SEKO launched in 1976 with one office, in Chicago. The logistics, transportation, forwarding, and warehousing firm now boasts 150 locations in more than 60 countries. It serves as a global end-to-end logistics partner for its customers, aiming to turn supply chain strategy into a competitive advantage.
Akhil Nair, based in Hong Kong, is SEKO’s senior vice president for global ocean freight. McKinsey spoke with Nair about ongoing disruptions to supply chain infrastructure, such as the slowdowns at the Panama and Suez Canals. The discussion touches on the playbook for dealing with supply chain disruptions, how much attention logistics gets in boardrooms, and what sort of role generative AI (gen AI) will play in the future of logistics. The following is an edited transcript of the conversation.
McKinsey: I imagine you’re having a lot of conversations where customers are looking at these canal and port infrastructure disruptions and asking, “What does the next year look like? How should I be thinking about this? How should I be planning?” What do you say when you get asked those types of questions?
Akhil Nair: What we’re telling customers today is that the only thing they can expect in these times is volatility, uncertainty, complexity, and ambiguity. We’re not seeing a light at the end of the tunnel yet.
What we do with them is help build some sort of resilience. Customers need to make that part of the ethos of their organizations. They need to have routing hedges. They can’t just do the same annual procurement exercise without making any changes.
We look at new options with them. We try to be creative and flexible, coming up with new potential opportunities to ensure supply chain resilience and inventory levels. We’ve had some success in looking at how futures contracts are done, in terms of hedges. These sorts of approaches can give you some guarantees and some price protection.
McKinsey: Have digital solutions helped customers outperform through these disruptions?
Akhil Nair: A lot of companies are very siloed. For example, when a merchandiser is talking directly with suppliers and placing orders, that’s not always properly communicated to the supply planning team that will determine how to get the freight on the dock or to the distribution center at the destination.
How does technology help with that? It brings a new level of visibility and helps reduce intracompany complexity for our customers. When we integrate our technology with their enterprise planning software, we can give them a heads-ups on what’s happening within their supply chain and their purchasing behavior. We can tell them what’s happening in the market today with live data. We can help them prioritize what they want to ship well in advance, so that we can ensure there is resilience built into their supply chain.
With that visibility, down to SKU-level prioritization, the customer’s silos begin to start coordinating better. And that results in a reduction of noise and escalations—internally as well as externally. Because if you know that you’re going to have a problem, and you know it six weeks out when the order is placed, you can automatically make adjustments.
McKinsey: Are these disruptions beginning to elevate the role of logistics in planning?
Akhil Nair: I can tell you that logistics and supply chain never had a seat at the table in a boardroom before 2021. And today it is a very big part of C-level discussions. Because, at the end of the day, if logistics fails you cannot make your sales. Which is why there’s a lot of buy-in from management teams when it comes to investing in logistics technology and partnering with technology providers.
McKinsey: Is there a playbook at this point for dealing with these kinds of disruptions? Or do you need to create a brand-new plan of attack each time it happens?
Akhil Nair: It’s a bit of both. Some of the lessons learned are perennial. But some of the reactions need to be tactical at a given point in time.
In terms of having a playbook, it’s about asking customers a few simple questions. What needs to be moved? How important is it to you? When does it need to get there? Because that approach replaces panic with prioritization.
The moment we have priorities, then we can get tactical and look at specific alternatives. For instance, we had to get a bunch of football jerseys to their destination in time for the end of the season. We ended up sending them on a truck from Vietnam up through China, put them on a fast boat to Los Angeles, and air freighted them from there. If it’s urgent enough, we can come up with creative solutions on the fly. But the first step is: instead of getting lost in the mayhem of the crisis, let’s break it down into bite-size pieces.
McKinsey: If you could wave a magic wand and make a big change that would help the industry better respond to disruption in the future, what would you do?
Akhil Nair: One thing I think needs to happen is to electronically connect the financial markets with the industry. There are still too many barriers there. A complete, end-to-end, integrated digital flow could eliminate a lot of the manual requirements that go into enabling moving cargo—from the letter of credit to the bill of lading to the release of cargo to visibility and tracking. Having that all in one clean data flow would make trade more efficient and also more resilient, because it takes away lots of the blind spots.
Global free trade would also help. A lot of countries seem to be heading toward protectionism. It’s more difficult to nimbly, quickly solve for disruption when you’re dealing with protectionist trade tariffs.
The last would be to magically switch all ocean and air transportation to sustainable fuel and stop heating up this planet. In the long term, that might reduce some of the weather-induced disruption we’re seeing.
McKinsey: What is the biggest change you see affecting your business over the next decade?
Akhil Nair: I would say it is the replacement of our function. The death of the intermediary in the industry. Because we exist due to complexity, ambiguity, and the lack of interconnectivity.
If there’s digital growth that allows more interconnectivity, electronic trade documentation, and use of gen AI solutions, that could result in a complete change in how the freight industry works. Right now, there is enormous reliance on human capital when it comes to things like procurement and regulatory compliance, and that could be taken over by AI. AI could streamline manufacturing workflows, help with supply planning, and eliminate a lot of the gaps that we see between various stakeholders.
McKinsey: That’s a provocative statement. Let’s assume everybody has clean data that allows gen AI to eliminate lots of tasks. What is left? Is there still a significant role that logisticians will need to play? What is the skill set that is still going to add value?
Akhil Nair: Gantry cranes at the port are already automated. Driving a truck can eventually be automated. The ships are still steered by humans, for now—until automated navigation arrives.
There are human relationships, but in many cases they exist because of structural inefficiencies. Me calling somebody and asking them about rates, connecting them with customers, or making them an offer are all actions that are eventually replaceable by an algorithm that knows everything and more than I do—and knows it all six weeks in advance. So then what is left?
I think the biggest value-add will be the creativity that a person can bring to this. I think the logistics industry will become more advisory, wherein you use your experience to provide the rules that AI is going to use to optimize things. The algorithm tweak has to come from somebody who knows what they’re talking about. And this is where I would say logistics expertise comes in. Humans can provide wisdom when, for instance, AI suggests routing that might make sense from the data but, for complicated reasons, doesn’t make sense in the real world. It’s about adding an experiential layer on top of AI, knowing how trade really flows.
It’s going to be a collaboration. I don’t mean that humans will be completely disintermediated. And widespread use, trial validation, and getting accurate results in all scenarios are important hurdles that still need to be crossed by the technology. So I don’t see this happening for decades.
“Our firm is designed to operate as one—a single global partnership united by a strong set of values. We are equally committed to both sides of our mission: attracting and developing a talented and diverse group of colleagues and helping our clients create meaningful and lasting change.
From the C-suite to the front line, we partner with clients to help them innovate more sustainably, achieve lasting gains in performance, and build workforces that will thrive for this generation and the next.”
Please visit the firm link to site