Heather Mueller, supply chain COO, Breakthrough, joins Peggy to talk about logistics and supply chain systems. She talks about the challenges as a result of COVID and how they have been tackled; some of the common supply-chain disruptions; and lessons learned to avoid future shortages. Mueller also discusses how transportation and supply-chain decisions made at the local level can help dramatically improve the global landscape. Case in point: she says, you cannot improve what you can’t measure, and actuals are not averages.
Below is an excerpt from the interview. To hear the entire interview on The Peggy Smedley Show, visit www.peggysmedleyshow.com, and select 05/25/2021 from the archives.
Peggy Smedley: Heather…. I would love for you to first tell our listeners, who might not really know what your company’s all about why don’t you give us an introduction of that and your role right now?
Heather Mueller: Yeah, certainly. Never has it been more clear to all of us how important supply chain is. And specifically, Breakthrough focuses on the transportation part of supply chain. And that has certainly been a hot topic over the last year and a half as well. And so, at the highest level, Breakthrough really helps shippers. So, companies who are moving goods to market think about both reducing the cost, the consumption and the emissions related with moving their products from a fuel and overall transportation perspective. So the company is rooted in helping clients understand the transportation fuel costs, (which is) something really unique that we started doing about 17 years ago. And what we realized over the course of helping clients do that is just how much data we were collecting on the shipments that were happening across the United States. And in recent years, we’ve really helped think about how to leverage that data, use technology, and make better decisions about procurement and operations in their transportation overall.
Smedley: It’s really kind of interesting because we always say here, “If you don’t look at the data, if you don’t measure it, you can’t improve it.” So, talk to us a little bit about that. What you’ve encountered, just let’s say in this past year? The pandemic has opened our eyes, not only on the idea of goods and services but what we didn’t get. What we realize is if something is bottlenecked and you can’t get that good and service, whether it’s delivered and the cost of fuel that we’ve seen and why things are good or bad or deliveries and what have we delivered right now or we couldn’t get. And people all of a sudden realized, if you don’t get it and if something is expensive or is reduced, just the whole concept of that. People, all of a sudden realized the panic that went through people. Not just because of the pandemic itself of the virus but the idea of not receiving something that they’re so used to having.
Mueller: Absolutely. Shortage is something we have not lived with as consumers very often. And it’s a very unsettling feeling. But what I will say is I think you’re absolutely right. You cannot improve what you can’t measure. That has always been a foundational belief here for us at Breakthrough. And the other thing that I think ties very closely to that and you hit on it is that actuals are not averages. And that was really an important thing to unpack in the pandemic. While we saw that consumer demand for goods was up across the country, it wasn’t up all together. In fact, some things were down. Some retailers were closed. Some manufacturers were closed that were considered non-essential manufacturers. That was of course at the beginning of the pandemic. And that really created an uneven type of demand and production and disrupted what the landscape of transportation looked like that we were used to prior to the pandemic. So, it was really important to understand while in total transportation was struggling, there was so much product to move to market. There were actually some pockets where the need for trucks was totally displaced because those products weren’t popular pandemic products, maybe is what we’ll say. So, really understanding at the smallest level and at the lane level, what’s happening in my transportation network and what’s happening in the ecosystem around me was absolutely essential.
The same thing is true for fuel. We can see this at a micro level, just driving through the city. The cost of fuel looks different in winter as compared to summer. Of course that is really proliferate times of uncertainty or supply disruption. The cost is incredibly different in California as compared to Oklahoma and not really understanding what’s driving costs, separates shippers from the reality of what’s happening in their transportation networks. And it doesn’t allow them to make as informed decisions as they would if they understood, at the smallest level, at the most local level, “What is my cost structure? What is the availability of trucks that I have and how can I make the best decisions possible to move my product in a time of uncertainty?”
