In a globalized world of interconnected supply chains, we are well accustomed to seeing container ships ferrying goods around the world and airports busy with freight operations transporting products from factories on one side of the world to customers on the other.
Lenovo is no stranger to this model with 30+ manufacturing sites globally. These sites are made up of a mixture of wholly owned, joint venture and contract factories that ship over 100 million finished products every year around the world to end customers, retailers and partners.
With locations as far afield as Argentina, Brazil, China, Hungary, India, Mexico, Japan and the United States, Lenovo’s manufacturing footprint is arguably one of the most global and flexible in the world for any company in the technology sector.
But, when the planes stop flying and national borders around the world close, even the most flexible supply chain must adapt in order to move parts between factories to accommodate lockdowns and deliver finished goods into the hands of customers.
I had the opportunity to speak with Lenovo’s Executive Director of Global Logistics, Gareth Davies, to find out how Lenovo responded to the overnight change to doing business that came with COVID-19.
What transformation was required for our logistics operations in response to the COVID-19 situation around the world?
First and foremost, our response required a lot of creativity. What many may not realise is that 55% of all cargo shipped by air goes on a passenger plane. But passenger flights started to reduce dramatically from the end of January to a point where a route such as Hong Kong to London that might usually have four flights departing within an hour of each other dropped to two flights a day, then only weekly, and then less than that!
As well as passenger flights reducing, the scheduled freighters more or less ceased operations too. In all about two thirds of the world’s planes are sitting on the tarmac right now.
In the early days of the pandemic when China was most impacted, we were seeing lots of planes coming into China loaded with Personal Protective Equipment (PPE) so we could backload those planes with products from our China factories as they headed back out to other destinations, which was extremely helpful. Now we have the opposite with huge volume of PPE departing China and placing more strain on significantly reduced capacity.
To combat this, we’ve looked at a different mix of transportation, for example using alternative vessels, more road, rail freight and ‘sea air’ services – i.e. where a product might leave for the first part of the journey on a vessel, but then from a hub destination such as Singapore or Dubai it makes the rest of the journey by plane. We’re even loading passenger flight conversions – using seats and luggage bins to carry freight to accommodate the changing nature of traditional cargo capacity available.
How has Lenovo managed things different to the wider industry?
What’s stood us in good stead over the past few months is our deep strategic relationship with our core third-party logistics providers and directly with the airlines. Everyone in the industry is having to adapt and I really believe that the ‘true-partnership’ approach we have taken over the years with these companies, seeing them as an extension of our organization rather than just taking a transactional approach with them, has meant we were able to lean in on some of those relationships to our advantage during this time.
I’ve been hugely encouraged by the collaboration I’ve seen and how supportive our partners have been in ensuring continuity of manufacturing by having the parts in the right places as well as delivering products to customers around the world.
When a city locks down such as Wuhan did, where we have our primary smartphone manufacturing site, how do you adapt?
With Wuhan it wasn’t the case that the city was shut and then it reopened. It came back online gradually meaning we needed to be flexible in adapting to how we managed for the regulations in place. We were ahead of the game as we’d applied for early transport permits, but we needed to use smaller trucks for final mile deliveries in and out of the city.
We also had to look at interchange systems to accommodate lockdown regulations such as swapping the cab from one truck to another as the goods moved from one province to another. It’s about thinking through the problem and looking at ways to adapt to the situation. While it might add more work or complexity, our focus was always on doing everything we could to maintain our commitments to our customers.
What will change for the logistics industry coming out of the global pandemic, will we see lasting change?
I see three key long-term positive changes. Firstly, a more connected logistics network. For example, today a parts supplier may bring parts into an airport and then be responsible for the shipping of those parts to a factory. But a truck may have just delivered finished goods to that same airport and is now running empty as it heads back to the factory.
We’ll also see a reengineering of airfreight worldwide as the balance of cargo and passengers recovers and changes over the coming months and years, meaning we’ll need to look at alternative routings and gateways with fewer flights in the air.
Secondly, a change to relationships, contractual terms, commitments and transparency and by that, I mean a real focus between carriers, logistics suppliers and clients like us each understanding the other’s challenges and then creating new opportunities collaboratively. And finally, the use of technology and wider digitalisation of logistics to drive greater efficiency and visibility overall.
What have you learned during the last few months as a leader that you will take beyond this situation?
For me this situation has reinforced the importance of team communication and stepping up engagement with the team – both formally and informally. So that might be a formal manager call each day and daily planning with teams around the world, as well as the check-ins with individuals to see how they are doing.
We’ve also had a big focus on recognising and rewarding those individuals both internally and at our third-party logistics partners who have gone above and beyond what’s expected of them – a reinforcement of the Lenovo culture that sees us treat our suppliers and the whole eco-system just as importantly as any other aspect of the network.