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Q&A: Supply chain crisis talk with 8VC’s Jake Medwell and Skyline Policy’s Loren Smith

Time to discuss the bad news … and the good news

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The views expressed here are solely those of the authors and do not necessarily represent the views of FreightWaves or its affiliates. Jake Medwell, founding partner at 8VC, and Loren A. Smith Jr., president of Skyline Policy Risk Group, discuss key industry topics for this regular quarterly Q&A exclusively on FreightWaves.

By Jake Medwell and Loren Smith

JAKE MEDWELL: Last year we talked about how disruptions in the supply chain had created “a complicated mess.” How have things developed since then? All the problems are fixed, right?

LOREN SMITH: Ha — well, there actually are some encouraging signs here and there.

JAKE: Let’s start with the bad news, to set the table with what folks are seeing in the headlines. Then we’ll be ready to hear about the good news.

LOREN: Sure. Of course, the terrible situation in Ukraine leads the bad news. And hopefully the violence there will end very shortly. A lot of ink has been spilled about the impact on energy prices and other sectors (defense, agriculture and potential systemic effects on finance), but suffice it to say it’s a human catastrophe in Ukraine with ripple effects everywhere else.

JAKE: Definitely.

LOREN: Inflation in the U.S. and Europe continues to be the worst in 40 years. If you’re looking for wood to build a new deck, buffalo wings at the bar or anything involving new microchips, you should plan on paying more, getting less and/or waiting longer.

JAKE: The price increases are crazy. 2x, 5x, in some cases more, depending on the commodity. What are some of the public policy angles here for folks to keep in mind?

LOREN: On policy, we’re trying to make the supply chain crisis a bit more legible for observers, just to help folks think about it, particularly the things policymakers might be able to affect (in good ways and bad): geopolitics, infrastructure, regulation and workforce:

Geopolitics: Russia’s invasion of Ukraine is part of a trend of disruptions driven by geopolitics, particularly tensions surrounding China. Companies, especially the largest players, have to pay careful attention to sourcing and try to de-risk their own supply chains. That de-risking movement is itself creating disruption.

Infrastructure: A global economy that is accelerating (we hope) out of the COVID pandemic requires infrastructure — a robust freight network. The U.S. does have legitimate infrastructure needs, particularly in the freight area. Upgrades to ports, airports and key freight corridors would be a big help. Hopefully the implementation of the $1.2 trillion infrastructure package that was enacted late last year will be part of this. However, a caution: The money will take some time to allocate, and the projects themselves will take several years to execute.

Regulation: Policymakers have a number of legitimate workstreams in the regulatory space, including health, safety, environmental and labor protections. Companies should be sure to engage with them to make sure that the efficient movement of freight gets that same priority. This is not just a matter for national-level consideration; rules at the state and local level also need to be on the radar screen.

Workforce: It’s not news that companies are having a tough time finding workers, and even before COVID, trucking companies had made the driver shortage a major theme. This is also where automation, including autonomous vehicles, could be a growing factor over the next 10 years. What’s causing the shortage, meanwhile, is a combination of things: remote work and other COVID impacts, early retirement, expanded unemployment benefits, reduced immigration, and probably a few other elements. Not everyone agrees on that list, by the way — to paraphrase an old joke, “ask nine economists, get 10 opinions.”

JAKE: So what do individual companies do about a labor shortage?

LOREN: Better recruitment, better retention. Reach beyond your current workforce to apprenticeship programs — either in coalition with other companies and trade associations or solo. Depending on your ideal workers, work with local high schools and pitch careers in your space. These aren’t slam dunks, but they can help.

JAKE: You mentioned good news. Are we seeing companies create workarounds?

LOREN: A few pieces of good news. We believe companies are, on average, succeeding in fixing their own supply chains. As long as policymakers are able to net out to a neutral-to-positive impact, the situation will improve. Individual entrepreneurship is going to be the ticket out of the supply chain crisis.

It’s also the case that the overall U.S. economic data, including labor numbers, is generally positive.

JAKE: That’s true. As troubling as the inflation and supply chain challenges are, we don’t seem to have a recession on our hands — at this point, anyway.

LOREN: That’s right. And another element we’ve discussed before: The New York Fed has created a new measurement, the Global Supply Chain Pressure Index, which mixes a few different gauges to get a sense of how tough things are for the supply chain globally. As its update from earlier this month notes, the crisis has ebbed slightly, but we’re definitely still at elevated levels of pressure on the supply chain. Notably, the situation seems to be improving in emerging markets a bit faster than in the advanced economies.

We should get more positive news later this year, with 2023 when we might get a sense of the new normal, post-COVID.

JAKE: So it sounds like we’ve got a tough road ahead, but at least a little bit of a road map for understanding our progress.

LOREN: Some positives, at least.

JAKE: And on that note, thanks to our readers and we hope to see you next time!

About the authors

Jake Medwell, founding partner of 8VC, focuses on both consumer and enterprise investments. A serial entrepreneur who has spent his life building and scaling companies, he also leads 8VC’s logistics and transportation focus. Prior to launching 8VC, Medwell co-founded Humin, a consumer mobile software company where he built the engineering team and led growth. He also co-founded The Kairos Society, where he sits on the board of directors. While in college at the University of Southern California, he founded Sole Bicycle Co. and grew it into an industry leader. Most recently, he co-founded Operation Masks with partner Drew Oetting to help bring personal protective equipment to medical workers on the front line of the fight against COVID-19.

Loren A. Smith Jr. is the president of Skyline Policy Risk Group, a consulting firm working on the supply chain, infrastructure, and technology. From 2017 to 2021, he helped lead the Policy office at the U.S. Department of Transportation. There, his work included serving as DOT’s chief environmental review permitting officer; chair of the management teams on rural transportation and Opportunity Zones; and as a member of the task force on regulatory reform. From 2009 to 2016, he was an analyst for Capital Alpha Partners, an investor research firm. There he specialized in transportation and related areas, and published more than 500 research notes. He has also worked as a congressional staffer and as an aide at the U.S. Department of Labor.

Contributed Content

Note: FreightWaves occasionally publishes commentary from industry sources with expertise, information and opinion on current transportation topics. The opinions expressed in the article are solely those of the author and not necessarily those of FreightWaves. Submissions to FreightWaves are subject to editing.