We all remember the early days of the pandemic when toilet paper was the scarce commodity, but now the world seems like it is running out of everything from computer chips to ketchup. To make matters worse, an unprecedented labor shortage has left business owners bracing for a holiday season in which demand is likely to overwhelm resources.
Unfortunately, it’s clear that the supply chain disruption plaguing the American economy is not a short-term crisis. While you can’t fix the broken supply chain, you’ll need to steer your business through this crisis and be able to explain delays to your customers when necessary. To do so, it’s important to understand what’s behind any and all supply chain disruptions.
In this blog, we will highlight some of these disruptions and help you be better prepared to keep your business thriving – sometimes without a fair warning.
What is supply chain management?
The supply chain is the journey products take from where they’re mined, grown, or otherwise made all the way to their eventual destinations in the hands of consumers.
Supply chains are made up of so-called “nodes” and “links.” Nodes are stops a material or product makes along the way, like at a factory, port, warehouse, or retail store. A link, on the other hand, is the time material or product spends in transit between nodes—usually on a cargo ship, train, freight aircraft, or semi-truck. If all of that seemed confusing to you then this video might help.
Supply chain disruption root causes:
Shortages for a number of goods have been a hallmark of the pandemic-induced recession and recovery; which is why it is so important, as a business, to understand what is driving these issues and if there is a way for you to fix them. As we look at the causes of supply chain disruptions, we find some intertwined factors leading to the disruptions and delays your company and customers might be experiencing:
- The pandemic: The pandemic is the overarching reason for supply chain disruptions. Outbreaks and lockdowns limited productivity in factories and the transportation of goods around the world. At the same time, consumer demand for certain products has increased dramatically as many people have more disposable income and spend more time at home.
- Just-in-time (JIT) manufacturing: The JIT manufacturing model serves to meet demand instead of creating a surplus before an item is needed. While it can lead to cost savings and reduced waste, the practice also means manufacturers don’t keep extra supplies on hand. As a result, the delay of a single component can stall an entire production line—such as when, earlier this year, Ford had lots filled with nearly complete trucks awaiting semiconductors.
- Lack of shipping containers: Increased demand and a limited supply have led to a shipping container shortage and a big jump in associated costs. Partially, this is because PPE supplies were shipped to parts of the world that don’t have many exports, and the containers were left there, sitting empty. The Independent Commodity Intelligence Services reports that it cost $20,000 to ship a 40-foot container from Asia to the U.S. in September 2021, up from $4,500 the previous year.
- Staffing shortages: According to the U.S. Department of Labor, 4.3 million Americans quit their jobs in August 2021 and an additional 4.4 million quit in September. If you’re a small business owner, you’ve likely felt the strain yourself—workers are not easy to come by or retain. Notably, there’s been a multi-year shortage of truck drivers in the U.S. Though there’s a massive push underway to recruit truck drivers, people can’t learn to drive 18 wheelers overnight. The same goes for operating a crane, especially when shipping containers are stacked high and accessing the right one means playing a high-stakes game of Jenga. Major ports like the Port of Los Angeles and the Port of Long Beach will soon be operating 24/7, but that won’t help unclog the traffic jam if the truck driver shortage persists.
- Overwhelmed docks: Increased activity and worker shortages are also leading to delays at U.S. ports. According to NPR, 52 cargo ships were waiting off the coast of Los Angeles one day in late October. Off the Port of Savannah, The New York Times reported that cargo ships were anchored up to 17 miles off the coast, waiting at times more than 9 days for their turn to dock and unload their shipping containers. While some of these ports are setting records for volume coming in, it may still take weeks (instead of days) for containers to be picked up by a truck—which only adds to delivery delays and a shortage of available shipping containers
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Plan ahead for a brighter future
In some dire or unexpected scenarios, operations may come to a halt, but even in these instances, preparation can make all the difference in how quickly a business can repair supply chain issues. Below are some tactics you can start implementing as early as today:
Create a supply chain emergency plan: Just as it is wise to have a go-bag at home in case of emergency, a family plan in case of fire, and a winter supplies bag in the car for icy situations, it is equally wise to maintain an up-to-date supply chain emergency plan. This can include an emergency budget for use in the face of disruptions alongside plans around how to move goods around, maintain supplies, and continue operations in the face of different types of supply chain problems.
Build up inventory, when possible: If your business relies heavily on certain inventory to continue operations, consider stockpiling essential supplies so that your business could weather disruption that endures for several months.
Conduct a supply chain vulnerability audit: Risk analysis is a good way to spot weak links in a supply chain and it is something businesses should engage in seriously and regularly. Armed with information, finding replacements becomes a more straightforward task in terms of priority.
Identify backup suppliers: This is not always a viable option given where your products are coming from and what they are, but are there other suppliers that could provide the products needed to continue business if a go-to supplier is not able to fulfill supply needs. One important factor to consider when seeking out backup suppliers is their geographic location. For example, if your original supplier is hit with a natural disaster or similar issue, having suppliers who are further away from the event site can help guarantee continued supply.
Diversify supply base: As mentioned above, diversification of suppliers helps mitigate risk just as a diversified investment portfolio does. Geographic diversification is critical, but another important factor to consider is further up the supply chain. Even if three of your suppliers are in different areas, they may share a supplier amongst them which could leave all three in the wake of disruption. Diversify in as many areas as possible and begin to build relationships with these suppliers well ahead of potential disruptions.
Looking at the bigger picture and not focusing solely on short-term issues, such as meeting the upcoming holiday season demand will help your business in the long run.
Bringing it all together
Although you can prepare on some level, there’s no true silver bullet solution for the supply chain woes. The only thing that fixes this is time. While you might be waiting for the supply chain disruptions to unsnarl and catch up, the name of the game will be survival. This will be especially true during the holiday season when big box stores are likely to have much more inventory than small businesses. And it means that you will need to get creative, sourcing products and goods locally as often as possible and finding ways to repurpose existing inventory. Customers who care about shopping locally will make every effort to support mom and pop, but it will be vital for small business owners to communicate clearly with their customer base, explaining delays and offering frequent updates.
Need help giving your business every available opportunity to see optimal growth by getting ahead of some of these disruptions as much as you can? Contact one of our experts today.