Smedley: Well, there’s also uncertainty as we just saw through hackers, right? There’s all kinds of uncertainty. That’s not just the idea of having to get goods and services to a location, but you never know when the bad guys are out there. The nefarious characters. There’s always something you have to plan for…. So, how do you help them solve some of these things? You’re giving them insights that they didn’t know that they needed, but you’re helping them really look at, “Look, let’s plan for the uncertainties but let’s also look at the numbers and make better business decisions.”
Mueller: Yeah. I think that’s absolutely right. One of the things that we foresee well into the future is that there’s always going to be uncertainty. And as you are alluding to, the pace of those uncertain events, those events that we maybe never thought what would happen is increasing. And so, what that is a strategy that says, “Hey, I set my plan at the beginning here,” and then just execute. And don’t really think about how that needs to adjust. Just isn’t going to be relevant as we move forward. So, what that means to us is that we really need to take partners, have data, and have technology that is robust, realtime, and comprehensive enough to allow us to meet the strategic goals that we have but perhaps shift course appropriately throughout the year as events happen that we weren’t expecting. Gone are the times of, you know, set a plan and then just hit the go button. We certainly know that things are going to be more dynamic than that moving forward and we have to be able to respond to it.
Smedley: That’s kind of what happened with manufacturers, which is they learned or realized that just-in-time manufacturing isn’t going to cut it anymore. Are there lessons that were learned from the pandemic that will help us avoid or maybe even better prepare? Because I think that’s what we need to think in transportation because there’s really shifts. Even when we talked about what happened a week ago with the pipeline. Now, we realized there wasn’t real dramatic losses on the East Coast with what happened but I do think what we have to think about if there were. That would have been dramatically affecting the way transportation is done and the costs that could have been impacted here. So, we have to think about all of these things and just the idea if there were delays or were there increases in costs. Don’t all of these things have to come into play that you’re thinking about?
Mueller: Yeah, absolutely. So, I think what’s so important is to be able to have a robust strategy. And one of the things we talk about is how consumers think about the idea of diversifying portfolios of both carrier partners and fuel types. So, I think that certainly from a sustainability perspective and just from a technology and innovation perspective, we’re moving into a future that will be a multi-fuel future. So, right now commercial transportation is primarily run by diesel fuel but certainly we see a path for renewable, CNG, for electric, and for hydrogen. All of those are going to come into play in commercial transportation. And if shippers weren’t single threaded on diesel, something like a diesel pipeline outage wouldn’t be quite as impactful to the cost structure of their transportation network in total. So, really thinking about, “How do I start now incorporating some of those alternatives,” both from a sustainability and cost perspective, this is important. But also from a robustness and diversifying risk perspective. This is incredibly important. Same thing is true on the freight side of the equation when we think about carrier partners who are moving products to market. How do I make sure that I have a balanced strategy of big national players and then sometimes even small regional players who can fill in the gaps of surging demands that I might have in a specific area. Maybe, my port volume is through the roof because I’m bringing product in faster than ever before. Of course, I’m going to use some of my big core carriers to help support that product but are there regional carriers that I should have relationship within the spirit of having a nicely balanced portfolio of partners to ensure that I’m not single-threaded and leaving myself open to risk.
Smedley: So, when I hear you talk, I always use the expression about… Especially when I think about sustainability or I think about a circular economy as I just wrote my book, is I always say, “You have to think locally and act globally.” How do we actually enable that in a global landscape? Are we able to achieve those goals coming out of the pandemic and have you been able to help your customers do that despite the pandemic? Or as we think about a better tomorrow as we keep continuing to achieve and get out and see companies getting back to… They say, normal, but I say a better normal.
