Well, it’s official. It’s now crucial to the survival and success of your organization that you take that long-discussed step toward advanced supply chain planning optimization.
Let’s face it, the handwriting was on the wall prior to the pandemic. Twenty months later, that writing has chiseled itself into a stone that threatens to fall and flatten us. For example, Moody's Analytics is now warning that supply chain disruptions "will get worse before they get better. As the global economic recovery continues to gather steam…it will be stymied by supply-chain disruptions that are showing up at every corner.” Moody’s considers this situation a “perfect storm” where the lack of a "concerted global effort to ensure smooth operation" hampers global production, logistics and transportation.
Labor shortages and logistics jams are everywhere. Transportation analysts say turnover at large trucking companies reached 90% in the fourth quarter of 2020. Driver shortages and other factors have left shipping containers piling up on docks, with each incoming ship bringing 10,000 to 21,000 more. The ports of Los Angeles and Long Beach are instigating an unprecedented regime of round-the-clock operations to deal with the bottleneck of ships waiting offshore. For some vessels there, the wait time has equaled the transit time from Asian ports.
So, it’s dark days right now, especially for companies that run with minimal inventories and rely on “just in time” replenishment. Their pain has triggered a preemptive overordering response and multiple orders for the same products from different factories, further exacerbating the strain on the system.
Over the long haul, our current trials will ultimately make us stronger. The Covid cloud will have a silver lining. CNBC reports optimism from JPMorgan Chase CEO Jamie Dimon, who offers: "This [supply chain shortfall] will not be an issue next year [2022] at all. This is the worst part of it. I think great market systems will adjust for it like companies have." If this is so, perhaps we are facing an opportunity for supply chain transformation. An opportunity right in front of us, ready to be seized.
If you haven’t embarked on the optimization journey yet, take heart. You’re not alone. Many published surveys show companies across industries are stuck in an ad-hoc, reactive stance that prevents them from responding efficiently to rapidly changing conditions. This isn’t surprising when you look at just how many are trying to build a resilient supply chain on the back of spreadsheets. Spreadsheets only exacerbate issues with stock outs, inability to handle demand volatility, and service levels. A familiar litany given new urgency by current conditions. It’s clearer than ever that rules of thumb and gut-level instincts supported by ad hoc tools simply don’t cut it given the staggering levels of volatility and uncertainty in our labor markets and logistical networks.
