Winning the war for talent: interview with Gerry Fay
What separates a global market leader from the also-rans is its people, says Gerry Fay of giant electronics distributor Avnet. That's why the company is so intent on winning the war for talent.
Mitch Mac Donald has more than 30 years of experience in both the newspaper and magazine businesses. He has covered the logistics and supply chain fields since 1988. Twice named one of the Top 10 Business Journalists in the U.S., he has served in a multitude of editorial and publishing roles. The leading force behind the launch of Supply Chain Management Review, he was that brand's founding publisher and editorial director from 1997 to 2000. Additionally, he has served as news editor, chief editor, publisher and editorial director of Logistics Management, as well as publisher of Modern Materials Handling. Mitch is also the president and CEO of Agile Business Media, LLC, the parent company of DC VELOCITY and CSCMP's Supply Chain Quarterly.
Gerry Fay has a lot on his plate. As the chief global logistics and operations officer for giant electronics distributor Avnet Inc., his job puts him in charge of an operation that spans the globe with 48 locations and ships 40,000-plus items per day on behalf of the 300 suppliers that make up Avnet's client base.
While those numbers may tell you something about the scope and scale of the operation, they don't begin to convey the magnitude of Fay's overarching challenge: keeping more than 100,000 end customers in 70 countries happy.
Fay may have the ideal background for the job. Upon joining Avnet in 2005, he was named senior vice president of global strategic accounts for Avnet United and created the Avnet Velocity global supply chain practice at Avnet Electronics Marketing. In that role, he led the expansion of a key accounts program designed to provide global support services to Avnet's top customer base.
He met recently with DC Velocity Group Editorial Director Mitch Mac Donald to discuss his career, Avnet's extensive logistics operations, and the company's strategy for winning the "war for talent."
Q: Could you describe the scale of Avnet's global logistics operation?
A: Avnet is the world's largest electronic equipment distributor by market cap. We are in many countries all around the world and finished FY 2012 at $25.7 billion in revenue. We've got about 3.4 million square feet of Avnet-owned warehouse space globally and ship billions of units each year.
Q: What are your key responsibilities? A: To think about the supply chain and the way we plan, source, make, and deliver. That naturally and ultimately includes everything related to making deliveries, integration of our cable and connector assembly facilities, our programming facilities, and then all of our warehousing facilities on a global basis. I oversee our corporate operational excellence program and a group called Avnet Velocity, through which we sell supply chain services to our supplier customer base.
Q: What skill sets do you draw on most heavily in your job? A: I spent my first 15 years in business in manufacturing, working for the big aerospace companies. I have been in distribution for 17 years. At Memec [an electronic components distributor acquired by Avnet in 2005], I really got to broaden my horizons because I started out running operations and eventually, as Memec went global, I became responsible for our global operations. Then, I moved into managing all parts of our supply chain and then, eventually, into being the president in the Americas, where I ran all the sales and marketing. I have been both a line and a staff guy.
I think one of the main skills that I brought with me when I moved from a sales-facing or customer-facing role back into this logistics role is an understanding of how our own logistics challenges affect the customer. The first question I always ask is: How is this affecting the customer, either positively or negatively?
Q: What are some of the biggest changes in logistics you've seen over your career? A: The two biggest changes, I think, have been changing customer expectations and what I call a "war for talent." Regarding the first, changing customer expectations, it used to be that if you got an order and you told the customer they'd get it in a week, they would be OK with that. Now, they expect things to happen overnight. We are in the Internet age. With that, the challenge for us in logistics is, How do we get that profitable proximity? How do we get close enough to satisfy the customer while being still able to have a logistics infrastructure that is supportable and cost-effective?
As to the war for talent, we are now expecting our logistics leaders to be a lot more strategic and to have a broader set of experiences. We want them to be knowledgeable, for instance, in how you set up logistics operations in emerging markets. We want them to know how you deal with different cultures, different laws, and different export and import rules.
