We hope we don't get labeled as curmudgeons as a result of this post. We are trying to see the positives and negatives of the ongoing supply chain crises facing the world. Supply chains have not been top of mind for anybody(but supply chain professionals) for years. Now it's top of mind for most everyone and will remain that way for a long time. And, truthfully, we hope we are wrong about the depth and length of the problems but we don't think so...
We know it's coming. Manufacturing problems in Asia, too few containers & ships, overcrowded ports, lack of landside freight capacity in the US, Asia & Europe among other factors point to a further supply chain meltdown over the next three months.
There's not much many of us can do about the continuing problems with supply chains. And it's not just one issue, it's many that are simultaneously interacting to produce the current crisis. If you are a huge global shipper like Ikea, you can charter container ships to move your boxes, but good luck getting them unloaded and transported inland with any decent transit times. For everyone else, you better buy holiday gifts early, if you even find any now.
Let's focus on a few upsides first.
From an infrastructure perspective, the current problems in global supply chains will put a fine focus on an area that has historically suffered from underinvestment, both in infrastructure and in technology. Expect to see governments ( we are thinking about you, Egypt, who should have widened the Suez Canal decades ago), European countries who need to expand rail capacity for inland freight (the roads are already overloaded), Asia to build out landside transportation from plants to ports and North America (just about all freight infrastructure upgrades are past due, also by decades). Will governments and private companies step up to the challenge? We'll see. We are not holding our breath. We are already seeing missives from the freight PR lobby that the supply chain crisis is due to over-ordering/buying by companies and consumers, not because carriers, ports, et.al. don't have enough capacity. There's some truth in this argument, but the word 'some' is operative.
From a technology perspective, many carriers, shippers, ports, and affiliated players (forwarders, etc.) are on a supply chain technology buying binge. It remains to be seen how much of this technology will positively contribute to reducing backlogs in supply chain operations, but it's better than doing nothing. Why are we skeptical of these technologies as a solution? Often, these new technologies will focus on optimizing a single supply chain player's operations, not across the complex global supply chains that they participate in. There are definitely supply chain technology solutions that begin to optimize operations across multiple segments of the supply chain, but their adoption is the exception rather than the rule.
How about the downsides?
It's not going to get any better for global supply chains any time soon. Why? it's not just a few problems it's many and some, like COVID Delta (and newly emerging viruses), are outside the control of supply chain professionals. It will take years to restore any semblance of normalcy in supply chains as many of these current issues cannot be attacked simultaneously--we can build a lot more containers really fast, but it will take years to launch new container ships to move them.
Consumers will discover the wonderful world of substitute products. Whole Foods and other supermarkets have bare shelves in every aisle, different ones every week. Even Amazon can't figure out how to correct supply chain problems. When's the last time you actually got an Amazon Prime order in two days? One of ours came today (Reid Hoffman's new book, Masters of Scale--highly recommended), the first one in months...and the last for a while, looking at estimated delivery dates on other orders. No Ritz crackers or Oreos for months? Mondelez workers are on extended strike, another twist to supply chain problems. Late July has some good substitutes, but their shelves are now empty as well from substitute buying.
Companies will have to pare SKUs, increase prices and improve inventory positioning. We have lived through an era where SKU proliferation has created much more supply chain complexity, stuffing supply chains with 'new' products, ones that have minimal tweaks to the existing products but creating more stuff to move through the supply chain. We have also lived through a time when distribution center consolidation has led to fewer inventories sources nearer consumers. The growth of omnichannel shipping and next-day/same-day deliveries has companies scrambling to rent/build more warehouses closer to prime markets. It's going to be expensive for companies to make these transitions, require new facilities and technology, and keep the CFO up at night deciding how to pay for it all. And oh, by the way, product prices will be going up to pay for it all.
So what's the average consumer to do in this wonderful world of supply chain crises? Grin and bear it? That's the reality for most. It's hard to find other supply chains to replace the ones that feed, cloth, and provide us with all the other products in our lives. Being creative in shopping is another approach. Wise supply chain gurus have always told us that Walmart is the least shorted of all the major chains, so showing up at 7 AM at a Walmart store near you may yield some of the products missing from your other retailers. Finally, it may be time to actually look at ways to reduce our overconsumption and do more with less product. Not an answer a lot of consumers want to hear, but when the shelf is bare, the shelf is bare.
Looking forward to an interesting holiday season...
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