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| 3 minutes read

When your family starts talking ‘supply chain’ you know something’s up

A few days ago, my mom called me to ask what my kids wanted for Christmas this year. She started the conversation by telling me her concerns about getting them their “top” gifts given the Supply Chain bottlenecks that she has read about or seen on the news.

In my 42 years on this earth, I can never remember my mom uttering the words ‘Supply Chain’… it is more than just headline news. It is a growing cause of concern for consumers and that makes it the number one issue facing most businesses right now. And, to make matters worse, it seems there is pain at every point…

Lingering effects from the COVID pandemic remain and consumers, an increasingly fickle and demanding group, are grappling with the downstream effects of highly disrupted supply chains. More than 100 container ships are waiting to unload in Southern California and severe labor shortages are impacting the ability to move, store and manufacture goods. To mitigate their concerns and driven by an overwhelming fear of missing out, consumers are ordering in larger quantities and earlier, making an already difficult situation worse. Shelves in retail stores and online are empty in some cases, wait times for durable goods have significantly increased, and inflation has taken hold. We are all living through a global supply chain crisis. Across the Atlantic we have already seen the impact of consumer panic buying played out in gas stations across the UK. As the Wall Street Journal reported recently, this is the 'perfect storm'.

Probably more acutely than consumers, companies are also struggling to effectively manage through the crisis. This is no longer an operations or procurement issue; it is reverberating around the boardrooms and corner offices of corporations around the globe. We are proud to be on the front lines with our clients advising them on practical and battle tested ways to mitigate or lessen the immediate impacts of the crisis, helping them to:

  • Divest underperforming business units to align focus and investment on core business;
  • Consolidate shipments to mitigate the impacts of rising transportation costs;
  • Procure transportation (all modes) further in advance to secure capacity and limit delays;
  • Implement new and innovative policies to retain or attract workers;
  • Qualify new components and expand supply base to mitigate material shortages;
  • Adjust inventory policies to lessen the impacts of supply and demand shocks;
  • Implement price increases to reflect realities of input costs;
  • Focus on no regrets SKUs, streamline their product portfolio to have alternatives that are “good enough” so that customers can substitute;
  • Thoughtfully ration limited supplies of products, and
  • Improve productivity of manufacturing and warehousing operations to improve output with less labor / inputs.

Despite the instinct to focus on the challenges we face in the short to medium term, we can’t let the lessons we have learned during this crisis go to waste. We’re pushing our clients to think about the longer term and helping them to think through how they should restructure their supply chains in the future to mitigate or take advantage of lessons learned. This requires them to ask some searching questions, such as:

  • What portions of the supply chain should we control (e.g. make)? What portions should we outsource (e.g. buy)?
  • What is the most effective footprint to manufacture and distribute products?
  • What role does automation have in future warehousing and manufacturing operations / processes?
  • How should we organize our supply base (e.g. near shore vs. offshore)? How do we value redundancy and resiliency vs. purchase cost?
  • How much inventory should we carry? How do we position the inventory to best react to demand and supply shocks?
  • How do I more effectively use data (digitalize) to understand demand and supply trends?
  • How should pricing to my customers be tied to input costs? How do I implement changes without affecting volume and revenue negatively?

Long past the time that Supply Chain is no longer headline news, companies will be implementing changes to their supply chains based on lessons learned from this crisis and in anticipation for the next crisis. The ultimate challenge is to incorporate agility and resilience without huge sacrifices in efficiency. ‘Fighting the last war’ is a real risk when emerging from a disruption of this magnitude. The smart companies will create supply chains that can handle whatever’s thrown at them and pivot accordingly.

And maybe… just maybe my kids will get their top gift choices for Christmas this year… as long as they want the “right” color. If not, there’s always next year… or the year after…

“It’s a perfect storm: supply-chain bottlenecks, tight labor markets, ultra-easy monetary and fiscal policies,”

Tags

supply chain, operations, disruption

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