Q: How about the converse? Can you point to anything that has remained constant over the years? A: The main thing that hasn't changed is that people are the key differentiator. Just about any company can go buy the latest conveyance, the latest WMS system, or the latest AS/RS and integrate it. The differentiator is how well your people are integrated into your operations.
We are very focused on employee engagement at Avnet because we believe if our employees are fairly paid, continue to be educated, are focused on doing their job, and have the tools to do that, that will translate to delighted customers, which means we will get more business, which means we can hire more logistics people. We see a nice healthy symbiotic relationship between employee engagement and customer engagement. For me, the biggest challenges I've had in my career in fixing logistics operations usually came down to management and employee engagement.
Q: You used a term I haven't heard before: war for talent. How does a company like Avnet approach that? How are you finding folks with the right skills? Are you bringing them up internally or are you hiring people at a higher level with more specialized degrees? A: The fundamental thing we do is succession planning. Through many levels down through the organization, we have identified who are our major succession candidates, who are our key players, and who are folks that need development. Then, we create development plans. Our ultimate goal is to grow people up in the organization.
Q: As folks move up the ladder, are they primarily coming out of logistics and supply chain management or are they coming from other areas of the company? A: It is a little bit of both. For the most part, they work their way through the logistics organization over time. One benefit we've had at Avnet is that because we have acquired so many companies, we generally get a look at the best talent that exists in the industry. One of the things that we say at Avnet when we do an acquisition is "Best people, best practice" and we really believe in that.
When we acquire a company, we look at the talent they have and determine if the talent is as good as or better than the talent we already have, and as much as possible, we will bring in those folks that we think can add to our talent base. I don't think most companies involved in an acquisition spend as much time evaluating the talent from businesses they acquire because a lot of time, it's all about synergies. When we do an acquisition, we are looking at both the Avnet folks and the acquired company's folks to really pick best of breed.
Q: What's the next big challenge on the horizon for managers striving for logistics excellence? A: As operations expand around the world, driving efficiency, effectiveness, and standardization becomes a bit of a challenge. A lot of companies have not designed their logistics networks to support future growth.
The next big thing, I think, is logistics leaders looking out in three- to five-year chunks about what emerging markets their companies are getting into and starting to plan what their logistics infrastructure will need to look like. I think that is a big change. It used to be, "Hey, we are going open up here, find us a warehouse and use a 3PL," but there wasn't a lot of thought of connecting those because business was generally fairly local. Now that it is global, a lot of times, the customer will be in the U.S. this week and move its manufacturing to Asia and expect you to move the supply chain. You've got to have a logistics infrastructure to support that.
Q: What advice would you offer someone considering a career in logistics and supply chain management? A: I would tell them that before they focus on logistics as an area of study to try to go get a summer job at a warehouse and learn what logistics is about from the inside out. Try to help build relationships with management there to understand that.
Once you do that, my personal opinion is that even if you are focused on logistics, move on to a focus on supply chain because you have a little bit broader background. I think that helps anyone understand how that all fits together and the role logistics plays in the supply chain.
Most of the apparel sold in North America is manufactured in Asia, meaning the finished goods travel long distances to reach end markets, with all the associated greenhouse gas emissions. On top of that, apparel manufacturing itself requires a significant amount of energy, water, and raw materials like cotton. Overall, the production of apparel is responsible for about 2% of the world’s total greenhouse gas emissions, according to a report titled
Taking Stock of Progress Against the Roadmap to Net Zeroby the Apparel Impact Institute. Founded in 2017, the Apparel Impact Institute is an organization dedicated to identifying, funding, and then scaling solutions aimed at reducing the carbon emissions and other environmental impacts of the apparel and textile industries.
