Ask anyone, and they will say the supply chain is broken. A recent survey found that 67% of respondents believe product shortages are the new normal. Almost 75% believe that shortages will dominate supply chain problems in the near future. The vast majority of Americans are concerned about shortages in food, hygiene products, and medications. Over half of consumers have purchased an alternative brand because of supply issues, while 32% have switched brands completely because of supply chain shortages.
Yes, supply chain challenges continue, but they are not as widespread as news outlets and social media claim. Many shortages result from normal fluctuations in supply and demand. For example, food shortages of items such as the following are the result of human choices that rippled through the supply chain:
- Sriracha. The shortage of chili peppers has more to do with climate change than the supply chain. The continuing drought in the American West and Mexico has been limiting the availability of peppers for years.
- Beef. According to Forbes, the beef shortage is the result of conscious decisions made early in the pandemic, as outlined in a select subcommittee’s Coronavirus Crisis Report. More recent shortages can be attributed to a cyberattack on one of the largest meatpacking companies, JBS.
These shortages are not inherent to a broken supply chain, rather they are the result of decisions that failed to take into account their ramifications. Not compensating for a decline in chili pepper production when it first began isn’t really a supply chain problem. While the shortages are real, that doesn’t mean that suppliers do not have constraints as they struggle to deliver products.
For decades, supply chain managers focused on sourcing. Where could they get the best product for the least amount of money consistently? If a regular supplier couldn’t meet demand, there was always another supplier who could. When the pandemic hit, flaws in that approach become self-evident. According to Harvard Business Review, supply chain management has changed. Companies must now consider:
- Geolocation and Geopolitics
Supply chains must look beyond today’s covid-generated backlogs, labor shortages, and rising fuel costs. They need to reorient their processes to be more flexible and more regional.
Geolocations and Geopolitics
Trade wars and military conflicts impact delivery capabilities. When borders close for whatever reason, the flow of goods slows. Manufacturers and suppliers need supply chain configurations that allow pivoting. Whether it’s storing more supplies locally or delivering finished goods closer to the buyer, businesses need to rethink how they manage their supply chains.
Companies need to divide their supply chain options into blocks. Instead of sourcing all electronics through an Asian bloc, businesses should develop sources in North America or Europe. Organizations then source 50% from Asia, 30% from North America, and 20% from Europe. If production halts in North America, corporations can quickly pivot to their other supply chains. Supplies may slow temporarily, but the flexibility ensures a minimal impact.
Supply chains were not that concerned with shipping and distance before the pandemic. Now with increased natural disasters and constrained shipping lanes, businesses need to evaluate shipping costs and delivery times. They may need to store items in one location for longer than anticipated.
Having flexible storage options makes it easy to adjust cargo size. When the Suez Canal was blocked for six days, hundreds of ships had to find alternative waterways or wait for the Ever Given to clear the canal. Some options were to divide cargo so it could ship on smaller ships that could use narrower waterways. With flexible storage, manufacturers could ship as much product as possible while keeping the remainder in port until the canal opened or another ship became available.
Until recently, container shipping was relatively inexpensive; however, changes in the environmental controls of sea-going vessels will add to the cost of container shipments. The International Maritime Organization (IMO) has a 10-year plan to reduce emissions. More countries plan to impose financial penalties to constrain the use of fossil fuels in transporting goods by rail or road.
Not all shipping costs can be passed to the end-user. Businesses will need to look at regional delivery solutions to reduce shipping expenses. Having the ability to store some items closer to the end-user while shipping larger quantities to other distributors provides the flexibility and agility to meet market demands while adhering to sustainability guidelines.
Supply chains belong to everyone. From the smallest supplier to the largest manufacturer, a supply chain functions only if all links in the chain do. As the pandemic lengthens, most companies continued to operate their supply chains in much the same way as before. They continued to look for low-cost solutions without considering the consequences to their usual small-business suppliers. As a result, many of those small businesses are no longer in business.
If organizations want the resiliency to survive another pandemic, natural disaster, or conflict, they need to consider the impact of their decisions on the entire supply chain. Perhaps a company agrees to purchase a percentage of widgets every month from a small supplier, even though it increases their inventory slightly. The added cost to store a small widget until it is needed may be insignificant compared to the cost of not having an alternative supplier.
Organizations can view the supply chain as broken, or they can accept that supply chain management has changed. It’s not that the sky is falling, but that world has changed. Manufactured goods need to reside closer to the user. Businesses need more flexibility in how they store and deliver finished goods. Being able to store and locate items quickly gives companies the agility they need to pivot quickly. Look to Postal Totes for storage options to modernize your supply chain.