Globalization and Supply Chain Woes
It is not surprising to enter a store and see aisles missing items or completely empty, at the same time you might experience an overabundance of products. This had led some consumers to feel frustrated that they can’t find a product and to the businesses losing money due to overstocked items, of which many need to be sold at a discount to make room for additional stock that is forthcoming. The uncertainty of the supply chain is frustrating to all involved in the process, from the manufacturer all the way to the customer or client. The supply chain struggles began in 2020 as governments and businesses responded to COVID-19. The pandemic really showcased how interconnected and dependent countries were around the world due to globalization.
As the threat of COVID-19 lessened, countries began to return to some form of normalcy and the supply chain started to bounce back slowly with frequent choke points and breakdowns. Many of these worldwide problems have become synonymous with labor shortages, logistics backups, and demand increases. Businesses are learning that there are some flaws in how supply chains operate, such as a dependence on overseas production to a reliance on just-in-time manufacturing.
As businesses were beginning to hope that the supply chain would slowly return to pre-COVID-19 efficiency, those thoughts were quickly crushed when Russia invaded Ukraine in February 2022. This caused the largest supply chain disruption to occur in the post-World War II era. Many governments imposed sanctions on Russia and export controls as to what could be shipped to Russia. Additionally, Ukraine was no longer able to export many of its staple crops and products to the world, such as barley, sunflower oil, wheat, and fertilizer. Additionally, Russia was limited in how much oil and natural gas it was able to export. This created shortages across many industries, which has caused an increase in prices for the consumer and customer and increased demand for substitutes.
It is becoming clear that businesses need to rethink their supply chain and operations as the supply chain will never return to pre-COVID-19 efficiency. A Jabil and IndustryWeek survey discovered that 27% of companies are investing in supply chain risk management technology to improve their supply chain performance and maintain their resilience. Additionally, 26% of the respondents shared that their organization was investing in cloud computing with 25% of the respondents utilizing demand planning/forecasting technology.
Furthermore, businesses need to assess the risk carried by each of their current suppliers and potential alternative suppliers. This will help increase the likelihood of the business maintaining its resilience and strengthening their supply base. There is also the opportunity to maintain and continue to cultivate the relationship with each supplier and logistics partners. Better relationships will lead to improved negotiations and the likelihood of the organization’s products or supplies receiving allocation or space on a container ship.
Businesses may find that some things are out of control in regard to the supply chain. For example, a restaurant has a large cooking appliance that needs a new part. The part is out of stock due to supply chain disruptions and is not expected to be back in stock until 6 months to a year. The restaurant has three logical choices available to them: 1) go without the cooking appliance, 2) buy a new cooking appliance, or 3) think outside the box in regard to substituting parts. In this example, the large cooking appliance is of great value to the restaurant and it is costly to replace. This led the restaurant to choose innovative thinking and pursue the third option. The restaurant decided to reach out to a local 3D printing company to see what options were available for printing a part for their large cooking appliance. The 3D printing company was able to support the restaurant by printing the part. The part was installed on the large cooking appliance and it ended up working better than the original OEM part.
During this unprecedented time, companies are rethinking where their facilities should be located in the world and reimagining their supply chain. This is an area prime for innovation and opportunities for many industries. There will be a new normal for globalization and supply change management.
Sources
Emma Cosgrove, “Where the supply-chain crisis came from, where it’s going and when it will be over”, November 4, 2021, https://www.businessinsider.com/supply-chain-crisis-when-it-will-be-over-end-2021-11
Frank McKay, “The Impact of the COVID-19 Supply Chain Disruption”, https://www.jabil.com/blog/covid-19-supply-chain-impact.html
Tarek Sultan, “5 Ways the COVID-19 pandemic has changed the supply chain”, January 14, 2022, https://www.forbes.com/sites/imperialinsights/2021/01/08/does-covid-19-mean-the-end-for-globalization/?sh=51687811671e
Jeffrey G. Weiss, et. al., “Impacts of Russia’s Invasion of Ukraine on Global Supply Chains, Part 1”, May 19, 2022, https://www.steptoe.com/en/news-publications/global-trade-policy-blog/impacts-of-russias-invasion-of-ukraine-on-global-supply-chains-part-i.html