The author of this annual study is researcher and consultant Michael Sadowski. He wrote the first report in 2021 as well as the latest edition, which was released earlier this year. Sadowski, who is also executive director of the environmental nonprofit
The Circulate Initiative, recently joined DC Velocity Group Editorial Director David Maloney on an episode of the “Logistics Matters” podcast to discuss the key findings of the research, what companies are doing to reduce emissions, and the progress they’ve made since the first report was issued.
A: While companies in the apparel industry can set their own sustainability targets, we realized there was a need to give them a blueprint for actually reducing emissions. And so, we produced the first report back in 2021, where we laid out the emissions from the sector, based on the best estimates [we could make using] data from various sources. It gives companies and the sector a blueprint for what we collectively need to do to drive toward the ambitious reduction [target] of staying within a 1.5 degrees Celsius pathway. That was the first report, and then we committed to refresh the analysis on an annual basis. The second report was published last year, and the third report came out in May of this year.
Q: What were some of the key findings of your research?
A: We found that about half of the emissions in the sector come from Tier Two, which is essentially textile production. That includes the knitting, weaving, dyeing, and finishing of fabric, which together account for over half of the total emissions. That was a really important finding, and it allows us to focus our attention on the interventions that can drive those emissions down.
Raw material production accounts for another quarter of emissions. That includes cotton farming, extracting gas and oil from the ground to make synthetics, and things like that. So we now have a really keen understanding of the source of our industry’s emissions.
Q: Your report mentions that the apparel industry is responsible for about 2% of global emissions. Is that an accurate statistic?
A: That’s our best estimate of the total emissions [generated by] the apparel sector. Some other reports on the industry have apparel at up to 8% of global emissions. And there is a commonly misquoted number in the media that it’s 10%. From my perspective, I think the best estimate is somewhere under 2%.
We know that globally, humankind needs to reduce emissions by roughly half by 2030 and reach net zero by 2050 to hit international goals. [Reaching that target will require the involvement of] every facet of the global economy and every aspect of the apparel sector—transportation, material production, manufacturing, cotton farming. Through our work and that of others, I think the apparel sector understands what has to happen. We have highlighted examples of how companies are taking action to reduce emissions in the roadmap reports.
Q: What are some of those actions the industry can take to reduce emissions?
A: I think one of the positive developments since we wrote the first report is that we’re seeing companies really focus on the most impactful areas. We see companies diving deep on thermal energy, for example. With respect to Tier Two, we [focus] a lot of attention on things like ocean freight versus air. There’s a rule of thumb I’ve heard that indicates air freight is about 10 times the cost [of ocean] and also produces 10 times more greenhouse gas emissions.
There is money available to invest in sustainability efforts. It’s really exciting to see the funding that’s coming through for AI [artificial intelligence] and to see that individual companies, such as H&M and Lululemon, are investing in real solutions in their supply chains. I think a lot of concrete actions are being taken.
And yet we know that reducing emissions by half on an absolute basis by 2030 is a monumental undertaking. So I don’t want to be overly optimistic, because I think we have a lot of work to do. But I do think we’ve got some amazing progress happening.
Q: You mentioned several companies that are starting to address their emissions. Is that a result of their being more aware of the emissions they generate? Have you seen progress made since the first report came out in 2021?
A: Yes. When we published the first roadmap back in 2021, our statistics showed that only about 12 companies had met the criteria [for setting] science-based targets. In 2024, the number of apparel, textile, and footwear companies that have set targets or have commitments to set targets is close to 500. It’s an enormous increase. I think they see the urgency more than other sectors do.
We have companies that have been working at sustainability for quite a long time. I think the apparel sector has developed a keen understanding of the impacts of climate change. You can see the impacts of flooding, drought, heat, and other things happening in places like Bangladesh and Pakistan and India. If you’re a brand or a manufacturer and you have operations and supply chains in these places, I think you understand what the future will look like if we don’t significantly reduce emissions.
