Let's face it. Supply Chain disruption is the new normal. The Coronavirus pandemic shook supply chains. It caused disruption across the world that we’re still feeling today.
Now, the War between the Ukraine and Russian sanctions have caused another shake-up across many countries of the world.
Supply chain disruption has not had the time needed to recover properly after the pandemic and so old operations can’t stand up to these levels of pressure and disturbance.
New models need to be drawn up and implemented in order to restore the function of supply chains for the future.
So - before we properly examine the solutions, we first need to look at the problems.
Supply Chain Disruption - What's Actually Happening?
What has disturbed the logistics industry so much in such a short time?
The main issue is availability.
All goods need to be sourced from somewhere.
They are manufactured and distributed from that source, and for the majority of the world, those goods come from China. The singular shipping point paradigm meant that only one country controlled the outflow of business to the rest of the world. And now that country is facing its own challenges.
The same thing has happened in Russia. When the countries in defence of Ukraine sanctioned Russia, they shut them out of the world economy and forbid the sale or trade of their produced goods. This happened to include energy, which most of the European nations sourced from Russia’s pipelines. The natural gas and oil lanes have all but shut down, and new sources were required from other distributors. Not everyone has gas or oil to offer and so the number of suppliers is limited.
During the pandemic, farms and wholesalers were unable to ship their produce fast enough and had to destroy countless tons of otherwise edible goods to prevent them from spoiling. The goods, if held, would not have been in a sellable state by the time they got to store shelves and may have led to further health related complications. It was a bitter pill to swallow, seeing so much inventory going unoptimised and thrown away.
Fuel Prices also cause disruption
As fuel prices have risen sharply following the beginnings of a global recession, an importance has been risen over the innovation and production of electric vehicles as a long-term solution. But these vehicles are a long way out from being optimal, or from production starting at all. Meanwhile, the existing shipment industry workers languish over their pay which is no longer sustainable with floundering work.
Russia’s invasion and subsequent sanctioning disturbed more than just their neighbours. Dozens of countries have relied on Russia as a food source, who was the largest wheat exporter in the world at the time. But countries can no longer rely on them for the food to feed their people or supply their food production plants. The chain has been broken in several places from just one action, after being weakened and split in many others from the pandemic. We’re seeing economies collapse across the world, but there is a sliver of good news to pull from. We are also seeing how to make things work better.
The Solutions to Supply Chain Disruption:
How are businesses managing so much supply chain disruption?
Too many operations have relied on single entities, corporations or governments for trade of essential materials. Having key exports is essential to keeping a fair economy going at a global level, but when one country is the exclusive or vast majority importer of another country’s goods, and suddenly stops, everyone gets hurt.
This was already seen between China and Australia. Tariffs and trade deals soured the relations of Australia’s biggest export partner when China neglected to take Australian coal. Australia, meanwhile, had to look for new buyers for coal, countries with coal burning power plants, or use it themselves, which went against the unified green energy initiatives that have worked to slow the reliance on fossil fuels. China was an ideal partner because they have more coal plants than any other nation, and the proximity of the countries made shipments regular and simple.
Diversify your supply and shipping
Relying on just one importer or exporter is too risky. Kickbacks or long term funding won’t mean much when all business ceases due to issues outside of anyone’s control.
Even environmental impacts, such as coastal storms or earthquakes, can stop all shipping and receiving for indefinite periods of time.
Diversified supply and shipping must become a priority.
Look for new partners, new buyers, new sellers, new services and keep in touch with all of them. Limit sales to ensure that the supply isn’t stripped out by one single entity, even at a premium, in order to keep the cashflow regular into the future.
Inventory Management and Optimisation
Holding onto inventory for an extended period of time is not seen as a successful strategy in many industries. It’s impossible for some, such as perishables or electronics which have limited shelf-life, to store their goods indefinitely.
But it is possible to manage and control when their shipments come in, in what amount and how they will be shipped out in the least amount of time. Having optimised inventory management systems in place will allow goods to flow through warehouses without delays.
Most delays in shipping are caused by the ground force, the shipping enterprise itself. Shipping lanes at major international ports have been clogged for years now with no end in sight.
It’s one thing to say “just build a new harbour” but no one company can do that.
Once the supplies are free of the blockage, it’s up to the drivers to expedite shipment to the necessary places.
A resilient supply chain depends on the delivery of goods, and truckers depend on their jobs to earn a living. Increased efficiency through daily operational management helps keep the freight and shipping sector moving smoothly and at a higher cost efficiency. Adopting into new technologies such as fully-electric trucks will help increase sustainability down the line.
Rebuilding a supply chain is hard work. It will take a global effort to adopt a new one after the old one has failed.
Change has to start somewhere, from single departments to enterprising companies.
We can help!
uTenant specialises in the optimisation of your inventory. We KNOW warehousing and logistics. We live and breathe solutions to modern supply chain challenges.
If you need to find better ways to optimise your current models, we're here to help.
Call or email us for an obligation-free chat today.