Pop the champagne, we know how to save the supply chain

What are supply chain delays anyways? 

Late package deliveries, shipment setback notifications, and emptier shelves than usual are due to disruptions in the supply chain. A massive influx of online, cross-border shopping and shortages in nearly every sector of the supply chain since the beginning of the pandemic has caused supply chain delays, creating a global economic challenge.

The supply chain disruptions stem from a number of catalysts: Covid-19; shortages amongst workers, trucks, and resources; increased demand; and lifestyle adjustments. For more information on what supply chain delays are and what has caused them, be sure to check out our recent blog covering delays. It’s a good idea to learn what is already being done—and what can be done—to mitigate and eventually eliminate the current supply chain delays as an industry, as a retailer, or as a consumer, so keep reading! This article will discuss the following:

• What is the industry doing to relieve supply chain delays?
• Is there anything retailers can do to ease the burden of supply chain delays?
• How can consumers be savvy and avoid delays?
• What is the bullwhip effect? And why it should be avoided!
• Strategies to save the supply chain

Strategies to overcome supply chain disruptions 

Industry innovations

Those within the supply chain industry are experiencing the disruptions first-hand and see where fixing is needed. The industry needs to make changes on a large scale to ensure they are prepared for future industrial shocks. With that in mind, the industry is already planning to make big transformations within the trucking and manufacturing sectors in order to combat delays.

Reviving professional driving

The world is experiencing shortages everywhere. One of the most prominent shortages since Covid-19 is within the labor force; however, truck-driver shortages were an issue before the pandemic. Historically, career-wise, truck driving has not had the best track record. The long hours, the dangerous and harsh conditions, the struggle of finding overnight parking, the egregious gas prices, and the unattractive pay don’t make for a highly coveted occupation. In a study conducted from 1995 to 2017, the United States (U.S.) Bureau of Labor and Statistics found that the turnover rate for truck drivers was between 79-94%. With the current situation of shortages and the desperate need for truck drivers, changes were essential.

Truck driving wages have increased over the past couple of years, but some argue that it's not enough to compensate for the harsh conditions. However, President Biden’s Bipartisan Infrastructure Law includes $17 billion USD to upgrade the nation’s ports and an additional $110 billion USD to upgrade highways, bridges, and roads. This new law will create safer and more efficient transportation for truck drivers (i.e. better and safer conditions). The upgrades coupled with the increase in wages present new incentives for the occupation, which will help subside the shortages and mend the supply chain delays.

Made in China

Another issue that needs to be addressed on an industry level is the tendency of businesses to rely on a single source of production. There’s no denying that China has—and continues—to play a fundamental role within the supply chain. As the manufacturing hub of the world, many countries heavily rely on Chinese factories to produce the goods or parts needed to sustain their businesses. Outsourcing all manufacturing needs to China is not always the best idea.

The Covid-19 pandemic shows us a perfect example of why outsourcing to multiple suppliers has become a necessity. The pandemic’s first outbreak was in China, which caused factories to close and production to freeze. This was the initial incident that jumpstarted the supply chain disruptions. This, and the geopolitical tension between the U.S. and China, has brought the U.S. dependency on China to light. The lower labor costs in China make diverting all production to other countries unrealistic; manufacturing in China will likely always be part of the supply chain. Still, diversification is imperative.

If a business has multiple manufacturing sources and one country or factory has issues, then the business will still get production from its other locations. This means that retailers have consistent stock, which can fix a lot of the current problems.

Revamp retailers

Though supply chain delays may seem like an industry problem out of businesses' control, there are certain adjustments available that retailers can incorporate to repair links within the chain. Retailers need to make modifications to their processes if they want to experience a standard supply chain again.

Predict spending splurges and demand surges

Retailers can make educated predictions based on communication with customers, analytics, infrastructure, and their knowledge of past sales.

Communicate with customers: Communicating with customers is one of the most effective ways to gain insight into their wants and needs. Conducting surveys, sending emails, and paying attention to customer tendencies will assist retailers in figuring out what's popular and when they will need more of certain products, which will help them plan ahead and prioritize.

Analytical infrastructure: Artificial intelligence (AI) and machine learning (ML) software tools can help predict likely occurrences based on patterns and influences. AI and ML technology can be used to improve plans, assess risks, and better utilize revenue. These tools can help predict when another global shift is about to occur, what plan of action will be most profitable, and what products should take priority. This kind of technology will likely be necessary in the near future in order to beat demand shocks.

Historical data: Sensing changes in demand patterns is more essential now than ever. The supply chain processes are particularly complex nowadays and production is dependent on many upstream operations. Historical data can be used to analyze and reflect upon known and forecasted demand requirements, which can help decide how to best distribute production, revenue, and priorities.

