Do you remember in the not-distant past waiting for a year to buy a car? Or seeing empty shelves at the store during the pandemic? Just a few years ago, it seemed as if there were a weather-related or COVID-related shortage everywhere we looked. Consider that:
- Widespread COVID-19 cases led to factory closures across the globe.
- Surging demand for some items needed by home-based workers resulted in port congestion.
- The Ever Given, a container ship, was stuck in the Suez Canal for six days, blocking hundreds of ships from traversing the waterway.
- Major manufacturing hubs in Vietnam, China, and other countries were shut down in response to jumps in COVID-19 cases, leaving companies scrambling for alternate suppliers.
- Natural disasters like Hurricane Ida and the Texas deep freeze disrupted the petrochemical supply chain, causing production delays of resins, plastics, and other materials used in everyday products.
It was a cacophony of bad news.
Supply Chains: Then and Now
Well, it’s 2023 now. Are supply chain practitioners breathing a sigh of relief?
Not quite. COVID–driven disruption has been reduced from a boiling cauldron to a mere simmer, but a host of other bad actors have taken its place.
According to a report by KPMG Global, supply chain disruptions are still here in 2023. These disruptions can impact access to goods and how they flow to their final destination, create port holdups, reduce container and ocean freight availability, and cause price surges.
The KPMG report and other research also identify unsettling supply chain trends that are expected to continue into the future. Of course, we still have climate change, a labor shortage, and inflation to consider, but beyond this trifecta of turmoil, there are other disruptive factors including:
- Availability of key materials such as semiconductors, rare earth metals, and lithium remains volatile in 2023.
- Footprints are changing. The pandemic experience, aided by a surge of digital technology options, accelerated the trend of reshoring manufacturing operations back to home countries. At the same time, increasing levels of e-commerce have led to a shift in retail and distribution supply chains. Although it should decrease volatility in the long run, transformation always carries short-term risks from the disruption caused by new locations and processes.
- As supply chains become more digitized, there is more opportunity for cybercriminals to wreak havoc on companies’ ability to maintain a reliable supply of goods.
- War in Ukraine and upset in the Middle East bring with them a new set of potential supply disruptions. Instead of COVID-caused supply chain issues originating in the APAC (Asia-Pacific) region, 2023 is seeing turmoil-caused disruptions emanating from EMEA (Europe, Middle East, and Africa).
- The faster the rate of innovation, the more that businesses must guard against creating excess inventory of key components that are necessary to initial versions of a product but then become obsolete in future versions (like some semiconductors or electric car batteries). So the ability to create agile supply chains that keep inventories low will become even more important as the pace of change accelerates.
To manage all this disruption effectively, organizations need a mature supply chain planning capability that is always a step ahead and ready to identify risks and opportunities. They also must ensure that their supply chain is responsive and agile enough to “turn on a dime.”
This doesn’t happen overnight; for many companies, it’s beyond the capabilities of their planning professionals and systems. It’s no coincidence that AWS, Microsoft, and IBM all have recently introduced products that focus on supply chain planning; they understand that disruption is here to stay and that the ability to pivot and rebalance will be essential to meeting customer demand.
With the passing of time, the goodwill that supply chain teams generated within their organizations during COVID is diminishing. The good news is that there are still executives within each business community who remember the heroics of the supply chain employees during the pandemic.
Chief Procurement Officers can take this opportunity to align with risk management and the CIO to influence investment in supply chain technology before the next tsunami of disruption is upon us.