Q: There are different categories of emission levels, depending on the role within the supply chain. Scope 1 are “direct” emissions under the reporting company’s control. For apparel, this might be the production of raw materials or the manufacturing of the finished product. Scope 2 covers “indirect” emissions from purchased energy, such as electricity used in these processes. Scope 3 emissions are harder to track, as they include emissions from supply chain partners both upstream and downstream.
Now companies are finding there are legislative efforts around the world that could soon require them to track and report on all these emissions, including emissions produced by their partners’ supply chains. Does this mean that companies now need to be more aware of not only what greenhouse gas emissions they produce, but also what their partners produce?
A: That’s right. Just to put this into context, if you’re a brand like an Adidas or a Gap, you still have to consider the Scope 3 emissions. In particular, there are the so-called “purchased goods and services,” which refers to all of the embedded emissions in your products, from farming cotton to knitting yarn to making fabric. Those “purchased goods and services” generally account for well above 80% of the total emissions associated with a product. It’s by far the most significant portion of your emissions.
Leading companies have begun measuring and taking action on Scope 3 emissions because of regulatory developments in Europe and, to some extent now, in California. I do think this is just a further tailwind for the work that the industry is doing.
I also think it will definitely ratchet up the quality requirements of Scope 3 data, which is not yet where we’d all like it to be. Companies are working to improve that data, but I think the regulatory push will make the quality side increasingly important.
Q: Overall, do you think the work being done by the Apparel Impact Institute will help reduce greenhouse gas emissions within the industry?
A: When we started this back in 2020, we were at a place where companies were setting targets and knew their intended destination, but what they needed was a blueprint for how to get there. And so, the roadmap [provided] this blueprint and identified six key things that the sector needed to do—from using more sustainable materials to deploying renewable electricity in the supply chain.
Decarbonizing any sector, whether it’s transportation, chemicals, or automotive, requires investment. The Apparel Impact Institute is bringing collective investment, which is so critical. I’m really optimistic about what they’re doing. They have taken a data-driven, evidence-based approach, so they know where the emissions are and they know what the needed interventions are. And they’ve got the industry behind them in doing that.
The global air cargo market’s hot summer of double-digit demand growth continued in August with average spot rates showing their largest year-on-year jump with a 24% increase, according to the latest weekly analysis by Xeneta.
Xeneta cited two reasons to explain the increase. First, Global average air cargo spot rates reached $2.68 per kg in August due to continuing supply and demand imbalance. That came as August's global cargo supply grew at its slowest ratio in 2024 to-date at 2% year-on-year, while global cargo demand continued its double-digit growth, rising +11%.
The second reason for higher rates was an ocean-to-air shift in freight volumes due to Red Sea disruptions and e-commerce demand.
Those factors could soon be amplified as e-commerce shows continued strong growth approaching the hotly anticipated winter peak season. E-commerce and low-value goods exports from China in the first seven months of 2024 increased 30% year-on-year, including shipments to Europe and the US rising 38% and 30% growth respectively, Xeneta said.
“Typically, air cargo market performance in August tends to follow the July trend. But another month of double-digit demand growth and the strongest rate growths of the year means there was definitely no summer slack season in 2024,” Niall van de Wouw, Xeneta’s chief airfreight officer, said in a release.
“Rates we saw bottoming out in late July started picking up again in mid-August. This is too short a period to call a season. This has been a busy summer, and now we’re at the threshold of Q4, it will be interesting to see what will happen and if all the anticipation of a red-hot peak season materializes,” van de Wouw said.
The report cites data showing that there are approximately 1.7 million workers missing from the post-pandemic workforce and that 38% of small firms are unable to fill open positions. At the same time, the “skills gap” in the workforce is accelerating as automation and AI create significant shifts in how work is performed.
That information comes from the “2024 Labor Day Report” released by Littler’s Workplace Policy Institute (WPI), the firm’s government relations and public policy arm.
