How Businesses Can Protect Themselves

With key workforces on both sides of the Atlantic threatening to strike, September could deliver a fresh round of international supply chain chaos.

Just as businesses start to recover from the logistics headaches caused by Covid-19, industrial action by freight railroad workers in the U.S. and dockers at the U.K.’s busiest container port could lead to fresh disruptions.

The fragile nature of the global supply chain became painfully obvious over the past two and a half years. The pandemic put production, manufacturing, and transport systems around the world under immense pressure. Commodity shortages, shipping bottlenecks and production delays impacted virtually every person and business on the planet.

From this year’s infant formula shortage in the U.S. to the ongoing slump in vehicle production and sales in the U.K., supply chain issues have hit all sectors of the economy.

The impact has even extended beyond business to other organizations society relies on. It’s understood the UK military can’t access a staggering 15% of its spare parts inventory.

There are signs that we may be over the worst of the pandemic-related supply chain challenges now that organizations have had time to tweak their logistics operations and adapt to the new normal. The Drewry World Container Index, which tracks freight costs on major global routes, is down from the peaks it reached earlier this year. But it remains almost four times higher than it was in the pre-Covid days of 2019.

Covid-19 and Strikes Aren’t (Entirely) to Blame

Even prior to Covid-19, supply chain issues were a nightmare for manufacturers, primarily due to three main factors:

• Heightened consumer expectations – In an age of instant online gratification and same-day delivery via AmazonAMZN
  , customers no longer find it acceptable to wait days, let alone weeks, for orders to arrive at their door.
• Markets pushed to the limit – Manufacturers, suppliers and retailers have responded to consumers’ growing impatience by fine-tuning their logistics systems, taking a ‘lean’ or ‘Just in Time’ approach to supply. That has left them susceptible to disruptions when their inputs change, as happened during the pandemic.
• Geopolitical pressures – Several new geopolitical barriers to free and fast global trade have emerged over the past few years, including Brexit, the anti-globalization movement, and Russia’s war with Ukraine.

With this combination of factors already weighing heavy, it was inevitable that the arrival of an additional pressure—the global pandemic—would break the supply chain.

Having rushed to implement workarounds, and with the world slowly returning to (a new) normal as the most significant impacts of the pandemic abate, there is a sense earlier this year that the worst of the disruptions were behind us. But the supply chain remains far less robust than is ideal, and therefore susceptible to breaking again when the next disruptive event—such as significant industrial action—comes along.

Overcoming the Supply Chain’s Weaknesses

Catastrophes due to supply chain failures are certainly not a new phenomenon. In 2012, a horrifying plane crash in Nigeria killed 159 people—the result of the aircraft needing a replacement part that was not available. Rather than waiting three days for the part to be shipped in, the airline kept flying, with tragic consequences.

That disaster epitomized the need for a new way of operating: parts had to be made locally, on-demand, using digital manufacturing equipment. A decade on, progress has been made, with disruptive manufacturing innovations, such as 3D printing, increasingly helping to ensure vital products were available where they were needed, when they were needed.

These innovations mean businesses now have the tools to take a range of measures to combat the supply chain weaknesses that have been such a burden on the global economy recently:

• Evolve their operating model as conditions change – Businesses need to be agile in the face of changing market conditions, whether they are caused by consumer sentiment, market dynamics or geopolitical pressures. Harley Davidson may be a quintessential American brand, but that didn’t stop the company moving some production offshore when it was hit hard by new European tariffs.
• Standardize their processes, workflows and operations – Having consistent and coherent procedures in place enables organizations to react with speed and agility when consumer demands change.
• Embrace a low-overhead, fast response manufacturing model – This will ensure organizations are best placed to maximize efficiency, throughput, and responsiveness to change. While the recent chip shortage ravaged the production capacity of much of the auto sector, TeslaTSLA
  sidestepped the problem by rewriting its vehicles’ firmware so it could use alternative chips.
• Improve the flexibility and resiliency of their supply chains – Businesses should collect and analyze data on how they manufacture and distribute their products. These insights can be used to predict and overcome looming challenges before they impact operations.

Digital Transformation is the Key to Success

Taking the above steps to building resilience against supply chain weaknesses is only possible with the use of digital tools. Manufacturers who digitally transform the way they do business can expect a range of enhancements that will benefit their business:

• Better collaboration with suppliers – Real-time communication and collaboration with customers and suppliers can have a truly transformative impact on business operations. Online work order management and execution enables a manufacturer to directly manage and schedule their providers’ efforts with visible orders and execution.
• Improved visibility and analytics – Direct visibility into suppliers’ execution levels and order readiness enables manufacturers to enhance their planning and forecasting.
• Supplier live bidding and brokering – Being able to make real time, live bid requests on the parts and services a company needs, when it needs them, can significantly reduce manufacturing delays and increase speed-to-market.
• Enhanced security – Digital solutions are the best way to ensure supply chain data and information rights are protected. They also provide a more effective way to manage and protect intellectual property.

Manufacturers who struggled to operate during the pandemic, or had their output significantly reduced due to supply chain problems, may be tempted to look back on their ordeal as the unavoidable consequence of a global event. But rather than accepting the inevitability of being susceptible to similar problems in the future, now is the time to learn from the experience and begin the transformation to a more resilient way of doing business.