Mueller: Right? Yeah. I’m with you. And I certainly think acting local in the spirit of creating a better global strategy is absolutely essential. Certainly, we see this when we’re helping clients think about, “How do I find the right alternative fuel strategy for myself?” Finding that first at the local level and then rolling up from there seems to be the best approach. Again, going back to this. Averages is not the same as actuals. If we unpack what diesel fuel taxes look like across the United States, certainly they’re higher in California. And so, when we start looking at price parody between diesel fuel and renewable CNG, for example, all of sudden, there might be a really nice strategy to start incorporating at the local level in the states. Some transportation, renewable CNG at price parody and it allows shippers to understand, “Okay, what’s the best way to find partners to create a strategy and to execute?” And once we have success in one area, how do we replicate that in a bunch of different areas? And then all of a sudden, put ourselves in a place where we have a global strategy around renewable CNG, for example. So, that’s one small example but certainly what we’ve seen is understanding at the lowest level, what is the data that shows where I have opportunity? How can I enact something that I’d like to see at a global level locally first and then build from there? I think that that is such a great way to approach it.
Smedley: So, thinking bigger scale now. We all have the short-term goals. Then we have these long-term goals and we’re all trying to be more sustainable. And we’re thinking about how our fleets are going to be and we have to think about this in the bigger events of today and what we want to do tomorrow. What’s your predictions on how we’re going to get there? Are we going to get where we want to be? We see what’s happening in California is completely different and what their objectives from 2030 to where we are in Chicago. Let’s say, where we are right now. How are we all going to get there? We’re trying to move that needle. We’re all looking at the Paris agreement. We’re all trying to reduce emissions and things like that. How are we all going to get there and do you see us achieving the goals that we’re trying to get to?
Mueller: I think we can do it. But certainly, there’s work. So, the one thing I’ll say is that I don’t think that the importance of finding sustainable strategies is going anywhere. I certainly think that we, as consumers, see that this is really in our minds. It’s what consumers want. It’s what we, as people want. And so, I don’t think this is a trend. I think this is a long-term, long-term mainstay for us. And so, one thing that I’m really encouraged by is that we’re seeing clients at a higher than ever before, ask for our help in trying to figure this out. And certainly I think that’s the first step. One thing that is true is that transportation emissions in total are the single biggest emitter across the United States. So, certainly we need to look to our transportation supply chains to figure out how we are going to reduce the amount of emissions that’s coming out of the process of moving our products to market. I certainly think that we’re at a point right now where it requires local strategy to build up into something more successful. We don’t yet across the entire United States have infrastructure or equipment that can immediately change our fleets to all electric, for example. But we do, in pockets, have both the trucks themselves and the fueling infrastructure that can allow us to experiment, to put in place pilots and to learn. And certainly as we find success in that, I think that it can become more and more widespread. So, I think that we’ve got work to do. I think that we have the appetite to do it. And I think that understanding data at the lowest level of detail allows us to really find first-mover opportunities and then exploit our learnings from there.
Smedley: So, Heather, my take on this as you get collaboration. You understand from a transportation and supply-chain decision perspective, you get it. So, what’s next? Where do we go from here to really be better citizens or better partners? What’s your thoughts?
Mueller: Yeah. Such a great question. I think that we’re at a point where collaboration isn’t a yes or no. It’s a yes. We have to understand the transportation ecosystem that we’re sitting in. Of course, we need to do the right things with data. Of course, falling within antitrust guidelines. Of course, maintaining anonymity where appropriate but we really need to think differently about how we act together to both take advantage of all of the capacity that we have on the road today and make sure that those trucks are full in the most productive way so that we’re reducing unnecessary emissions. I certainly think that this starts with a foundation of transparent data. I think that two parties can’t come to the table to have a meaningful relationship unless they have the same data. They believe in the same data that they’re looking at. And what we really see is when you cut through some of the distortion and some of the noise and get down to the facts, we’re able to settle into a fair and equitable relationship and have conversations about things that we might not have considered before. In service of moving our products to market, doing it in a more sustainable way. And so, certainly that is one of our goals. How do we bring unbiased third-party facts to the table to facilitate more meaningful relationships between shipper and carrier partners, between shippers and shippers collaborating on transportation together. Absolutely essential.