The fragility within the global supply chain has existed for decades, but it has never been exposed the way it was during the Covid-19 pandemic.
With the pandemic, there came heightened awareness about certain subtle, but vital weaknesses within the chain that every serious shipper, carrier, and logistics manager will no longer ignore.
It exposed to all the industry players the importance of considering a paradigm shift concerning future sourcing and inventory management.
For a long time, the greatest concern for the majority of the participants in this sector has been just-in-time shipment delivery with fairly tight inventory to sales ratios. These were seen as the principal avenues for improving efficiency while lowering costs at the same time.
However, the pandemic forced a shift in the focus where it became apparent that there was a need for companies to adopt more conservative and safe inventory stock supply strategies.
Through meticulous planning, it is possible for shippers and logistics companies to avoid some of the risks that became apparent during the Covid-19 pandemic.
The pandemic made it clear for container shipping operators that it was very easy to experience container fleet imbalance, without forgetting about the cargo flaws that may arise from dependency on a few countries within the supply chain.
Presently, one of the top risks to the recovery of the industry from the pandemic is container availability. This is a result of the hindrances that were occasioned by country border flows mainly due to the strict quarantine measures.
It also became clear to all the industry players that overdependence on key China suppliers can create significant problems that can lead to deep dents on the revenue streams of logistics companies.
But it is not only the movement of goods and labor that should be the sole focus regarding improving global supply chain management.
This is because the global supply chain network is a multifaceted industry. For example, a few years ago, it was easier and more cost-effective for countries to outsource production to other countries.
Companies in the United States would outsource the manufacture of electronics, clothes, computer chips, and medicines among other goods to countries with relatively low production costs.
However, such a model has shown some limitations that ought to be addressed as soon as possible. Currently, the industry is witnessing a period of tremendous disruption.
Some of the common problems in the industry, and which are direct threats to this model of doing business, include geopolitical complications, a change in consumer demands, anti-competitive practices, and off-shoring reliability to transportation jams.
In this piece, we delve into some of the practical ways and approaches that can be adopted to improve global supply chain management and to insulate the industry against some of the flaws that were exposed by the pandemic.
Digitization as a means of managing uncertainty
The time is ripe for companies to consider implementing supply chains as a means of managing disruptions in the industry.
With proper digital solutions, some of the disruptions and inconveniences that were occasioned during the Covid-19 pandemic could be easily mitigated.
Before coming up with a potential supply chain plan, it is vital for every company to first establish certain parameters that will be key to their smooth operations.
For example, it is important to know how much lead time a supplier may need to produce a given product.
It is also important to have a clear picture of the demand that may be anticipated for the same product.
To ensure proper management of variability within the supply chain, it makes sense for companies to arm themselves with as much data as they possibly can about the demand and supply, and then use this data to create realistic models of the potentially changing conditions for the future.
The good news is that logistics companies don’t need newer inventions to take their data collection for creating this model to a new level.
This is because there are plenty of opportunities to collect data that can then be used to support decision-making within the industry.
Through the use of new Internet of Things devices, companies should start this serious data collection now to enhance their knowledge base and produce better forecasts to ensure minimum disruptions in the future.
Identify potential sources of risk
With the proper data analytics, it becomes easier for companies to create more resilient sourcing strategies.
For example, through the careful analysis of the risks faced by suppliers due to Covid-19 infections and other challenges, it becomes easier to anticipate the potential challenges likely to disrupt the supplier chain.
With such analysis, companies can quickly create a list of higher-risk suppliers that can then be evaluated further to ensure that production deadlines are not compromised further along the line.
With such data and knowledge, companies can always tell when supplies from one supplier begin to dwindle, then make the necessary adjustments to a different supplier to keep the chain running.
This is how companies can manage to maintain safety stocks and also set volumes depending on how long it would take to recover in the event of a disruption in the global supply chain.
Making public health a key priority
The Covid-19 pandemic has caused a lot of stress and product shortages in key areas of economies. The rise in public health challenges during the pandemic came along with a lot of pressure on manufacturing as well as distribution networks around the world.
The bulk of the developed world turned their focus to off-shore manufacturing and just-in-time networks, but these also become overstretched as the pandemic kept on biting.
For businesses that were accustomed to manufacturing vital products in the developing world, then having them quickly shipped to the global markets soon felt the pangs of the pandemic with a total disruption of supplies, distribution, and manufacturing all over.
Products that could normally take just a few weeks to get now required a few months for them to get delivered.
