4th February 2022
With suppliers and manufacturers from all industries currently encountering several supply chain challenges, the uncertainty and shortages are impacting our industry significantly including pressure on pricing, meeting increased demand for products and operational efficiencies. We have outlined some of the contributing symptoms of the current crisis and share an interesting report from Everstream Analytics which we think could be of interest.
Lack of Qualified Workers
One of the major symptoms impacting our industry is the lack of a fit and available workforce. As is the case with our our local and international logistics sector, our factories and facilities are too faced with continued labour shortages.
Businesses are being forced into either hiring of temporary workers or a to skill and equip existing employees to fill the void. Temporary hires may seem like the obvious answer, however there is unforeseen cost and risk attached to this option. HR teams and recruitment agencies may find qualified applicants who are compatible to open positions and successfully engage them into employment agreements. However, there is no guarantee that these workers will even turn up let along stay for any length of time.
Stock management is crucial to sustaining profitability and supply chain efficiency. Organisations strive to maintain optimum inventory levels to ensure desired customer delivery expectations whilst accruing minimum storage and logistic related costs. Companies are faced with the juggle of inventory requirements versus increased customer demands, delayed shipping schedules, and cost-related factors.
Achieving successful forecast and inventory outcomes is difficult enough without the current delays with the myriad of local and international situations. There are many implications to over or under forecasting in this climate, especially given the uncertainty of end user demand.
Shortage of Raw Materials
The inaccessibility of raw materials is an issue that many suppliers and manufacturers are experiencing as a result of the global supply chain crisis. When raw materials such as metals, glass, and of course food and ingredients become scarce, prices head north causing a tap on affect to the end user and consumer. Further pressure is placed on businesses managing demands and remaining competitive. Stockpiling seems the obvious answer, however not always feasible when it comes to perishables and managing cashflow and storage costs.
On the upside there is a strong movement and demand for local produce and product with suppliers being forced to look at alternatives to ensure they keep up with their supply.
Sea-freight freight bottlenecks
This one is a major issue for those that import and export goods. Unfortunately, the global sea-freight cargo sector is predicted to continue to endure port congestion and delays well into 2022 with record low-inventory levels being reported, robust consumer demand, and the evolving Covid-19 situation all impacting on logistic capabilities and workforces. Port workforce & Covid-19 eruptions will continue to impact operations, leading to the potential of interim closures of terminals or entire ports thus causing longer waiting times for vessels. The outcome of such occurrences will lead to an increased level of yard deployment and import volumes.
There are already reports of yard deployment in some large international ports operating at over 100 percent; 80 percent is considered full capacity. Consistent demand, coupled with heightened labour shortages, will continue place pressure on capacity and result in delays that we have been experiencing in recent times. Last year’s six-day Suez Canal blockage, which suspended vessel movement in one of the world’s most important waterways, is a prime example of how vulnerable we are to the current climate across the globe.
Global Water Shortage
In a recently released ‘2022 Annual Supply Chain Risk Report’ from Everstream Analytics, a leading supply chain risk analytics provider, worldwide water instability is outlined as one of the top 5 supply chain risks that global companies should prepare for in the next 12 months.
This threat is in 5 out of 11 global regions who now see water stress values above 25%, and includes two regions with high water stress and one with extreme water stress, according to the UN, two-thirds of the global population will face water shortages by 2025. This threat is escalating directly as a result of population growth, swift industrial and urban development, as well as an increase of extreme weather events such as drought and floods. Water instability will impact companies operating in water-abundant regions as interlinked supply chains expose companies to risk from drought-prone regions.
Even as there seems to be no end to the onslaught of the current supply chain crisis and pandemic shortages, companies around the world are pivoting to newer ways of mitigating risk in the post-pandemic world and using new technologies to make this transition to operating an uncertainty-filled world.
Regardless of the reason behind any supply chain issues, your team must remain innovative and nimble in order to mitigate risk, maintain sales and manage costs.