All around the world, supply chains have yet to return to pre-pandemic levels and capabilities.
Factors including Covid-19, the war in Ukraine, and one-off events such as the blockage of the Suez Canal in 2021 have all contributed to the current situation.
And as a result, businesses and consumers face higher prices, longer wait times, and shortages of goods.
Generator’s Lean Operations & Supply Chain specialist, Andy Dobson, sets out some of the issues supply chains are currently facing, how businesses are being impacted, and what they can do to mitigate the impact.
What issues are supply chains currently facing?
- Port congestion: Ports around the world are experiencing record levels of congestion caused by labour shortages (mainly in Chinese ports due to Covid) and increasing demand as economies around the world recover.
- Goods shortages: Shortages of goods inevitably cause price spikes
- Labour shortages: Labour shortages are also causing delays in transportation, warehousing and manufacturing as well as in the service sector.
- Rising fuel and energy costs: The price of fuel and energy has risen sharply since the start of the war in Ukraine. Also, as the global economy recovers, this is increasing the cost of transporting goods, which is also driving up prices.
- Extreme weather events: Extreme weather events such as hurricanes, floods, high temperatures and wildfires, are becoming more common, and are causing disruptions to supply chains. These events can damage infrastructure, disrupt transportation, and destroy crops.
These are just some of the most pressing current supply chain issues. The situation is likely to remain challenging for the foreseeable future, as businesses and consumers continue to grapple with the effects of all of the above.
In addition, other factors are increasing the strain on supply chains include:
- The shift to online shopping: The Covid-19 pandemic accelerated the shift to online shopping, which put a strain on supply chains. Online retailers often require faster delivery times than traditional retailers and also tend to order smaller quantities of goods more frequently.
- Increasing complexity within supply chains: Supply chains have become increasingly complex in recent years as businesses have attempted to reduce costs by outsourcing production to other low-cost countries as costs have increased in existing countries. This complexity has made managing supply chains more difficult and has increased the risk of disruptions.
- Lack of transparency in supply chains: Supply chains often involve a large number of different suppliers and partners, and it can be difficult to track the movement of goods through the system.
Many businesses also lack sufficient visibility of their supply chains making it difficult to identify and respond to problems until it’s too late!
What’s the impact on Business?
These issues are having significant impacts on businesses and consumers around the world. Businesses are facing higher costs, longer wait times, and shortages of goods.
Consumers too are paying more for goods and are also facing longer wait times for deliveries.
At least in the short to medium term, the situation is likely to remain challenging.
What can businesses do to mitigate the impact of the issues?
- Work with suppliers to improve visibility into the supply chain. Data is everything.
- Really understand your supply chain and its issues and be a better customer by sharing data with your suppliers.
- Don’t be afraid to challenge suppliers to improve and be accepting of ways that minor changes can help your supplier better fulfil your needs.
- Invest in technology to automate and streamline supply chain processes. This will help to improve efficiency and reduce costs.
- Build inventory to buffer against disruptions but only where absolutely necessary.
- Can the supplier make to order?
- Can the supplier hold a buffer stock on your behalf?
- Be transparent with customers about any issues you are facing. This will help to manage expectations and build trust.
- The UK has great capability in design and manufacture despite what many people believe. There are many opportunities to relocate operations BACK to the UK.
- Consider buying locally. This will help to support UK businesses and reduce your reliance on global supply chains.
Remember, in terms of your suppliers, around the corner is better than half way round the world. Calculating Total Cost of Ownership (TCO) can often show that local is not only better but cheaper too!
About Andy Dobson
Andy is an engineer with 25+ years in Manufacturing running operations in the UK and abroad. He has spent 15+ years in Consulting; working with SMEs as well as multinational companies across Europe and beyond.
His hands-on experience ranges from direct Operational roles to Supply Chain and Supplier Development as well as start-up and scale- up including Pharmaceutical validation and many, roles in process optimisation and crisis management.
If you could benefit from Andy’s support, schedule an initial conversation with him to discuss where you’re at and where you want to be
About GoTo Generator
Generator are senior specialists collaborating in teams on projects to deliver value-based outcomes.
Our promise to our clients:
- We deliver outcomes faster and more efficiently than individual providers
- We operate an expertise-based model which means the senior specialists who take on the project PLAN, EXECUTE and DELIVER the project
- We share our experience and expertise using our hands-on approach
- We deliver faster results often achieving multiples of ROI on EBITDA/Cash
- We work with companies who have a strong desire and ambition to grow, accepting that change is part of that process.