Do you remember the story about Humpty Dumpty? There are two versions of that tale.
Here’s the first one: “Humpty Dumpty sat on a wall, Humpty Dumpty had a great fall. All the king’s horses and all the king’s men couldn’t put Humpty together again.”
Here’s another version: “Humpty Dumpty fell on his head. They picked him up and put him to bed. All the king’s horses and all the king’s men — they put Humpty back together again.”
These different versions seem to apply to different viewpoints expressed about the state of global supply chains today.
Recently there has been a spate of articles and videos in the news about the viability of supply chains. They seem to suggest supply chains can’t be put back together.
In March 2022, InBound Logistics magazine cover featured a special topic: “Reboot: Global Supply Chains: Can We Get a Do-Over?”
Also in March 2022, the Wall Street Journal released a YouTube video: “Why Global Supply Chains May Never Be the Same”.
In April 2022, Supply Chain Management Review published an article: When Will the Supply Chain Return to Normal?
These pieces all underscore that disruptions have damaged and weakened supply chains. Covid-19, the Omicron variant, the Russo-Ukrainian war, western sanctions on Russia. These aren’t typical disruptions. They’re major disruptions that have shocked global supply chains.
That brings us back to the story of Humpty Dumpty. Can you put global supply chains back together again? Or have they hopelessly fallen apart, never to return to normal?
Why global supply chains can’t be put back together again
This represents one view in the industry. It’s a pessimistic one, but this view has some merits. (Next week, we’ll review the case for putting global supply chains back together again.)
Let’s review the case that supply chains can’t return to normal.
The operating theme of this view is that today’s global supply chains are different. And they are so different, a return to normal (whatever that is) is unachievable. For this post, let’s define “normal” as the way supply chains operated in pre-pandemic times.
Let’s expand on that definition of “normal”.
Before the pandemic, supply chains were reliable in a limited way. They met specific needs. They supported specific customers. And they employed specific, often inflexible, processes to achieve their objectives.
Global supply chains were cost-focused and profit-oriented, rather than customer-focused. They were also tactical rather than strategic in nature. That means supply chains weren’t closely integrated among all stakeholders from suppliers to customers.
With that expanded definition, let’s review the issues inhibiting a return to normal.
- Labor issues have always affected the industry. But today they have expanded and become more persistent. For example, Covid-19 and Omicron have compounded trucking’s persistent labor shortage. Similarly, the pandemic and the government’s social policies have affected hiring and retention. Today we have an industry-wide labor shortage amid a tight labor market. Both negatively affect reliable supply chain execution and a return to normal.
- Aging infrastructure is another issues affecting supply chains. The main issue here is the lack of a consistent and strategic investment strategy. Decades have gone by without reliable infrastructure investment. Now the industry must deal with dilapidated roads, bridges, and buildings. Neglected infrastructure has compounded delays, shortages and customer satisfaction. The passage of a massive infrastructure bill will help. But will take time to make a difference in the short- and medium-term (CNN).
- Extreme weather is another factor wreaking havoc on global supply chains. Extreme weather events now occur on the regular. They used to be the exception. Many blame climate change. If that proves out, that makes extreme weather events a persistent risk factor. It would increase volatility and uncertainty to levels not experienced before the pandemic.
- Government regulation is on the rise and often contrary to best business practices. Many in the industry see regulatory compliance as obstacles to profitability. Many see government regulations as too constraining and restrictive. Industry sees the focus on climate change as excessive, given the market’s instability. Anticipating and navigating government regulation is critical to reliability and profit.
- Geopolitical events are becoming more prominent in their impact on global supply chains. The Russo-Ukrainian war and western sanctions are breaking global supply chains. Professors Dai and Tan argue these combined disruptions have led to “unprecedented supply chain disruptions”. Some say globalization is over as a trend towards regionalization grows (Newsweek, 4-19-22). We see that in the increase in near-shoring and on-shoring.
- Cybersecurity threats are on the rise. Last year, several major cyber breaches compromised or shut-down operations. Many projections indicate threats to cybersecurity will increase in number and severity. That’s compounded by the reality that cybersecurity takes a reactive approach. It’s difficult to be proactive. That said, new technologies are pivoting to make defense more active. For example, CrowdStrike “patches” vulnerabilities while detecting and protecting against threats. That would help moderate the effects of potentially catastrophic branches.
- New technologies aren’t intended to be disruptive. Yet, that’s a reality, as many companies aren’t prepared for the scope, scale, and effects of new technologies. They pose training challenges. They make change management mandatory for any technology implementation, as employees resist change. The impact on business processes can turn tried-and-true business processes on their heads. Innovative technologies are taking a strategic focus and driving integration in contrast to pre-pandemic times. To succeed, your business must adopt a culture that embraces change and innovation.
- The unstoppable rise of e-Commerce is taxing resources and shows no signs of slowing. During the pandemic, consumers resorted to purchasing online. Rather than shop in brick-and-mortar stores, they flocked to online shopping. Given that, many drivers have left long-haul jobs for jobs in last-mile delivery. That further aggravates the driver shortage. Also, increased consumer demand has exacerbated capacity. The e-Commerce trend and its effects look like they will only grow in the future.
- The pandemic proved to be a major disruptor. And it continues to be, at least in Shanghai, China for now. This latest lockdown will soon send ripples in supply chains. And Beijing appears next in line for a total lockdown. This is and will lead to the further delays and supply shortages worldwide. It will also erode confidence in the reliability of global supply chains.
Today’s global supply chains are under duress. The challenges they face are more erratic and precarious than before the pandemic Shippers and carriers struggle with volatile prices and constrained capacity.
Also, the pace of business is faster than ever. Heightened and more persistent supply chains risks prevail, affecting daily operations. These challenges make a return to “normal” operations unimaginable.
Putting Your Supply Chain Back Together Again
We’ve said before global supply chains are under assault. It’s safe to say global supply chains won’t be the same. As put your put supply chain back to together again, you will run into challenges. Despite that, the potential exists to make them better than before the pandemic. That doesn’t mean global supply chains will emerge better and stronger.
With a reliable 3PL, you can ensure you make your supply chain better than before the pandemic. Vanguard companies are transforming their supply chains to make them more responsive. They are transforming them to operate in the New Normal.
At American Global Logistics, we focus actively on our customers. We know and understand their needs, wants, and desires. To succeed in the New Normal’s, supply chains must be agile, speedy, and resilient.
Along with a fixed focus on our customers, we are well aware of the supply chain challenges you face. Given that we can help you transform your supply chain for agility, speed, and resilience.
Contact us before you think about transforming your supply chain. We can help you can achieve profitability and competitive advantage.