We all saw how rapidly supply chains can disintegrate and how disruption can impact our businesses. In many ways, we’re still dealing with supply chain disruptions from the COVID pandemic.
Pre-COVID, retailers typically carried forty-three days of inventory. Today, inventory has been reduced to thirty-three days. Cars and home inventory are at near-record lows with just a thirty-day supply of available vehicles. According to research from the US Census Bureau, supply chain delays are still occurring across multiple industries.
- 50% to 60% of businesses in the Manufacturing, Construction, Retail sectors
- 40% to 50% in Accommodation, Food Service, and Other Services categories
- 20% to 40% in Health Care, Social Assistance, Entertainment, Arts, Real Estate industries
- 10% to 20% of businesses in Information, Transportation, Warehouse, Mining, Oil & Gas, Professional Services, and educational services.
Nearly every business has been affected in one way or another.
While the current supply chain disruptions are expected to be mostly transitory, it will be some time before things catch up. In the meantime, slow markets are impacting companies and customers. Longer lead times for products and higher costs are still emerging.
Businesses need to re-evaluate supply chains based on resiliency as much as pricing. Developing dual sourcing or multiple sourcing for products should be on the front burner.
Re-Evaluating Your Supply Chain
The majority of businesses are in the process of re-evaluating supply chains. Nearly 60% of companies say they are working more collaboratively with supply chain partners to jointly manage supply chain risk. 54% of businesses surveyed say improving the data used to measure and monitor supply chains for decision-making is critical. More than a third say redesigning the supply chain is crucial to future success.
Your analysis should include running scenarios and performing operational risk assessments to make sure you know where gaps in your planning are and put together a contingency plan for breaks in the chain in the future.
Your supply chain design should allow you to visualize your current supply chain while also letting you model the future. This helps ensure a consistent and repeatable process which is essential for a robust supply chain.
Businesses should:
- Identify vulnerabilities and risks within the current supply chain.
- Identify alternate sources of materials, supplies, and inventory to diversify your supply bases.
- Re-evaluate current levels of safety stock.
- Take advantage of process innovations to make for more efficient supply chain management.
Companies need to have the right tools in place to make data-driven decisions for managing inventory levels better and surfacing trends more quickly.
Data-Driven Supply Chain Management
In today’s environment, you need data-driven solutions to supply chain management. Businesses of all sizes need to be able to monitor multiple supply chains across multiple business sectors.
Here are some of the most important factors you need to take into account.
- Guaranteed resiliency: When designing supply chains, businesses must identify alternate suppliers to meet production or inventory objectives.
- Flexible arrangements: In case suppliers are unable to meet demand, flexible arrangements need to be made to increase or decrease stock and reserves.
- Data analysis: Data needs to be managed in a more structured way to accommodate dynamic pricing and spot market anomalies.
Algorithms must be capable of analyzing real-time data, supply, demand, and historical trends to provide earlier warnings to businesses of potential problems in the supply chain.
All of this should be taken into consideration as part of your risk management and business continuity planning.
Executive Order on US Supply Chains
We also learned that it’s not just health crises that are impacting supply chains. When Colonial Pipeline was hit with a ransomware attack, there were long lines at gas stations, diminished supplies, and rising prices for weeks. Some suppliers ran out completely.
“The United States needs resilient, diverse, and secure supply chains to ensure our economic prosperity and national security,” said President Joe Biden in signing an Executive Order to shore up the nation’s supply chain.
The Executive Order called for a comprehensive review of government and private supply chains across a wide range of industries along with a risk assessment. It called for the prioritization of critical goods and materials and proactive measures to avoid future disruptions.
By identifying gaps in supply chains, such as single points of failure, single suppliers, or limited resilience, the White House hopes to provide a more robust framework for critical supplies. Businesses would do well to initiate a similar undertaking.
“More resilient supply chains are secure and diverse — facilitating greater domestic production, a range of supply, built-in redundancies, adequate stockpiles, safe and secure digital networks, and a world-class American manufacturing base and workforce,” said Biden.
Conclusion
While the supply chain disruptions from 2020 may be easing, there are other challenges ahead. Another supply chain disruption can happen at any time and for a variety of reasons. For this reason, businesses need to take a closer look at their suppliers and monitor supplies more closely.
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