If retailers can accurately predict, then they can accurately prepare by ordering more or less than usual to accommodate demand fluctuations.

Be wise about critical supplies

Inventory buffers, multi-sourcing, strategic manufacturing expansion, and third-party logistics can all help in responding to changes in the supply chain. It’s crucial that retailers secure access to warehouse/working space, labor force, and raw materials that will help fulfill priorities. Looking into alternative sources for critical materials can also be beneficial.

Skills pay the bills

It’s important that businesses train their employees with skills that reflect product prioritization. Another way to cultivate a skilled labor force is to increase incentives for cross-training and learning new skills. Training employees to be more responsive to customer needs will help throughout supply chain disruptions. If employees are better trained and multifaceted they will be prepared for supply chain shocks and will be able to work where help is most needed. If businesses were equipped with these practices pre-pandemic, then the shortages of workers that we’re experiencing right now would likely be less detrimental.

Increase inventory to increase flexibility

“Just-in-time,” or lean, manufacturing became popular in the 1970s and became a practice for many companies. This practice is a production process based on an ideology of maximizing productivity while simultaneously minimizing waste by not ordering more materials or items than necessary. However, when there’s an unexpected uptick in demand, this model does not work; there’s not enough supply in production to pacify the demand. Lean manufacturing is risky and leads to not having any surplus when supply shortages occur to get through lean times. Companies need to rethink the practices they’re accustomed to and keep additional inventory from various suppliers to be prepared and avoid scrambling.

We have gone over what the industry and retailers can do to improve the supply chain disruptions, but unfortunately, consumers play a big part in creating supply chain disruptions, so what can the general public (as consumers) do to help mitigate or even eliminate the disarray?

Consumer contributions

As contributors to supply chain disruptions, consumers must also help to repair the supply chain. There are multiple practices that consumers can take part in to help mend the supply chain issues we are experiencing.

Christmas in July

The first thing that consumers need to be aware of is that supply chain delays are so severe that manufacturers have already placed orders for the holidays. If consumers need to place ecommerce orders, it may seem outrageous to start holiday shopping before autumn, but it may be worth considering. Since so many businesses are deciding to order early, they should have enough stock to accommodate customer orders throughout the summer, and the consequential decrease in holiday orders in November and December may help relieve the delays.

Thrift and shift

Consumers should consider shopping locally, supporting small businesses, and thrift shopping. If buyers are waiting for a good to be produced, shipped from overseas, to the ports, to a truck driver, to a local post office, to their doorstep is going to take a long time, especially now. Oftentimes, local/small businesses get cut out of the equation by retail giants like Amazon and Walmart. Buyers will likely get their goods much quicker if they shop locally, support small businesses, and thrift. Those practices will also reduce the strain on cross-border shipments, which can help mitigate the supply chain delays.

A lot of economists assumed that post-pandemic, consumers would reduce their online shopping, allowing the supply chain to catch up, but that has not been the case. Covid-19 did not eliminate spending; it just shifted it around. Traveling and going out were not options for a long time, so spending shifted to materialistic goods rather than experiences. Now that the world has opened up much more, if spending returns to a balance of materials and experiences (hopefully more experiences than goods), it will help to reduce pressure on the supply chain and level things out.

While industry leaders and retailers need to do their part to create long-term solutions, avoid irresponsible orders, and reduce pressure on the supply chain, we, as consumers, need to keep in mind what we can do to help minimize the supply chain crisis as well.

Beware the bullwhip effect 

As everyone is doing their part to assist in bettering the current supply chain situation, it’s important to look out for the bullwhip effect. The bullwhip effect is when demand projections prove the supply chain to be inefficient and insufficient. It refers to increased swells in inventory caused by an attempt to accommodate the shifts in consumer demand, which has rippling effects through the supply stream, all the way from retailers to raw material supply. Businesses and consumers react to shortages by ordering earlier and extra, placing more strain on the system. These issues are a key factor in rising inflation and are likely to last through 2022—possibly longer. Although increasing inventory is a good idea (as mentioned in the retailer section) it’s important not to get carried away and induce the bullwhip effect. If retailers or consumers must increase the size of their purchase order, then so be it, but know that it is just a quick fix. Implementing the other strategies discussed throughout this blog rather than just ordering prematurely and in bulk will help the long-term solutions come into reality.

The Optimus Prime of supply chains 

While some of these strategies may seem too small and futile to make a difference, they will make a positive impact. The supply chain simply won’t survive in its current state. The changes that the industry, retailers, and consumers need to make aren't just for a short-term remedy; the goal is to create an optimum supply chain that can withstand disruptions. The strategies discussed in this blog are in line with long-term solutions that will help consumers, retailers, and the industry as a whole come out of these disruptions more prepared and stronger than before.