The Importance of Supply Chain Management & Sustainability in the Global Market

Supply chain and logistics problems have been at the forefront of many minds in 2021. Though these concerns have particularly impacted the automotive industry around the world, their effects can be felt across almost all businesses. The issues are expected to continue into 2022. Business Insider has predicted the crisis could last until 2023 without major government intervention. 

The costs of ocean freight have risen in excess of 500% from summer 2020, making it unaffordable for many businesses and seriously eating into their bottom line. However, such escalated costs may create opportunities domestically where there are no labor issues and where the benefits of consistency outweigh costs.

In today’s post, we consider some of the current issues with supply chain management, and how an effective supply chain and sustainability can coexist. 

The Sustainability Problem in Supply Chain Management

Major supply chain issues are not caused by just one factor. Rather, many different issues are at hand.

The COVID-19 pandemic remains a significant problem. From government shutdowns and labor shortages due to infections to time-consuming testing and documentation requirements at entry ports and the ensuing congestion, the virus continues to wreak havoc on the global supply chain. The pandemic has also caused a shortage of shipping containers, which naturally has knock-on effects on the entire industry. These effects include soaring prices and increased wait times for companies. 

Empty containers piled up all over the world in places that generally do not send the product back to China, just as Chinese factories were producing a surge of other goods destined for markets in North America and Europe. Because containers were scarce and demand for shipping was intense, the cost of moving cargo skyrocketed.

The continuing chip shortage crisis has impacted hundreds of industries from computing and commercial electronics to automotive, medical supplies, and even the military. Apple recently quoted a cost of $8 billion to redeploy its chips as the company was forced to make difficult decisions about which products it would prioritize. 

Droughts overseas due to low rainfall and recurrent power outages have also had a significant impact.  Taiwan, for example, recently experienced its worst drought in more than 50 years. According to Fortune, this has had a further impact on the ongoing chip shortage, as computer chips take significant amounts of water to manufacture. In the meantime, China has had recurrent blackouts and brownouts.

Many manufacturers have shifted their labor from Taiwan to the U.S., which has resulted in a significant cost increase for many consumers. 

Further, the American Trucking Associations in 2019 estimated the trucking industry would be short some 60,000 drivers, but those shortages have increased due to retirements and COVID-19 closures.

The shortage of drivers is one of several issues contributing to problems in the overall supply chain. However, it is a reflection of the strong demand for goods—and nearly everything consumers buy is delivered by truck.

These are just a few of the problems facing companies and industries worldwide, not least of all the consumers who are impacted by the related rapid inflation. The end result is clear: The current situation is unsustainable. But what are the solutions, and how can businesses weather this storm and build a model that will withstand future crises that may arise?

Potential Solutions 

Though companies may be severely impacted by the ongoing supply chain crisis, they are not helpless in the face of it. With careful planning and strategic decision-making, it is possible to build a sustainable supply chain management model even in these challenging times. 

Here are a few suggestions to help you manage your supply chain and ensure it is sustainable in the long run. 

Understand the Full Supply Chain 

Gaining a robust understanding of supply chains allows you to manage yours in a more efficient and sustainable way. Everyone at your company who plays a part in supply chain management should be educated on every step of the process. This allows you to spot potential problems early and identify contingencies to ensure your business can continue operating when issues arise. 

Leverage Data to Improve Visibility

Many organizations are overwhelmed by the sheer quantities of data they are able to access. Learning how to leverage that data into actionable insights is a crucial aspect of running a business. Disparate systems generate data and produce reports independently. An effective data management approach, however, can dramatically increase visibility across these various processes and help organizations identify their issues and areas for potential improvement. 

Supply chain data collection may consist of collecting and analyzing data about the efficiency of your suppliers, carriers, and other service providers at various stages of the process. This data, once analyzed, can be used to identify problems, determine solutions, and monitor performance.  

Finding strategic ways of leveraging data improves visibility and helps to facilitate efficiencies and avoid issues. No matter what part of the logistics space you serve, all customers are seeking improvements in their end-to-end visibility. Making data visible in a meaningful, efficient way accelerates decision-making, provides insights across processes and allows companies to optimize every aspect of the supply chain.

