Supply chains have been in disarray almost since the beginning of the pandemic. When lockdowns began, people started behaving differently than we had normally, disrupting the manufacturing, routing, and shipping of products used personally and in businesses. The first thing that started running out was toilet paper. Why? Because we were behaving differently than we did normally. People that usually spent eight hours a day at work were staying home. All of us. That meant we used more toilet paper at home.
It’s hard to change the habitual patterns that we use, day in and day out. The pandemic forced us to stop what we were doing, and change everything from behavior to what we bought and where we bought it from. While the toilet paper shortages resolved themselves within a few months, other supply chains that were disrupted due to the pandemic are still with us. Many companies have been forced to find new sources for products they need to complete complex builds.
The last two years have highlighted major issues with how companies source products. It’s hard to make a profit when you don’t have all the parts you need to complete your most popular product. If you’re not able to build your product on schedule, what do you do?
What Caused Supply Chain Issues?
It hasn’t been just one problem that has caused global supply chain issues. While the first cause was the regional lockdowns at the beginning of the pandemic, more problems have cropped up since then.
- Demand spikes due to changed behaviors and spending government stimulus money
- Raw material and component shortages due to labor shortages, closed businesses, and transport issues
- Labor shortages due to shutdowns, businesses closing, personnel loss, lack of childcare, and workplace safety protocols
- Manufacturing capacity issues brought on by labor shortages, disrupted global fulfillment, and rapid changes in consumer spending
- Major transportation issues, including considerable backlogs at shipping ports, loss of commercial truck drivers, and surging demand
These problems have not gone away, resulting in rising prices and causing distress in workers, which in turn has resulted in essential workers quitting or retiring from their jobs. This then completes the cycle by causing more labor shortages.
How Do We Resolve Supply Chain Issues in 2022?
While we’ve begun finding ways to live in a world with COVID-19, we haven’t resolved many of the issues causing supply chain disruptions. Within the US, most businesses are back in operation (if they didn’t close permanently), although many still have labor shortages. So, what can companies do to improve, replace, or workaround supply chain management?
Taking the First Step for the Short Term
One workaround is segmenting manufacturing priorities. While this practice won’t resolve the problems causing supply chain shortages, it can be used as a stopgap measure.
You start by prioritizing key products and using that prioritization to inform all your supply chain and labor issues. Acknowledging that segmenting your manufacturing and fulfillment process is a temporary measure, take into account value and risk, and include your cross-functional stakeholders in the decision-making.
Once you prioritize your own company’s processes, you can work with your suppliers to move some supplies to the “must-have” category, and defer other supply lines for later.
Using segmentation as a model requires involving operational, commercial, and financial parameters such as lead time, margin, demand variability, profitability, capacity, and service levels. By doing so, you have a holistic view of product priorities. Once in place, this plan will change your procurement, production schedule, and customer service directives.
Long Term Supply Chain Solutions
The pandemic has taught us that supply chains aren’t as secure as we thought they were. Sometimes what we think is the most cost-effective solution can turn into a costly error. Supply and demand can change on a whim, and being better prepared to protect supply chains needs to be prioritized. What is the best solution?h3
1. Make People a Priority
Revamp your procurement model with digitally-driven methods, and work smarter within your supplier ecosystem, with internal customers and external partners.
2. Secure Your Supply Chain
Mitigate supply chain uncertainties by improving your supply chain management with all your vendors, no matter how small. The pandemic has shown us that the smallest parts can cause the biggest problems.
3. Use Funds Wisely
Minimize unnecessary spending to have cash in reserve for future growth and supply chain management issues to lower risk factors.
4. Add Resiliency to Your Supply Chains
Improve risk management strategies with supply chain issues in mind to ensure purpose-led, resilient procurement decisions.
5. Innovate with Goals in Mind
As the economy recovers, make customer-centricity a high priority, and learn to build trust, offer transparency, and inspire innovation with a purpose-led approach.
Supply Chain Issues Will Continue
We can expect supply chain issues to continue, like the semiconductor chip shortage. However, how we respond to these shortages will affect growth, revenues, and profits to our businesses going forward.