Intro:
As SVP of Operations and Global Sourcing at Suuchi Inc, it is my team’s job to navigate supply chain delays and ensure successful production outcomes for our customers. We manage both a supply chain operations software platform and a digital sourcing network of hundreds suppliers. Our team operates on the front lines and has a unique lens into real time supply chain delays.
“Global supply chains are complex, and so is the story of how they’ve been disrupted. Often spanning several continents, we rely on these networks to supply goods and services across the world.”[1] When supply chain delays are prevalent, the effects reverberate across many industries and geos.
Professor Edward Anderson, Professor of Analytics and Operations Management at Imperial College Business School, said: “We have become so used to global supply chains that we barely think about them. But almost every product we consume arrives on our doorstep courtesy of a global network of firms each feeding their components into the finished product. And it is when things go wrong that we sit up and take notice.”[2]
Cause & Effects Of Supply Chain Delays:
We continue to face a significant shortage of raw materials such as computer chips, fibers, and construction materials. Material costs are also climbing fast. Cotton, for example, is at an 11 year price/lb high. The rapid spread of new COVID variants keeps slowing both production and transportation of raw materials and finished products. With material and logistics pricing and availability constantly evolving, This has been devastating for many companies.
Supply Chain Delays Reverberate Down The Value Chain:
Because of raw material shortages and capacity constraints, production lead times for most consumer products have increased drastically (by several months in some cases). This coupled with all the transportation delays and increased cost of moving goods across the globe, it has created a perfect storm for disruptions and price increases on all consumer products.
How This Impacts Business Growth:
The inability of many companies to accurately forecast cost and production output is hurting their ability to focus on growth because they currently must concentrate on ways to survive instead of focusing on growth and expansion.
What Supply Chain Delays Are Forecasted For The Future:
Many scholars feel that the current supply chain crisis will further pressure companies to bring production closer to home. In most cases, businesses are moving production from low-cost countries to high-cost countries, resulting in pressure to innovate. For example, developing fabric in country for duty savings, digitizing processes, and diversifying production across many factories based on cost. Consumers are also willing to pay a premium for sustainably produced goods. Although COGS may increase slightly, sustainable production will be in higher demand.
Have We Learned Anything?
Looking at sourcing from the cheapest place across the globe will always increase risk – both through longer transportation timelines and increased concentration of production, but most companies are still willing to take the chance. We can never eliminate risk, but we can learn to better manage and mitigate those risks.
What Is The New Normal Going To Look Like?
We must redefine our approach to Supply chain management with strong focus on sustainability, diversity, efficiency, and transparency. By learning to better understand and manage the data provided by our processes and challenges we can improve our understanding of how supply chains work and what we can do to avoid major disruptions in the future.
[1] https://www.imperial.ac.uk/stories/global-supply-chain-crisis/
[2] https://www.imperial.ac.uk/stories/global-supply-chain-crisis/
