After the enormous challenges in 2021, the logistics industry is hoping for a less testing new year. We spoke with Stephan Schiller, CEO of Hermes International, a division of Hermes Germany, about the “new normal,” the value of strategic partnerships in times of crisis, and the key pandemic lessons that help us to successfully tackle upcoming tasks.
Mr. Schiller, the international market is still in turmoil due to the pandemic: delivery bottlenecks, high transport costs and container shortages are part of day-to-day business. Is this the “new normal” of the logistics industry already? Or when do you expect the situation to relax?
I have some difficulty with the term “normal”: Whether “old” or “new”, the pandemic has clearly been an enormous turning point in the international movement of goods and it has, as in other industries, revealed weaknesses and areas for development within the logistics sector. Above all, it has changed the relationship between supply and demand in the market.
This change will, in my view, continue this year. It will probably not calm down until 2023 – assuming we will have overcome the pandemic by then.
What insights were you able to gain from what was going on in the market in 2021? What opportunities have arisen or will arise from this?
At Hermes International, we are constantly rethinking our own positioning. The question in focus is: What added value (Reason Why) do we want to generate for our clients? Our operational strength has undoubtedly brought us through 2021 successfully, but the status quo will no longer suffice in the future.
Looking forward, we want to play an important role for our customers in the entire supply chain context. Not only in the handling of transports, but also the planning, alignment and optimization will increasingly come into focus. Transparency and the availability and systematic use of data will play a key role in this context.
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For a recently published survey, the German Chamber of Industry and Commerce questioned 3,200 German corporations that are also represented abroad. According to the study, 32 percent of the groups are planning changes to their supply routes, and 15 percent are planning to relocate their production. How do you assess these considerations? What advice would you give to decision-makers who are looking for solutions in this tense situation?
Certainly, there is no one-size-fits-all advice to be given here. The type of goods, their dependence on transport prices and the time-to-market of the respective product are decisive for the chosen strategy. In principle, however, it is advisable to achieve the best possible resilience and avoid dependencies. This applies to procurement markets, as well as to the number of service providers used and the management of inventory.
Speaking of relocations of production: Thanks to strategic partnerships with ‘local heroes’ such as the Indian freight forwarder Jeena or the Pakistani full-service company WWG, Hermes International enables its customers to purchase and produce in these two countries. Should companies increasingly rely on close partnerships with individual players in the future in order to remain capable of acting? In your opinion, which strategy is the most efficient for companies operating internationally?
Our business model is still relatively young compared to large market competitors. We made a very conscious decision not to necessarily have our own offices in the major markets.
For us, it made more sense to join forces with local heroes, i.e., companies that have excellent networks in the respective markets and are familiar with the local characteristics. With some of our partners, we have already been working closely and successfully for years. A strengthening of this connection was a logical step in this context.
Partnerships with ‘local heroes’, as we maintain them, enable a best possible connection to the respective market. Not only does this simplify the often essential extra mile – it also offers clear efficiency advantages, especially for newcomers to the market, as they can draw on the comprehensive expertise of our external colleagues.
However, the same basic principle I have mentioned above applies here: There is no one-size-fits-all approach. The strategy selected should always be aligned with customer requirements, the company’s own corporate goals, and the market environment.
Companies have so far reacted very differently to the continuing challenges. However, studies show that digitization as a whole received a further boost during the pandemic and that the topic of supply chain risk management has also become more relevant. Will companies be able to respond to crises more agilely in the future? How do you assess the lessons learned on the corporate level?
Without question, the pandemic has been a massive accelerator in our market environment and revealed suboptimal processes as well as potential for development The importance of detailed volume planning and the ability to make decisions at any time on the basis of up-to-date data will be crucial to success in the future – and they can be answered by digitization and the use of technology. All those involved in supply chains will have to work on this in a goal-oriented manner in order to regain a more stable control and be able to hold their own on the market in the long term.
In 2018, you expressed a desire for “logistics to be perceived as a valued process.” A lot has happened since then: Awareness of the relevance, but also the fragility, of logistics processes within society has never been greater. Does this also go hand in hand with the appreciation you would like to see for the industry? What changes would you like to see beyond that?
If I can see anything good that has been entailed by this terrible pandemic, it’s the fact that logistics has gained maximum attention: A damaged container ship would not have made it onto the 8 p.m. news under ‘normal’ circumstances. The changed parameters in international air traffic have also led to end consumers becoming more sensitive to interrelationships along global supply chains.
In addition, I would like to see end consumers become even more aware of the associated responsibility and take it into account when choosing a product. This is the only way to achieve sustainable change.
What issues are currently on your agenda, also in view of global expansion and the volatility of the market?
If you ask me personally, then – and this sounds almost theatrical – I wish above all for people to live together peacefully. Because in this context, as well, the pandemic has to some extent shown a frightening grimace.
The wish for peaceful coexistence goes hand in hand with the wish for peace. It is inconceivable what effects military actions in Eastern Europe or in the Pacific region would have on the people living there.
If you ask me as a logistics expert, I would add at this point that such conflicts would also have an enormous impact on international supply chains and thus on the availability of goods and the stability of prices.
Mr. Schiller, thank you very much for this interview.