This blog post is a continuation of the one posted the last week of September. That post covered the first 12 issues impacting global supply chains. This post covers the next 13 issues rounding out the top 25 issues.
If you haven’t already done so, read last week’s post, which covers the first 12 top issues impacting supply chains.
Both posts are quick reads and will pay back your time spent in spades.
Let’s get started.
13 – Inventory Stockage vs. JIT. In the New Normal, companies are changing their inventory stockage requirements. Driven by reduced supply availability, businesses are stocking-up to achieve customer satisfaction. Before, the cost of holding inventory was a primary driver influencing stockage. JIT, in particular, was primary precept of inventory management. Today, that’s no longer true, given the experience of the pandemic.
14 – Labor Shortages. An industry-wide labor shortage exists, for the most part in trucking. The driver shortage is well-known and has been persistent. But now the pandemic aggravated that issue. But that’s not all. Also, impacting the logistics industry is the lack of “qualified” employees for new jobs emerging technologies require. This represents more of an imbalance of skills to jobs rather than a sheer shortage of employees.
15 – Natural Disasters. We saw extreme and damaging winter storms in Texas. They shut down roads and airports, halting the movement of goods. Further, electric and water utilities were also shut down compounding matters. Estimated costs were about $90 million. Next, Hurricane Ida devastated Louisiana leaving death and destruction in its wake. The estimated costs of Ida stand at a staggering $18 billion. The lesson learned here is that you must plan for unpredictability.
16 – On-shoring/Near-shoring. Ever since the U.S. and China trade war, global trade has been erratic. Then the pandemic intensified the optics and realities of outsourcing. As a result, many businesses have moved operations out of China. Many are relocating to the U.S., Mexico, or Brazil. Although this trend is gradual, it’s gaining steam. But moving a majority of operations back to the U.S. is unlikely. Nonetheless, diversification comes with short-term instability.
17 – Port congestion. Congestion at the nation’s ports has become a major obstacle to smooth-running global supply chains. The ports of Los Angeles and Long Beach (LALB) are bearing the brunt of the this, since they are the main ports receiving goods from China and East Asia. It will take time to work off this backlog. And congestion will persist, until manufacturing and shipping can re-synchronize their operations. Also, as the threat of Covid-19 recedes, we now see the Delta variant cropping up. That further complicates and delays a return to normal.
18 – Government Regulation. Like taxes, businesses can always count on government regulation. It’s not an unknown. What is unknown are the types, scope, impacts, and timing of regulations. That can be overwhelming. And that may cause instability. That said, prudent, long-term planning can mitigate any negative effects. Moreover, strategic planning can give your business a competitive edge.
19 – Resilience. We saw this term bandied about in pre-pandemic times. And you could find many books written about it. Now, however, resilience has taken on a new and more powerful meaning. It has become the watchword of global supply chains. Why? Well, businesses that can bounce back from disruptive events will outperform their competitors. So, building resilience into your supply chain is a priority of the first order.
20 – Supply Chain Risk Management (SCRM) & Continuity of Operations (COOP). Risk and disruptions pervade many of the issues discussed thus far. Hence, this is a good time to address the urgent need for SCRM and COOP. Before Covid-19, this seemed like a good idea. Now it’s imperative. Simply stated, businesses that take SCRM and COOP seriously with thrive and profit.
21 – Shipping Prices. Shipping prices are high and climbing higher. That pertains to both spot rates and contract rates. Thanks to Hurricane Ida, spot rates spiked even more but only in the short-term. Nevertheless, long-term rates will remain high. Factors keeping rates high are capacity constraints, container shortages, rising demand, and an employee shortage. Shipping costs now represent between 20% – 25% or a product’s cost. Current projections are that pricing pressures will ease in late 2021 or early 2022. Prices likely won’t revert to pre-pandemic rates until Covid-19-induced chaos subsides.
22 – Strategic Planning. Alluded to earlier, strategic planning has become a staple of successful supply chains. To survive and thrive, you must plan for the long-term. That entails having a vision to help guide operations through daily as well as future disruptions. It serves to create stability and reduce volatility amid uncertain markets.
23 – Supply Chain Bottlenecks. Today, you can find bottlenecks all along global supply chains. Ports, terminals, warehouses and distribution centers, and freight yards have logjams. Moreover, LALB faces an unrelenting surge in inbound shipping. Compared to last year, terminals handled about 35% more inbound containers in the first week of September. With peak shipping season here, bottlenecks will only increase before they get better. The slowdown in February due to the Chinese New Year normally provides some relief. But that likely won’t occur as businesses beef up depleted inventories.
24 – Supply Shortages. We started off with shortages of toilet paper. Then we saw shortages extend to lumber, computer chips, jet fuel, and more. Until global supply chains resolve the bottlenecks and vulnerabilities plaguing them, shortages will persist. This makes demand forecasting harder as consumers make runs on select supplies. And that further increases volatility.
25 – Uncertainty and Volatility. Global supply chain management has become dicier than in pre-pandemic times. Uncertainty and volatility represent the backdrop in which you must operate. So, having a blue chip supply chain is indispensable to success. Global supply chains are complex and becoming more so. That’s even truer as businesses adopt new technologies. That in itself has some second and third order effects. New technologies will replace manual operations and inflexible processes. Finally, they will require a higher skilled workforce.
The Look of the New Normal and Next Steps
The global supply chain landscape is changing. Some of the changes were inevitable, but the pandemic has accelerated many of them. That only adds to instability for the foreseeable future.
Conquering instability calls for a short-term focus on daily supply chain execution. And if you want to survive and thrive, the long-term calls for strategic planning.
Many issues are impacting global supply chains today. Global supply chains are struggling with obsolete and ineffective business practices. For that reason, global supply chains need new business practices and new technologies.
Is your business being battered by today’s supply chain disruptions? Is your business struggling with obsolete and ineffective business practices?
At American Global Logistics, we focus on insulating businesses from disruptions by modernizing obsolete and ineffective business practices. We do that while keeping our eye on what’s happening today. Then we integrate new business practices and new technologies to prepare you for tomorrow.
Call us if you’re ready to partner with a 3PL that can help you prepare for the New Normal. We’ll help you position your business to compete for today and tomorrow.