Certainly, with the recent pandemic has affected every part of the supply chain, in all market segments. The majority of companies worldwide are continually being challenged in their operational, financial and organizational resilience across their supply chain network. Looking back, the pandemic has highlighted risks and resiliency gaps for many organizations. Recent industry surveys are showing that Executive leadership is now looking ahead of new unforeseen disruption and varied risk factors and will increase investment in disruption detection and innovation processes.
As the effects of the worldwide pandemic continue to impact the global supply chain, how should businesses seek to build resilience and risk management evaluation into their supply chains moving forward? Below are some of the major disruptions effecting supply chains and strategies that are being rapidly deployed by leading organizations to help build resilience and agility.
Logistics disruption
The major logistics disruptions create a ripple effect across global supply chains that ultimately cause goods to pile up in storage, impacting those ships on their way to ports through diversion or being slowed down as they arrive at major transit hubs, thereby restricting global trade flows and limiting access for businesses to import products and refill their stocks of inventory.
Assuming that these disruptions recede and access to sea and airfreight reverts back to pre-pandemic levels, it will likely take some time before things simply return to normal. In the interim, you should expect to see higher prices (as excessive freight costs are passed onto the consumer), and longer waits for retail shelves to be replenished (especially imported products). Consumers should reset expectations, as items requiring repairs and maintenance could also be delayed in lengthy service queues.
Government and industry leaders are seeking to define strategies that build resilience and boost our domestic capabilities, thereby becoming less reliant on regional and global supply chains. Companies should look to re-design alternative supply chain flows, inventory storage capabilities closer to their customers, and determine how to best enhance last mile deliveries and returned goods.
Production Delays
Manufactures are competing for limited supply of key commodities and logistical capacity, leading to consumers experiencing empty shelves and long purchase lead times. However, it’s not all doom and gloom. The pandemic has intensified the focus on supply chain evaluation and evolution. Industry is evaluating and investing in their long-term supply chain strategies, paving the way for a new post pandemic normal.
The days of buffering inconsistent supply with excessive inventory at the lowest purchase cost are quickly becoming a relic of the past. Manufactures are evaluating risk first as a key decision point in their supply chain development.
Through awareness, and necessity to maintain a competitive edge, industry is being propelled to address many long-standing supply issues, re-engineer products’ specifications, leading to more resilient and cost-effective supply chains that can position their respective organizations as leaders in this new normal.
Continued Usage on a limited number of Third Parties
Despite the inherent risk associated with focusing on `one major trading partner’, many businesses have strong relationships with one major supplier, one large customer (or export market) and/or one major supply chain partner. They are actively seeking a broader list of suppliers, alternative markets/customers and alternative transport and logistics providers. Supply chain leaders are also turning the attention of their organizations to third and fourth parties ongoing risk monitoring to not only address inherent and residual risks in near-real time, but also cyber and counterfeiting risks.
Businesses can build greater agility and resilience into their supply chains by working with providers who provide new capabilities as a service. New technologies (trading systems, planning and analytics capabilities etc.) and additional logistics requirements, provided as variable cost solutions rather than long-term fixed overheads, thereby providing more flexibility and better cost control. The outcomes can create a more diversified and strengthened supply chain with greater potential for risk and cost mitigation in the future.
Accelerating the Technology Investment
In 2022, expect to see a continued accelerated level of investment as businesses seek to enhance critical supply chain planning capabilities by adopting more advanced digital enablers, such as cognitive planning and AI-driven predictive analytics as well as adding greater integrity and visibility into secure supply chains by using advanced track and trace and blockchain technologies.
One can observe that many supply chain managers are currently troubled by a lack of visibility throughout their extended supply chains, as there are so many nodes and participants within the extended chain. Leading organizations are using advanced technologies to significantly improve visibility and thereby become far more responsive to major disruption and variability within their domestic, regional and global supply chains.
Workforce and Labor
The COVID-19 period has been riddled with uncertainties and labor market shortages have further complicated post-COVID-19 recovery scenario for many industries. The shortages are for both white and blue collared workers alike in terms of both skills and numbers. Apart from the labor constraints due to the improvement in post-COVID-19 demand, there are several other non-COVID-19 related factors in play that organizations should look into to mitigate the staffing related issues.
The onset of new technology has fundamentally changed the way supply chains operate globally. The consumers are becoming more demanding, and this is leading the supply chains to change and evolve at a faster rate. Modern operations are focused on technology and innovations, and as a result, supply chains are becoming more complex. With this, the boundary between blue collared and white collared workers are diminishing. Technology cannot operate in silos and it needs workers equipped with right skills and capabilities. Hence, supply chain and manufacturing operations need a blend of both physical and technological skills to sustain and grow at present and in the future.
The changes in the demographics are also impacting the overall resource pool. Organizations should rethink their approach to recruit and engage Gen Z, who will increasingly become part of the active workforce in the near-future. The motivations and aspirations of new generations should be considered to keep the younger cohort of workers inspired with a purpose.
What’s next?
With these supply chain issues dominating board-level discussions for some time now, many organizations have experienced a resulting loss of focus on their existing transformation mandates. Driver shortages, logistics provider capacity issues, ‘Inflation’, shipping delays, increased freight costs, depleted inventory levels, labor shortages and dealing with demand peaks have all dominated discussions and required attention. Operations management have been required to shift their focus from large change projects to keeping the business running day-to-day and ensuring both staff and customers immediate needs are satisfied. Boards are now learning how to balance the oversight of crisis response with the strategic thinking that is required beyond these immediate challenges.
Modevity – Experts in Third-Party Vendor Risk Management Services & Investigative Due Diligence Reporting
Company Contact Information:
Thomas J. Canova
Co-Founder, CMO
Modevity, LLC 610-251-0700
tomc@modevity.com www.modevity.com
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