have looked around at their homes during the pandemic and during quarantine and said, 'If I'm going to have to do a work from home setup or be in this place 24/7, then I'm going to have what I want.' So looking around for different ways to move. I think the story is yet to be told on exactly how much this changes our lives, but it does seem to be an event that impacts consumer psyche longer term. That would be my thought on how that comes together. Looking at 2021, we're encouraged by the indicators right now on what that means from a demand perspective, but it really will be interesting to see how that impact on the consumer psyche plays out over time.

It sure seems that way. I would be hard-pressed to give you hard numbers on how that shift is happening at this point, but definitely you hear more anecdotes every day about things of that nature. Either figures of businesses relocating, I think people are taking advantage of being able to work anywhere. That's one thing. But then also you have some discussion, I think there was some discussion over the weekend about Elon Musk relocating from California to Texas. Those are kinds of things that again, this is an event that really causes people to step back and think about their entire existence and what it means and where they want to be. I do think that's causing some people to think through that. Anecdotally, what I'm hearing is consistent with what you're saying. There's a shift from urbanization to de-urbanization for sure.

Absolutely. Check us out. Our website is arcb.com, that's A-R-C-B dot com. You can check us out there. There are several ways to contact us through there. You can check us out on our socials as well. ArcBest is on pretty much every social channel you can find. And look me up on LinkedIn, I'm out there as well. It's great to be with you today, Craig, and I really appreciate you having me on.

Thanks a lot, Craig. Take care.