It became increasingly difficult to address some of the supply chain issues when the manufacturer’s ability to work effectively was hindered by product shortages as well as an increasing number of sick employees.
To overcome some of these problems, it is vital for companies directly dealing with the global supply chain systems to improve their public health infrastructure.
So long as there still exists major public health challenges, it is going to be impossible to overcome some of the disruptions like those just witnessed due to the Covid-19 pandemic.
One would be deluded to think that Covid-19 was the last pandemic to have disrupted the global supply chain in the manner that we saw, and it is important that the lessons obtained from this pandemic be used to make the industry more ready for similar pandemics in the future.
Agility and responsiveness
Customers’ needs keep on changing and businesses need to learn how to capture these changes and respond accordingly.
The time is now for businesses to start thinking about offering customers personalized offers in real-time and also engaging with them across every available communication channel.
One approach that businesses within the global supply chain can use to achieve this is to come up with solid short-term strategic planning.
Industry players such as shippers, carriers, and freight forwarders must realize the new reality that was brought about by the Covid-19 pandemic and resort to measures that will dramatically accelerate the recovery from some of the impacts of the Covid-19 pandemic.
For example, it is important that organizations work in real-time and also have a set of tools that will make it possible for them to analyze and create solid insights from market and customer data.
As part of being agile and responsive, it is also time for companies to start thinking about implementing strategic pricing.
The reason for this is that strategic pricing is one of the best ways that companies can use to improve their margins.
There has been a lot of volatility in supply and demand, and with such, it is ideal for both destination and origin companies to be capable of cooperating in real-time to provide a tailored solution at a customized price within their respective networks.
As such, the focus should be on price optimization through agile and dynamic models based on a proper understanding of the market signals, the volatility in the supply and demand, shifting needs of the customers, and stable pricing discipline throughout the business.
Finding solutions for labor shortages
Labor shortages and other forms of economic shocks have always affected supply chains, causing significant delays, increasing costs, and introducing a wide range of logistical challenges.
Consequently, inflation has become a perpetual problem that is closely tied to some of the underlying shifts in the workforce.
One of the major problems responsible for labor shortages across the globe is a change in demographics.
For most developed economies, the bulk of the workforce is made up of an aging population. In as much as the employment rates may be relatively low, a good number of employable adults are still not part of the workforce.
As the economies recover, the labor shortages still make it a challenge for businesses to find the right staff for the available positions so that they can meet the current consumer demands.
According to a report by the Society for Human Resources Managers Survey, it was observed that nearly 90% of the firms found it difficult to fill certain positions within their organizations.
There have always been various attempts by companies to overcome both short-term and long-term labor shortages within the logistics industry.
One of the recommendations that keep coming up quite regularly is the need for both the private and the public sectors to invest in digital infrastructure that will make it easier for workers to access broadband, carry out their tasks and operate remotely.
This is seen as a great approach for not just dealing with the effects of the pandemic, but also accommodating the demographic shifts being witnessed in the current workforce.
It is also necessary for companies to reconsider worker retraining for employees who may be falling behind and always ensure that employees have the resources they need to sustain manufacturing, distribution, and the sale of durable goods.
Long transit times and an increase in freight rates are some of the direct effects of supply chain disruption. Just a few years ago, it would cost only $2000 to ship a container from Asia to the United States, but now it costs as much as $20,000 and the transit time has also increased from six weeks to eight weeks.
These, and other logistical challenges, make a good case for companies to seriously reconsider moving their production overseas to within the country.
Though the labor costs in countries like the United States and Canada are relatively high, domestic production will considerably cut down the costs so much that it will make a good case for reshoring.
It is also recommended that companies should embrace domestic manufacturing if they have the capability to since it is a great way of becoming more efficient and gaining peace of mind.
This is because it is easier for them to visit a contract manufacturer in case of quality concerns and address other problems that may challenge the safe smooth production process.
More flexibility with the carriers
During such times of scarce capacity, the shippers that will survive and constantly have freight on the road are those that will have the ability to accommodate the needs of their truckers.
This calls for great flexibility with transit times, good trucks, and hours of operation that would be largely acceptable to most truckers.
It is also important for shippers to get trucks loaded and unloaded relatively fast to reduce downtime for truckers.
Most truckers will usually avoid facilities where they will be subjected to long lines and loading and unloading difficulties. Shippers should also be flexible and go easy on truckers that arrive slightly late.
For example, instead of turning away a trucker and telling them that they need a new appointment because they arrived slightly late, it would be better if the shipper can be more accommodating and allow a couple of hours for lateness before they can turn away a trucker.