Supply Chain Briefing

Supply Chain Disruption Is NOT Dead Yet

According to the Wall Street Journal, supply chains are back to normal. We do NOT agree. Using a take-off from Monty Python, supply chain disruption is not dead yet.

Certainly, as the article says, rates have come back in line and the most visible disruptions (mountains of ships sitting outside the ports of L.A. and Long Beach) are gone. Additionally, demand is down in several areas (consumer shopping), and China has been shut down due to Zero COVID policies. According to Maersk, the company moved 30% fewer containers across the Pacific last year. That is a BIG number; however, in digging further, Maersk reported a 31% increase in container ships across the Atlantic. So, how much is simply just a reshaping of supply chain?

Reshaping the Future of Supply Chains

We are moving into a period of reshaping of supply chains. As noted in our recent article, Reshaping the Future of Supply Chains, we are headed for volatility AND opportunity. What is clear is that supply chain disruptions will continue. It will just look different from the pandemic-related disruptions. Here are a few examples in the current environment:

  • Children’s medication shortages: parents cannot find baby Tylenol, Motrin, or other brands. Of course, there are surges in infections in the winter following the pandemic. Demand and supply should be aligned with a SIOP process. Many of the raw ingredients come from China and India. Perhaps Zero-COVID policies created this crisis?
  • Food shortages/ inflation: the price of food continues to skyrocket. There is not a quick resolution because fertilizer production has been impacted by the Russia-Ukraine war. Fertilizer is required for farming.
  • Oil & gas: Policy decisions. Wars. Neither appears to be improving currently. COUNTLESS numbers of products are derived from oil and natural gas. Plastic is a great example as it is used in baby diapers to medical devices to food packaging.

Disruption takes many forms. Increasing prices. Extended lead times. Missed delivery dates. Inventory in-balances. And more. Unfortunately, disruptions will continue. Yet they can provide opportunities…..

Opportunities Will Emerge

For those companies thinking ahead, willing to invest, managing cash flow vigorously (and therefore right-sizing inventory and taking proactive strategies beyond simply cutting inventory to ensure products aren’t available for opportunities), opportunities will emerge. As family business owners retire, businesses will be absorbed or close up shop. As supply chains move, new disruptions will occur which will create opportunities for those well-positioned to pivot and serve new customers. For example, East Coast ports have picked up volume from the West Coast ports. As we all know, it is harder to get volume back once it is lost.

Turning Disruptions into Opportunities

If you see disruptions as opportunities, you will thrive. Accept that disruptions will continue, and change your mindset to seeing opportunities. Clearly, take prudent steps to mitigate negative disruptions to YOUR business, but understand that they will continue. As competitors experience disruptions, it will be an opportunity for you.

For example, you could be like Uber and create a “cleaner, mobile friendly taxi” when the opportunity emerges. Did you ever wonder why Japan didn’t need Uber? Perhaps it was because their taxis didn’t have the same perception. Keep your innovation culture as a top priority.

Better yet, create disruption to solve issues for your industry and your customers. Go that step further. You will have to invest in people, processes, and technologies when others close the hatches and stop all spending. You will have to hire when others are laying off. You will have to hold poor performers accountable. You will have to celebrate failure to support a culture of innovation. It won’t be for the faint of heart. But, those who succeed will leapfrog the rest for decades to come.

Please keep us in the loop of your situation and how we can help your organization get in a position to thrive for years to come. Several of these types of topics are included in our eBooks. Download your complimentary copy.