The 2020 pandemic was a global Black Swan event for supply chains. And while it caused chaos throughout the duration of the pandemic, the world will continue to feel its ripple effects for years to come. As companies brace for the future, they’re looking to forward-thinking supply chain executives to help them prepare for continued fallout.
The problem supply chain executives face is threefold. First, is the imminent restructure and rebuilding of supply chains. Second, is the reorganization of supply chains to bring them closer to home—or to create supply chain resilience. Finally, supply chain executives need to do this at a time when inflation is imminent. It adds up to seemingly insurmountable odds.
Global supply chain restructuring
For many companies, the immediate challenge is rebuilding global supply chains derailed by the pandemic. This isn’t as easy as reconnecting with vendors and suppliers or relying on the same freight and transport providers. It can mean everything from renegotiating terms and conditions, to diversifying supply chains, to rebuilding them altogether through new prospecting operations.
Here, leadership is paramount because the implications are measurable. If a company can’t get the materials it needs or the logistics services it requires—or if it can’t find them at a reasonable rate—it effectively stalls the value stream. There are real implications for sales and revenue at stake. Supply chain executives need to act fast and with tact to ensure critical supply chains are functional and reliable.
A thought toward reshoring
Reshoring has been a headline topic in 2021 as companies look for ways to prevent similar supply chain disruptions from occurring again. The idea of bringing supply chains closer to home and exercising control over them is becoming appealing to more and more producers. The problem is, reshoring comes with heavy costs. Those companies seriously considering reshoring will need forward-looking leadership to see beyond the costs, at the potential for top-line growth and bottom-line savings.
To facilitate healthy reshoring, supply chain executives need a strategic plan that accounts for a complete shake-up of business. It’s not enough to find domestic suppliers or control more upstream channels. Executives will need to create a robust supply chain that accounts for higher reshoring costs, while affording companies more visibility and control over materials. More important, leaders will need to position their companies to be agile and flexible as they adapt to new a new domestic (or largely domestic) supply chain.
The pressing concern of inflation
Whether they choose to rebuild or re-shore, companies face the prospect of inflation. Materials shortages are rising, demand is growing and prices continue to rise. Companies unable to squeeze value from their supply chains will find themselves with lower margins—or the need to pass costs onto customers. In either case, it’s a clear sign of inflation.
To avoid the effects that come with inflation, supply chain executives need to have a clear mind for cost-conscious supply chain structuring. This is especially important for supply chain managers in tech-heavy manufacturing sectors, as well as those dealing with global distribution.
Take the semiconductor shortage, for example. Even when the shortage abates, companies will still face high competition for demand, which will ultimately keep prices high. Orchestrating more resilient supply chains can help companies build stock, cut costs and head-off demand to better-control costs. It’s not only semiconductors, either—virtually any raw material faces this prospect in 2021 and beyond.
Supply chain executives need to look beyond
Supply chain leaders face the arduous task of cleaning up a once-in-a-generation mess caused by the COVID-19 pandemic. As companies scramble to hire supply chain experts, these individuals need to understand the situation they’re walking into—and have a forward-looking mindset to address it.
- How were the company’s supply chain’s structure pre-pandemic?
- What chief disruptors have burdened these supply chains since the pandemic?
- Where are the rising costs present within the current supply chain?
- What is the total scope of the company’s supply and distribution efforts?
- Where are there opportunities to reduce or eliminate costs?
Understanding the current predicament lays a foundation for how to adapt and overcome the current and immanent struggles of supply chain remediation. Executives need to take this information to model solutions that involve either restructuring or reshoring, and to create solutions that are both agile and flexible.
The fact of the matter is that supply chain struggles aren’t something any company can solve overnight. However, installing seasoned leadership with a forward-looking approach means creating solutions that mitigate the aftershocks of COVID-19, to insulate companies against inflation and future Black Swan events.