LET’S FIX THE GLOBAL SUPPLY CHAIN

Written by Evita Vecozola

January 18, 2022

At this point, we have covered a lot about the supply chain and why it is in crisis right now. On one side – it is a perfect storm that most people fail to see the solution to. On the other side, there are some positive sides to it as well (hunting all the silver linings that we can get right?). The question at this point is how? How can we get the world back on track? After thorough research over the past couple of months, I would like to present my findings. Here are 7 possible solutions to the global supply chain crisis.

BRAINSTORM

First, let’s brainstorm. The global marketplace is extremely volatile compared to the rest of the supply chain because of scarcity is being damped. Or are we experiencing a complex failure? 

Even though the global supply chain crisis is complex and not just tied to a single tier in the global supply chain we still have one tier that seem to struggle the most: the shipping part. Let’s briefly touch upon the most obvious obstacles.

Of course, one extremely minor solution could be to just request the ports to allow a higher amount of container stacking at the ports, but that will have its physical limits as well as not solve the man labor shortage in some countries. The same goes for building more ports. While this might seem like an obvious solution, we can clearly see it will not work, since it can’t be integrated properly. And even if it could, there’s no safety that it would be a long-term solution. 

The problem is that the crisis doesn’t have clear edges. Even if the ports clear up, there still won’t be enough trucks on the road, or workers in warehouses, or delivery vans out in the streets. And COVID-19 could always cause shutdowns and delays.

But here are my seven solutions that may work if we collaboratively choose to change the way we produce and consume as businesses.

#1: A DIFFERENT TAKE ON THE BUSINESS MODEL

The world needs robust supply chains that are founded on sustainability, collaboration, trust, transparency, visibility, and diversification of supply. That new model of supply chains could help combat economic fragility, climate change, and inequality.

Global supply chains connect businesses and markets across all layers of economic, social, and ecological systems. That means customers, governments and other stakeholders should encourage the emergence of robust and sustainable supply chains.

More integrated, agile, and focused supply chains. Increasing production to meet the ceiling of the manufacturing capacity. Post lean supply chains. Which means we would have to change the way we do business. If we previously primarily looked at how to reduce waste, time, and inventory within the production, now is the time to change the focus. Marketing and sales must be far more coordinated, planned, and varied. Marketing plans must be primary as short-term plans with immediate and current availability. The outcome would be a more pull-based or on-demand production instead of producing to warehouses.

 

Supply Chain, warehouse, business, production 2022

#2: CAPACITY UTILIZATION

We must create nested supply chains by identifying and separating supply chains within supply chains. What do I mean? 

Well, let’s look at the Little’s Law. 

For example, one suggestion could be to lower the production variations (product range) to increase capacity utilization and productivity. Being able to produce small quantities may also help in this case. Even without the economic and supply chain crisis, companies often struggle with getting maximum capacity utilization, but now it is more important than ever. Less product range means less waiting time, volatility, and higher capacity utilization. And if the production is close to the market, producing smaller volumes in a more automized way, would go a long way. 

We must make sure that our inner supply chains within the company are doing a narrow range of activities. We can isolate the capacity within specific markets. Companies might need to investigate contracting for capacity and not output, ensuring transparency upstream and maintaining close relationships with different stakeholders.

#3: CHOOSING THE CUSTOMERS

 

Another option that we must consider is rationing, picking, and choosing our customers if we must, and finally go down on marketing expenses if experiencing supply shortage, just as I mentioned in the previous paragraph. 

Think about how you can transform your product so the customization of the product can be added as the last thing, for example already in the store. (Example: paint is being mixed when it is in the store).

#4: REAL-TIME FORECASTING

Leverage data to improve visibility: maximize visibility into demand, inventory, capacity, supply, and finances across the ecosystem.

Work on Collaborative planning and forecasting with chain partners. Track real-time supply chain data to have “Quasi Transparency”. Of course, you could identify strategic accounts and key customers manually, but as we are in crisis now, saving time on this specific part of the process might save your business.

We got to prepare for what comes next, a continuous cycle of risk mobilizing, sensing, analysis, configuration, and operation will help to optimize results and mitigate risks.

We need contingency plans for consumer substitutes, as well as to think how we can manage delinquencies strategically.  For virtually any consumer-facing institution that has future receivables such as credit card and telecommunications companies and retailers, the difficulty in collecting will lead to a sharp increase in the number of customers requiring financial assistance.

Risk teams must assess and reshape four core dimensions of delinquency management: segmentation, frontline operations (particularly those with remote workers), digital channels, and debt relief. Also, regardless of an institution’s level of sophistication, to successfully reshape its operations, risk teams need to build capabilities in agility, analytics, and infrastructure.

There’s no use in desperately trying to maintain the current production levels if demand is likely to dip. That approach quickly leads to overstocking and overspending a potentially deadly combination during a time of deflated customer demand.

Understanding both short and long-term demand levels is the first step toward a strong strategic crisis response. It helps you define the optimal level of output, which will affect the rest of your supply chain decisions.

#5: COMPANIES NEEDS TO SHARE THE BURDEN

Building effective collaboration means rewarding responsible and long-term management of the global supply chains and discouraging short-lived gains. Global supply chains should promote sharing the gains and the pains among buyers and suppliers.

Incentives need to be created to encourage this collaboration. Digitization of the economy will also contribute to better transparency and traceability in global supply chains.

I believe that consumers would consume better if they would know more and would know more about the products. That will eventually hit businesses. We need transparency. Be honest of what you do.” – Thomas Lindholm Uth (More on Thomas Lindholm’s take on the situation you can read in the previous article here.)

A close cooperation between the different departments will promote knowledge sharing. With a large number of experts within different areas of specialization, it will be a key to being cost-efficient and will drive innovation.

  #6: CRISIS MANAGEMENT TRAINING

Your management team needs to undertake in-service training in supply chain management. This will ensure that they are aware of key procedures and strategies that should be applied in response to any crisis that affects the supply chains. You want to build a team that can identify and respond to a crisis as soon as possible. This means you need a supply chain manager who has the knowledge and expertise to handle such circumstances.

You can encourage in-service training by offering free workshops and classes for your management teams or offering reimbursement for supply chain management courses. In the long run, you will benefit the company by having a reliable and well-trained management team who can handle a complication as it occurs.

#7: AUTOMATIZATION WITHIN PRODUCTION

That capability of the production should be technology-led, leveraging platforms that support applied analytics, artificial intelligence, and machine learning. It should also ensure end-to-end transparency across the supply chain. Long-term risk response will need to become an integral part of business-as-usual protocols.

Nonetheless, we should also consider atomization of our manufacturing processes. Even though that might mean a large upfront investment accompanied by many hours of learning and implementing the new processes. If we choose to do this, the production will no longer be affected by the labor shortages or even Covid-19 related restrictions, or not in the same intensity at least. We will have more quality insured products and fewer ‘black hours’ (hours of errors, enefficianty and low production) due to human factors such as lack of motivation or energy levels. 

 

Supply Chain, warehouse, business, production 2022

  THE ROUNDUP 

Every supply chain is different, but there are some indicators to watch to understand the health of the system in the grand scheme. Experts say those will show the first glimmers of light at the end of the tunnel. Although the situation might seem grim at the moment, we might see a brighter and more stable future if we apply the right actions and a good level of transparency. And may I also add- with the right tools? 😉

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