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We look at why there are kinks in global supply chains and how companies can use collaboration, transparency and data sharing to create resilience.
10 March 2022
For months now, there have been kinks in global supply chains.
Business insolvencies, overburdened warehouses and shortages of labour have all helped to create the perfect storm.
In this article we examine some of the reasons why.
JIT focuses on producing exactly the amount you need at exactly the time the consumer needs it. It helps to improve production efficiency and competitiveness.
So why might this have contributed towards the problem?
The COVID-19 pandemic exacerbated supply and demand imbalances. A crisis will often impact consumer buying decisions which is difficult for businesses to predict and manage.
Global supply chains are complicated and often highly fragmented with sub-optimal information flow.
Many manufacturers will have visibility of their immediate suppliers, but they won’t always have visibility of those further down the chain.
A simple way of addressing this is by shrinking the supply chain geographically.
While opting for suppliers on the other side of the world might increase opportunity and in certain markets is unavoidable, it inevitably extends lead time. Reacting to sudden shocks also becomes harder.
Having a more local supply chain allows you to respond to the consumer more quickly.
Transparency across the supply chain is key. But where manufacturing processes are paper based, valuable insights are being lost.
Investing in technologies like blockchain could be a huge enabler to manufacturers understanding supply chains better, gleaning rich insights on provenance of components and materials. The electric battery supply chain is a case in point.
Blockchain could help to improve coordination between stakeholders throughout a supply chain, which should increase business resilience.
Collaboration and buy-in from all parties will always be key.
All businesses should have contingency plans in place. Digital models can help manufacturers to predict the likely timing and impact of future shocks. Businesses can then react more easily.
If we can end by being positive, the pandemic has meant that companies have witnessed first-hand the importance of collaboration, transparency and data sharing across supply chains.
Digitisation and innovation must continue to be pushed going forward.
If your business requires a review and some possible restructuring in order to be more effective and efficient, please contact our Restructuring Team for a conversation.
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