Supply chains in crisis
While there have always been some disruptions to supply chains, the developments of the last years have put supply chains worldwide in a state of crisis. What is it that makes a supply chain persistent?
While there have always been some disruptions to supply chains, the developments of the last years have put supply chains worldwide in a state of crisis. Even before the Covid-19 pandemic and the war in Ukraine, companies were struggling to win the upper hand in dealing with supply chain disruptions. But with the ongoing strain of issues, many companies begin to rethink their strategy. So, what is it that makes a supply chain persistent? In the following article, the Makersite experts have drawn together the three biggest supply chain disrupters of the present, some examples of the most affected products, and a short guideline on making your supply chains more durable in uncertain times.
A continuous problem: Covid-19
The pandemic has been producing a new level of supply chain crisis and exposed the vulnerability of many. During the first lockdowns large parts of the global economy had to be closed and, in some cases, continue to be. Examples of how supply chains have been affected are numerous. The fact that three-quarters of the world’s ports have experienced abnormally long turnaround times over the past two years puts the level of crisis into perspective. (Source: RBC Capital Markets)
While the Shanghai port was able to lower its ship discharge time in comparison to before the pandemic, in 2022 the port is facing deeper issues. The world’s largest container port is currently and continues to be locked down because of Covid. While the city and the port slowly begin to go back to protocol the cargo delays impacted the clothing industry to the tune of $884m, textiles $717m, and cars and people carriers $767m. (Source: Russell Group)
But there’s more to the damages than the clothing, textiles, and automotive industries. With the help of the Makersite supply risk analyzer, Makersite experts found that one massive problem lies in the aluminum supply chain. China is not only the world’s biggest aluminum producer but also the biggest exporter of bikes. As neither the substance nor the produce was delivered in the last month, Makersite’s experts forecast a massive disruption in the bicycle and aluminum markets. The delays will be felt in Europe in about two months.
Also, the end of lockdown must be taken with caution. While the Shanghai port is very modern and will probably go back to normal in a short time, the backlog build is massive. The capacities of other ports will be overloaded when the Shanghai port suddenly goes back to work and there will likely be more disruptions.
An individual problem: The war in Ukraine
The war in Ukraine is constraining the short-term supply of natural resources and other raw materials vital to businesses around the world. Especially wheat prices are potentially rising, as Russia and Ukraine are under the biggest five exporters worldwide.
Also natural resources like iron and neon will likely be highly affected as both Russia and Ukraine are important to the world’s supply. While one will increase the price of steel, the other is mostly used in semiconductors, vital to all kinds of electronics, among other things to the automotive industry.
An increasing problem: Nature
In the last two years, it was easy to state the pandemic as the main reason for supply chain disruptions. Still, the growing impact of climate change on the supply chain thematic must not be ignored. Extreme weather events happen more frequently and more heavily and pose a serious threat. In 2021 only, hurricanes, typhoons, freezes, floodings, and tornadoes impacted supply chains globally.
Port Kelang, mentioned earlier in the first graph, was severely damaged by flooding in Malaysia. The impact: A break in the semiconductor supply chain and global semiconductor shortages.
What you can do to be prepared
Assess your risks
To be able to find out how resilient your company’s supply chain is, you need a data-driven risk assessment. Manufacturing enterprises have to fully understand the risk in the deeper tiers of their product supply chains to stay competitive. As of today, most risk and non-compliance take place in tier 2+ suppliers, yet 65% of companies have no visibility there. Getting transparency across entire supply chains at scale is extremely hard. Done manually, it takes months to years to find and evaluate the necessary information while being dependent on the suppliers will and capability to provide information about their supply chains and risks. To solve this for procurement professionals, Makersite partnered with Beroe Inc., a global SaaS-based procurement intelligence and analytics provider, delivering the first multi-tier supply chain risk assessment at scale.
Create mitigation strategies
Once you have a data-based analysis of your deep-tier supply chains and areas of risk, you can start to investigate and implement mitigation options. These can go beyond procurement and include the product design, finding alternative sources for your materials, adding strategic buffers to your supply chain for more capacity, identifying alternative routes for your logistics, and more. By doing this and having already evaluated the impact of these changes you will be able to act fast in the case of disruption. Still, figuring out how changes to your supply chain and product will affect the rest of your processes, like staying profitable, is an extremely hard task to do manually. Utilizing Makersite’s Multi Criteria Decision Analysis, companies can see the impact of every change made to the lifecycle of a product and take informed decisions based ondata.
Supply chain disruptions are not a single occasion anymore. They need to be prepared for, especially as climate change will make weather extremes more frequent and intense. Companies that have mitigation strategies in place will be at an advantage when the next unforeseen events hit the world and will be able to stay ahead of the competition.