Computer chips. Starbucks syrups. Patagonia Baggies shorts. Pokémon cards. Seemingly by the day in the news, there is a new (and often more amusing) product that is struck by supply chain shortages and disruption. And with shortages affecting more of everyday life by the moment, people outside of the industry are starting to wonder what supply chain management is and what factors led to such a confluence of shortages at once. After all, not being able to get a Starbucks Refresher is simply a bridge too far for many Americans.
Unfortunately, shortages and disruption are nothing new to supply chain-focused professionals, but the widespread interest is certainly new. Part of this increased visibility is most definitely due to the amusement of making memes about a big ship stuck in the Suez Canal. But the deluge of stories lays out just how impactful supply chain disruption can be – and how important it is to be better prepared in the future. So let’s take a look at the forces causing such turmoil in the supply chain world, and how supply chain teams can better prepare for disruption in the future.
While the news stories of goods and services impacted have been more prevalent the last few weeks, these industry-wide supply chain issues were not exactly shocking.
COVID-19 disruption catching up to consumers: In some industries, the effects of COVID-19 are just now catching up to the consumer level. For example, lumber production was largely shut down last spring to plan for a housing slump, but the housing slump never came. Now, there isn’t enough lumber to build new houses to catch up to demand.
Earlier disruption isn’t only due to COVID-19: the winter storms in Texas in February caused multiple semiconductor factories to shut down for a week, and research firm HIS Markit says those weeklong closures “will be felt for months.”
Struggles to attract workers: As workplaces like factories and processing plants are beginning to rehire and ramp back up to pre-pandemic levels, some organizations are struggling to find the manpower to increase production to hit demand. The chicken industry, for example, is seeing a shortage of workers hurt its profitability. As the Bloomberg article says, Pilgrim’s Pride is investing an additional $40 million to hire and retain workers, so they can navigate the tight labor market and increase production.
Rapidly increasing demand: Some shortages are coming from a positive energy behind them. Staying in the chicken world, KFC is struggling to keep up with demand for its new chicken sandwich. And similar to lumber, the steel industry is trying to catch up to the quick rebound in demand for new cars after slowing down production in the early days of COVID-19.
With all of this disruption in the past, supply chain teams simply have to pivot and address the market at where it stands. However, there are some lessons for supply chain teams in how they may navigate the next set of challenges that hit their industry.
Ensure high levels of visibility: Without a high level of visibility across your entire supply chain with your suppliers, any disruption like what we’ve seen the last 12 months would be crippling to any supply chain. Major issues like siloed systems and information bottlenecks can make any small change become massively disruptive. Functionality like aggregated data across the entire supply chain and automated reporting can make organizations more responsive and able to navigate challenges.
Create contingency plans in advance: When one supplier is hit hard by disruption, the companies that can quickly pivot to another supplier are the ones who will best serve customers and have a competitive advantage. PSG Dover, for example, was stuck with major production delays if a sourced part was missing or delayed for their technical production processes.
Once they built a streamlined dual-sourcing program optimized with citizen development capabilities, PSG Dover could source and approve parts quickly, and react to change immediately. And even before any change comes, PSG Dover can better work with its suppliers and solve major sourcing and procurement challenges.
Build an agility layer: Lastly, teams that rely solely on ERP systems to house data and manage digital transformation will be missing real-time insights. Also, being reliant on an IT schedule to make any needed changes doesn’t fit with the pace of business. While a major part of supply chain management, ERP systems can be difficult to navigate and lack actionable real-time data. By building an agility layer, teams can eliminate information sprawl and build the capabilities to make a reactive supply chain.