Don’t Let Supply Chain Issues Affect Your Business
Supply Chain Issues have become a big issue over the past few years. Everything is becoming more expensive, and the cost is being borne by the entire supply chain. Delays are already expected this holiday season, but what can you do to help meet customer demands while keeping costs low?
Everyone is feeling the effects of the current Supply Chain Issues, and the subject has become commonplace. It’s no longer just a lack of bathroom tissue. It’s a lack of everything, from a loaf of bread to big-ticket items like a new car or roof for your house. Nothing is forbidden… Or is it?
The supply chain is currently stressed. We all know this. However, while all roads seem to lead back to the pandemic, there are a variety of reasons how and why we got here. There are ways to get out of this mess. If not in time for the holidays, then certainly in time to make a difference in the future.
Demand Is High
Demand is higher than supply. Supply chains were strained at the start of the pandemic because manufacturing plants were closing down. Today, while manufacturing remains important, the greatest strain on supply chains is simply demand being much higher than the supply. Consumer demand, combined with monetary assistance via stimulus packages, as well as increased savings for many households, has pushed supply chains to the breaking point. With the onset of the pandemic, purchasing behavior changed. Many households have gone to online shopping. This includes just about everything from homeware basics and food to larger appliances and electronics. In addition, an economic rebound fueled by vaccine rollouts and relaxed COVID-19 restrictions, resulted in many businesses trying to maintain pace in meeting consumer demand. The ultimate result has proven disastrous. The supply chain that supported 2019 and was strained in 2020-21, is still having difficulties supporting 2022.
The result has caused production disruption across industries and around the world.
Production Is Low
Production has been tremendously disrupted. Manufacturing output has not been able to provide enough components that go into finished consumer goods. Vehicle production has stalled due to a shortage of semiconductors and chips. These are overwhelmingly produced in China with many other car parts. Without the necessary components, factories in the United States have delayed production. Many have even shut down operations until production levels can meet demand.
As a resort of Supply Chain Issues, many consumer goods have been offshored, leaving us overly reliant on foreign factories. While COVID-19 restrictions have been relaxed in some parts of the world, this is not the case in others. Southeast Asia has had to close factories or reduce capacity. Goods cannot be produced at the rate required to meet demand in the United States. The imbalance between highly vaccinated segments of the world purchasing goods from highly unvaccinated segments of the world contributes to the bottleneck and rising raw material costs.
Costs Are On The Rise
Transportation costs have increased tremendously. Fuel prices have risen, making it more expensive to transport goods by road, sea, or air. Aside from fuel, other factors are driving up shipping costs. Containers, for example, were not being shipped at the start of the pandemic because most manufacturing plants around the world had been shut down. When exports from other countries resumed, the containers were not where they needed to be, resulting in a shortage and the construction of new containers. All of this came at a steep price, which is now being felt around the world. Nearly 80% of the world’s trade is done via ocean freight, and the cost has risen from an average of $2,000 to nearly $14,000 for the same container (600%) compared to a couple of years ago.
When transportation costs eat into product margins, decisions must be made whether to pass the cost on to consumers or to halt production and shipment of those products entirely. This results in major supply chain issues throughout all industries.
Ports Are At Capacity
Traffic flow impediments have affected shipping ports around the world. Businesses that can find and purchase containers are now confronted with a new issue: Containers that are stuck at port. Waiting times before ships can dock have reached up to a month in some cases. Because ships can’t be unloaded, there aren’t enough empty containers in transit to carry the extra goods consumers are purchasing, which brings us back to the previous issue of transportation costs. It all exacerbates the issue of being able to deliver goods to businesses and consumers on time and when they are desperately needed.
The problem appears to stem from a few factors… Increased demand meaning more ships are arriving at ports, which are already at capacity and have no room to unload containers. In addition, there has developed a severe labor shortage ranging from those who work at the ports to those who need to transport goods from the ports.
Labor Is Hard To Attain
There are labor shortages everywhere. It’s not just at the port. There’s a labor shortage throughout the supply chain, including manufacturing, warehousing, transportation, and retail. There is an estimated 80,000 truck driver shortage in the United States, which is impeding both regional and local deliveries of goods to manufacturing plants, as well as retailers and direct to consumer from online purchases.
According to labor statistics, there will be twice as many job openings in the manufacturing and warehousing sectors this year. There are reports indicating that 4.3 million people quit their jobs in August 2021, the most since records began in December 2000. Labor shortages have an immediate impact on our daily lives, but they also have a direct impact on the other supply chain issues which include pent-up demand, delayed production, higher costs, and shipping traffic jams.
It’s easy to get bogged down in a crisis when it affects every aspect of your business. However, with a broader view of supply chain data and a better understanding of overall operations, it is easier to identify and address root problems and plan for more agile supply chain operations. Here are some suggestions so that the data you already have can help you make better decisions for your business and customers.
Inventory Control Via Data Management
It is difficult to optimize the level at which supply meets demand. Analytics eliminates gut instincts and depends on data to make informed decisions. It ensures your levels of on-hand inventory meet consumer demand.
Inefficient warehouse operations that falls short, contributes to workforce under or overutilization. Analytics provides full view visibility for better workforce management, inventory control and overall improved warehouse processes.
Transportation Best Practices
Tracking the movement of your product is complicated, especially when working with third-party logistics. Analytics provide visibility into your goods’ movement and can lead to cost-effective route optimization opportunities.
General Condition of Your Supply Chain
The supply chain is a network of linked business processes. A failure in one can have a domino effect on another. Analytics can combine inventory management, warehouse processes, and transportation into a unified view to evaluate critical lapses in one and better performance in another.
It’s easy to become overwhelmed in a crisis, especially when it affects every aspect of your business. However, with a broader view of supply chain data and a better understanding of overall operations, it is easier to identify and address root problems and plan for more agile supply chain operations. Keep the basics up front… Inventory Management, Warehouse Processes, Transportation Administration and Supply Chain Condition, so the data you already have can help you make better decisions for your business and customers.
We Are Your Partner
Customer Equipment Company, empathizes with any supply chain issues you may be experiencing. When using us as a supplier, please work closely with your CEC Customer Representative, to make certain your order is fulfilled in an expedient and efficient manner.
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