Internal Problem Solving

We have noticed that more and more companies are taking over importing, sourcing, and arranging transportation of goods themselves, rather than waiting for the shipping companies to do it for them. This may be the emergence of the next wave of Fortune 500 companies. 

Creating in-house solutions to various problems puts control back into your hands. Instead of relying exclusively on external parties, whose operations and processes you may not have any control over, consider handling more aspects of sourcing and supply internally where possible. Regardless, businesses should maximize visibility into demand, inventory, capacity, supply, and finances across the ecosystem.

Commit to Longer Relationships With Suppliers

When faced with supply chain issues, it can be beneficial to build longer-term commitments with your chosen supplier to secure continued production. This helps to ensure the supplier will prioritize you and keep your orders flowing. 

The downside to longer supplier commitments is that it does build some inflexibility into your model as you will likely be contracted to a specific company for a longer time. Exploring the supply chain for your suppliers before you commit will help to ensure you are working with the best company or companies for your requirements.

Dual-Sourcing 

Where possible, consider dual-sourcing from both international and domestic suppliers. Relying solely on overseas suppliers can create supply chain interruptions for your business when issues such as the current shipping and import crises arise. In other words, optimize your supplier network and diversify it so you are not putting all your eggs in one basket. With a dual-sourcing system in place, you always have a contingency plan in the event of unforeseen problems. 

Identifying alternative shipping ports is also useful. This will ensure you have alternative options in the event that unforeseen issues cause closures or holdups at your preferred port.

Research your suppliers thoroughly before committing to ensure they are reliable, provide a high-quality product, and offer quick enough turnaround times for your needs. New overseas suppliers are arising in an attempt to meet the increased demand, but do not commit to a new supplier without doing your due diligence. 

Forecast More Accurately

More accurate demand forecasting helps to ensure you always know exactly what products your business needs in plenty of time. It also helps to eliminate costs and waste caused by over-ordering (something that many businesses have succumbed to due to panic over the supply chain crisis). 

One way to manage to forecast is to work with a vendor-managed inventory (VMI) supplier. As a VMI supplier of industrial fasteners, Fastbolt works with its clients to assess and anticipate their needs. Outsourcing supply and bin management in this way can help to mitigate problems caused by supply chain issues and ensure you always have the required items in plenty of time. 

Run simulations to predict when and where excesses and shortages are likely to occur, as well as end-to-end scenarios to get actionable insights that will optimize operational metrics.

Invest in Inventory and Manage It Correctly

If you are reasonably certain of your inventory needs over the next few months, investing in inventory upfront can help minimize the number of shipments you will need and ensure all your required items are available. 

Invest the time and money required to create a better system for managing inventory, building supplier relationships, and mitigating risk. This way, you can invest in inventory upfront and manage it correctly to bypass supply chain problems and make the most efficient use of your resources. 

Partner With a Freight Forwarder

A freight forwarder is a company that arranges for goods to be delivered from one place to another. By partnering with a freight forwarder (or even several) that can manage and track shipments for you, you will be putting your supply needs in the hands of the experts. 

Freight forwarding companies are well equipped to understand the intricacies of the current crisis and its solutions. These companies can help you ensure you always have the required inventory to keep your business moving. 

Conclusion

The global supply crisis will likely persist for a while longer. It may very well continue into the new year and possibly beyond. This is likely to continue to create problems for businesses in a wide array of industries and sectors. 

Fortunately, by taking a long-term view and planning properly, companies can be prepared to weather this and any future storms that may threaten their operations. Taking a proactive approach and implementing measures to manage your supply needs allows you to take a sustainable approach that will serve your business for many years to come. 

Companies must build in sufficient flexibility to protect against future disruptions. They should also consider developing a robust framework that includes a responsive and resilient risk-management operations capability.

That capability 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. In the long term, risk response will need to become an integral part of business-as-usual.

The repurposed and reshaped supply chains of the future will need to be characterized by both resilience and responsibility. Doing so will help companies manage the short-term crisis and enable them to build around their customers.