Rarely does veteran executive Larry Pavey speak publicly about every issue bedeviling the industry. But this time, the Federated Auto Parts CEO took time out to engage AMBW on his thoughts on unkinking the logistics platform and unclogging the supply pipeline that continues to make the headlines in the business media. Some experts say things won’t get better anytime soon as costs feed into inflation, yet Pavey sees a brighter 2022. 

Few retailers, distributors, and mass merchandisers came out unscathed by the product shortages and spotty on-time deliveries. Given all this disruption, did 2021 meet your expectations?  

2021 has been very interesting, with bountiful challenges. Customer demand returned past the pre-pandemic levels, and the Federated membership worked hard to support customer expectations. Several issues have impacted us, including supply chain disruptions, health and safety impacts, personnel challenges, higher costs, and untold obstacles. However, our members committed themselves to resilience and found ways to achieve continued success—remarkably many showing record performance this year. 

What are Federated stakeholders' biggest concerns? How are you addressing them?  

Remaining competitive in an environment impacted by unprecedented change concerns the Federated membership the most. There is so much happening in such a short period that creates challenges and opportunities for all. Finding creative solutions to adapt and innovate is the key. The Federated model of working together and collaboration is a proven benefit to the members seeking best practices or shared results from processes. Certainly, we have all had to find new ways to approach the various business disruptions and obstacles and find ways to deliver increased value to all constituents. 

What lessons in the ripple effects in the disruption is Federated taking away?  

Many of these lessons serve as a reminder rather than new learning. Working closely with our supplier partners has been essential to minimize or manage supply disruptions. Our members have gone to extraordinary levels to offset personnel disruptions, inconsistent delivery times and fill rate quantities, and the like. Recognizing and rewarding those efforts have been important. Just as important is working with and assisting our customers in navigating the same challenges we face. As we have done in the past, we remind ourselves that we're all in this together. 

How do you balance the line between order and disorder in this era of supply chain constraints?  

While the desire is always to find a way to offset any obstacles, we seek a balanced approach and a visionary plan for the longer-term impact. Saying "just add more people" sounds easy but consider the issues that factor in and the long-term impact on your team: hiring, schedules, culture, policies, and so forth. The same applies to the supply chain. Saying "carrying more inventory" sounds easy, but consider space, capital, and availability. Next, consider additional returns, obsolescence, management, reviews, and assortment updates. Further along, couple this with process changes that may use hub and spoke distribution, that trigger more frequent deliveries and added vendors. All of this can impact operational efficiency and variable costs, which may force companies to balance problem-solving with long-term planning and direction. 

Moving forward, which technologies and best practices do you believe will make a significant impact on logistics operations?  

Some answers may fit most businesses and others that are more specific to each company. Data brings more value as inventory availability must be more precise and coordinated. Better supply chain visibility, both vertically and horizontally, is essential. Understanding total costs that capture all supply chain costs are more critical than ever with the added management, inventory, space, surcharges, additional freight, handling, capital, etc., that rolls up into total product costs. System flexibility and capabilities are significantly beneficial or detrimental when pivoting quickly or adjusting incrementally for optimal availability. Managing different cost structures that include surcharges and tariffs can challenge the best of us and maybe impossible for some. I believe these challenges will only serve us better if we embrace the need for constant change and improvement.