Supply chains ‘are pretty much diamonds’ right now: Interos CEO

Interos Founder and CEO Jennifer Bisceglie joins Yahoo Finance Live to discuss the outsized role supply chain constraints are playing this earnings season.

Video transcript

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JULIE HYMAN: As China takes extensive measures to grapple with COVID cases, the future of global supply chains remains in question. For more on that, let's bring in Jennifer Bisceglie, Interos founder and CEO. Jennifer, it's good to see you again.

You guys have done a lot of work on these questions. And now, of course, it looks like maybe we could see a shutdown in Beijing as well. You point out in a recent report more than 20,000 US entities have direct relationships with tier 1 suppliers in the region of Shanghai. So talk to us about what, then, the implications have been from the shutdowns.

JENNIFER BISCEGLIE: Well, I think the first thing to think about is simply how human the supply chain is. And if you think about what happened in Ukraine, where you saw displacement of over 6 million people, or if you're seeing what's happening in Shanghai, a displacement of about almost 400 million people have been asked to stay home, simply how physical and how human the supply chain is. And that creates a ripple effect just for sheer reduction of labor, to actually unpack the ships and the trucks that are moving product around.

BRIAN SOZZI: Jennifer, are we headed back to-- just given the lockdowns, are we headed back to what we saw last year, where ports could be clogged again?

JENNIFER BISCEGLIE: Well, I think you're already seeing that. I think that you're seeing statistics come out that about 20% of the ports are being stopgapped because of the labor shortage. And about a third of those are outside Shanghai, which is the world's largest port. And so you're going to continue to see this as you see the ripple effect happening and the rolling shutdowns because of the pandemic.

I think the thing for everyone to realize is that this is the new normal. It's not going to get better. And so we need to think about how to operate businesses in a world where we are just hyperconnected. And when anything happens anywhere in the world, there is a ripple effect.

The supply chains are pretty much under siege right now. But having said that, you see the good news story, like from Tesla, that realized how to reduce their production, and yet they had great earnings reports out there. So it is possible. We just have to get ahead of it

JULIE HYMAN: Well, and Jennifer, on that point, this is something we've been hearing about really since the onset of the pandemic, when we first started seeing those alarming maps with lots of ships clustered off the California coast, for example. Have you seen any progress, not with necessarily specific companies, but on the system itself to start to try to grapple with this stuff?

JENNIFER BISCEGLIE: So we are. We are. And I think that part of the reason for that is that businesses simply cannot continue to operate in this whack-a-mole reactionary system that we've been seeing. So the last 24 months, every company, every country in the world was really educated simply how reliant they were on other companies and countries and people that they had no idea about. So you are seeing some bright spots. We personally are seeing that the topic of supply chain, investing in the supply chain, mapping of the supply chain has hit the C-suite and the board level like it has never been before.

BRIAN SOZZI: Are there any indications, Jennifer, that we are beyond the worst of inflation? Just look through the prism of supply chains.

JENNIFER BISCEGLIE: Yeah, that's a great, magic question. I think that what I can say is that we are beyond the ability to continue to be surprised. We are beyond the ability to accept that there are black swans. The idea that not knowing is good enough anymore doesn't work.

Supply chains are being played out in the court of public opinion. You're seeing the report in 10-Ks for public companies. You're seeing valuations for private companies. Everyone is being judged on the health of their supply chain. And I think that as we see more boards and more C-suite get on top of it, invest in technology, invest in that trust and transparency that's truly needed from the supply chain, that you'll see inflation come a bit more under control, because a lot of inflation today is simply based on the uncertainty of what is happening in the global supply chain.

JULIE HYMAN: And part of that also have to do with people, right, and hiring people. In the United States I think in particular of what's happening in the trucking industry and just a lot of trouble finding enough truckers to move things around. How can that be addressed? Is there a way for it to be addressed through technology, for example? Are there ways of working around it?

JENNIFER BISCEGLIE: Well, there is. And you're seeing a lot of investments, again, into that trust and transparency in the mapping of the supply chain. There's a lot of discussion, actually, you hear about nearshoring, onshoring, the localized and hyperlocalized supply chain, so really finding alternative sources.

You can't simply just train a bunch of people to unload trucks in ports. That's not going to solve the problem. Really understanding that trust, the transparency, and the alternatives is what's going to actually enable companies to move forward to be profitable, and to the point that was just asked, to bring inflation back down and be more reasonable.

JULIE HYMAN: So, Jennifer, we've been asking the big questions. I want to get back to a specific question. And that has to do with Beijing. And if, indeed, there is a shutdown there, not a port like Shanghai is in terms of its importance. But what effect could that have?

JENNIFER BISCEGLIE: Well, I think the thing to think about as you continue to have examples like this happen, and they will continue to happen, is that supply chains are pretty much diamonds, if I were to give you a visual, where we're all sourcing and ordering product and services from the same few companies. There's a lot of fat in that middle, where that diamond balloons out with distributors, resellers, alternative sources. And then we're all sourcing from the same places of raw materials.

So whether it's Shanghai or Beijing or Ukraine or Russia or moving production to Mexico, this is really, as boring as it may sound, just truly getting that transparency so that you have the ability to make better-informed decisions faster in the supply chain. Whether that is training more people to unload more trucks or investing technology, it really comes down to getting that transparency and the visibility into the extended supply chain.

BRIAN SOZZI: Jennifer Bisceglie, Interos founder and CEO, good to see you again. We'll talk to you soon.