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Imagine: you’ve just run out of hand soap. You go online and pick one out from the “One Day Shipping” section. The next day comes, and you find that your soap isn’t at the door, but an email saying your package will be delayed is sitting in your inbox. Supply chain disruptions impact everyone, from supply chain leaders to the average consumer. These disruptions occur in various forms across all modes of transport, with challenges rising based on origin and destination. While we might not be able to avoid disruptions entirely, especially unforeseen ones like a pandemic, businesses can still look to the past and learn to manage the ones that may come in the future. To understand why these road bumps occur, we need to go to the source; a deeper look into supply chain stressors and what might be stopping supply chains from running smoothly. This article outlines some examples of supply chain disruptions, and how they can be mitigated.
The top four supply chain disruptions
1. Natural disasters
There are many examples of natural disasters creating massive disruption to the supply chain, and with the changing climate, more extreme weather events are on the horizon. Take Toyota for example, who have been pioneers in supply chain management. They’ve experienced extreme supply chain disruptions when their business was affected by the Tohoku earthquake and tsunami in 2011. They were unable to deliver or receive essential spare parts, ultimately leading to several losses. Climate change has also been linked to several unexpected weather patterns, especially in the Pacific leading to several cases of containers falling off at sea leading to losses and delays in the supply chain.
2. Global Pandemics
Undoubtedly one of the biggest disruptions to the global supply chain has been the pandemic. It halted movement, production, and limited capacity across global supply chains. External factors also played a part, including initial misunderstanding of the virus transmission, panic buying, and a resounding surge in online shopping. The outcome of these factors are quite clear and resulted in the bullwhip affect which still affects supply chains, including:
- A surge in demand for products: At the start of the pandemic, we saw millions of people panic buying household items such as toilet paper, resulting in massive shortages. All personal protective equipment (PPE) and sanitising products were also among those in short supply as demand suddenly spiked.
- A drop in demand for products/services: Conversely, the pandemic resulted in a massive decline in demand for airline travel and tourism products.
- Raw material shortage: China and the US remain the primary suppliers of raw materials, with the pandemic impacting several sectors. The result was either shortages or much higher costs when buying day to day items like laptops, clothing, shoes, and medicine. Even Apple felt the effects of casing and memory chip shortages, as it placed a limit on the purchase of iPhones.
3. Geopolitical conflict
Conflicts such as the Russian war in Ukraine are shining a spotlight on vulnerabilities in Europe’s overreliance on natural gas and crude oil from Russia, as well as agricultural products from Ukraine. Consumers are also feeling the impact of this supply chain disruption in the food and agricultural sector, with sunflower oil and fertilizers spiking in price. As with most supply chain disruptors, the repercussions of these conflicts cause a ripple effect down the chain. Virtually every sector can feel the impact, making it that much more difficult to revert back to normal.
4. Labour Shortage
The recent labour shortage has rocked global supply chains everywhere; from slowing down production to missing leadership, everyone has felt the impact. This is in part due to stressors such as pandemics, inflation, political instability and so on. Your supply chain is built on the network of people you create. If your team has missing links, your entire operation faces the risk of collapse. Labour shortages in every industry create a ripple effect to multiple sectors, making this issue all the more difficult to solve, and create lasting repercussions that supply chain leaders are stuck trying to mitigate for years to come.
How to overcome supply chain disruptions
While the nature of the disruption can’t always be anticipated, it’s clear that supply chain managers need to increase overall resilience and flexibility. Here are some of the ways this can be achieved:
- Digitally transforming your supply chains to ensure complete end to end visibility
- Future proofing your supply chains and building resilient supply chains to counter and manage disruptions.
- Preparing for changes in demand by reinforcing forecasting capabilities. Control towers and advanced supply chain analytics can assist with this
- Consider alternatives to what is now considered a slightly outdated concept of JIT supply chain management
- Procuring inventory and raw materials early on, particularly where they’re in potentially impacted areas.
- Ensuring your last-mile partners share the same supply chain philosophy and best practices
- Developing multi-modal transportation capabilities so cargo movement can be switched between modes quickly – like using air freight due to seaport congestions or using rail due to truck shortages
- Redefining the sourcing strategy by working with local suppliers and exploring near shoring and regional opportunities.
- Strengthening capabilities and talent within your organisation through further skills development.
- Improving communication channels and update customers on any delays to improve customer satisfaction and build trust.
- Performing risk assessments on critical business functions and making required adjustments accordingly.
Conclusion
Supply chains enable the production and distribution of various goods used in day-to-day life such as computers, cars, lifesaving medicines, and food to name a few. However, this trillion-dollar industry is facing constant risk from several disruptions as listed above. These external forces result in massive disruption to the supply chain, leaving customers without basic household goods, food, and medication. Supply chain managers can’t be sure of what threat is coming next, but they can be assured threats are usually closer than they think and need to be prepared. The best way to do this is by improving the flexibility and resilience of the supply chain through the solutions above. Digital and technological solutions that encourage communication, collaboration, multi-sourcing, and talent management are the best tools available to supply chain managers today.
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