Roughly a decade ago, in anticipation of changes in the supply chain and logistics sector, investment firm Saybrook Management started buying companies in that space – not so much because they were great opportunities, which they were, but because the firm wanted to understand how the various pieces of the supply chain worked.
Then came COVID-19.
“There’s nothing that compares to this from a logistics perspective,” Saybrook CEO Jonathan Rosenthal told FreightWaves technology reporter Vishnu Rajamanickam during a fireside chat Thursday at American Shipper’s Global Trade Tech summit.
“The industry was already going through change, but COVID has acted as an accelerant. And while the humanitarian impacts are horrible, I think from a logistician’s perspective and an investor’s perspective, it’s actually going to create some enormous and interesting opportunities.”
Rosenthal’s perspective is particularly relevant given his background. While head of Saybrook’s Restructuring Advisory Group from 1991 to 2006, Rosenthal was involved in dozens of workout situations involving some of the largest and most complex restructurings in history, including utility company Pacific Gas and Electric and United Airlines.
“We started to make investments in the airline industry, and when we saw disruption occur [because of deregulation] it was significant. But it was somewhat isolated to North America and the airline industry.” Rosenthal said a similar situation occurred with the transformation of the utility industry. The firm saw change coming and got involved well before deregulatory disruption – but again, the disruption was isolated, mostly affecting the industry in the western U.S.
However, he said, “COVID reaches every corner of the Earth and touches every industry, and that creates tremendous complexity.” Rosenthal predicts internet distribution within the supply chains is going to go from a range of 11-13% currently to 35-40% – and possibly as high as 50% – as a result of the pandemic.
There will be challenges too – the most immediate being efficient distribution of a COVID-19 vaccine.
“The minute you have a vaccine, you’re going to have a logistics problem,” Rosenthal said. “How do we get it to people, how do we track it, how do we overlay the information about where it’s working and not working and where are any new hot spots? All of a sudden all that information becomes very valuable. We in the supply chain play a very important part by making sure we’re ready.”
Rosenthal also sees pre-COVID-19 supply chain trends in the U.S. like near sourcing continuing.
“There’s absolutely no question that we’re going to shorten supply chains and [manufacturing] is going to come closer. There are a number of things going on there, it’s not just labor costs. It includes people being more skeptical about sourcing from China as a less dependable source. They want more diversity and they want responsiveness. Of course, as you shorten the supply chain, real-time information becomes that much more relevant.”
But Rosenthal stressed that with the dramatic disruption caused by COVID-19, “we’re at a fantastic point where innovation is going to explode in the logistics space.”
