Supply chains have been in disarray almost since the beginning of the pandemic. When lockdowns began, people started behaving differently, 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 behaved differently than we did before lockdowns. People who 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 habitual patterns 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. While toilet paper shortages resolved themselves within a few months, other supply chains that were disrupted due to the pandemic remain disrupted. Many companies have been forced to find new sources for products they need to finish 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?
One problem isn’t what 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.
- 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, and loss of commercial truck drivers amid surging demand
These problems have not gone away, resulting in higher prices and worker distress, which resulted in essential workers quitting or retiring from their jobs. This then restarts the cycle by causing more labor shortages.
How Do We Resolve Supply Chain Issues in 2022?
While we’ve found 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 work around supply chain disruptions?
Taking the First Step for the Short Term
Segmenting manufacturing priorities is one workaround. While this won’t resolve the problems causing supply chain shortages, it can be used as a stopgap measure.
Start by prioritizing key products and use 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.
Using segmentation as a model requires assessing 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. Sometimes what we think is the most cost-effective solution can turn into a costly error. Supply and demand can change quickly, and being better prepared to protect supply chains needs to be prioritized. What is the best solution?
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 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. But how we respond to these shortages will affect growth, revenues, and profits to our businesses going forward.