“We continue to see a labor shortage and an urgent need to upskill the current workforce to adapt to the new world of work,” said Michael Lotito, Littler shareholder and co-chair of WPI. “As corporate executives and business leaders look to the future, they are focused on realizing the many benefits of AI to streamline operations and guide strategic decision-making, while cultivating a talent pipeline that can support this growth.”
But while the need is clear, solutions may be complicated by public policy changes such as the upcoming U.S. general election and the proliferation of employment-related legislation at the state and local levels amid Congressional gridlock.
“We are heading into a contentious election that has already proven to be unpredictable and is poised to create even more uncertainty for employers, no matter the outcome,” Shannon Meade, WPI’s executive director, said in a release. “At the same time, the growing patchwork of state and local requirements across the U.S. is exacerbating compliance challenges for companies. That, coupled with looming changes following several Supreme Court decisions that have the potential to upend rulemaking, gives C-suite executives much to contend with in planning their workforce-related strategies.”
Stax Engineering, the venture-backed startup that provides smokestack emissions reduction services for maritime ships, will service all vessels from Toyota Motor North America Inc. visiting the Toyota Berth at the Port of Long Beach, according to a new five-year deal announced today.
Beginning in 2025 to coincide with new California Air Resources Board (CARB) standards, STAX will become the first and only emissions control provider to service roll-on/roll-off (ro-ros) vessels in the state of California, the company said.
Stax has rapidly grown since its launch in the first quarter of this year, supported in part by a $40 million funding round from investors, announced in July. It now holds exclusive service agreements at California ports including Los Angeles, Long Beach, Hueneme, Benicia, Richmond, and Oakland. The firm has also partnered with individual companies like NYK Line, Hyundai GLOVIS, Equilon Enterprises LLC d/b/a Shell Oil Products US (Shell), and now Toyota.
Stax says it offers an alternative to shore power with land- and barge-based, mobile emissions capture and control technology for shipping terminal and fleet operators without the need for retrofits.
In the case of this latest deal, the Toyota Long Beach Vehicle Distribution Center imports about 200,000 vehicles each year on ro-ro vessels. Stax will keep those ships green with its flexible exhaust capture system, which attaches to all vessel classes without modification to remove 99% of emitted particulate matter (PM) and 95% of emitted oxides of nitrogen (NOx). Over the lifetime of this new agreement with Toyota, Stax estimated the service will account for approximately 3,700 hours and more than 47 tons of emissions controlled.
“We set out to provide an emissions capture and control solution that was reliable, easily accessible, and cost-effective. As we begin to service Toyota, we’re confident that we can meet the needs of the full breadth of the maritime industry, furthering our impact on the local air quality, public health, and environment,” Mike Walker, CEO of Stax, said in a release. “Continuing to establish strong partnerships will help build momentum for and trust in our technology as we expand beyond the state of California.”
That result showed that driver wages across the industry continue to increase post-pandemic, despite a challenging freight market for motor carriers. The data comes from ATA’s “Driver Compensation Study,” which asked 120 fleets, more than 150,000 employee drivers, and 14,000 independent contractors about their wage and benefit information.
Drilling into specific categories, linehaul less-than-truckload (LTL) drivers earned a median annual amount of $94,525 in 2023, while local LTL drivers earned a median of $80,680. The median annual compensation for drivers at private carriers has risen 12% since 2021, reaching $95,114 in 2023. And leased-on independent contractors for truckload carriers were paid an annual median amount of $186,016 in 2023.
The results also showed how the demographics of the industry are changing, as carriers offered smaller referral and fewer sign-on bonuses for new drivers in 2023 compared to 2021 but more frequently offered tenure bonuses to their current drivers and with a greater median value.
"While our last study, conducted in 2021, illustrated how drivers benefitted from the strongest freight environment in a generation, this latest report shows professional drivers' earnings are still rising—even in a weaker freight economy," ATA Chief Economist Bob Costello said in a release. "By offering greater tenure bonuses to their current driver force, many fleets appear to be shifting their workforce priorities from recruitment to retention."