As freight delays, inconsistent production scheduling, and skyrocketing consumer goods prices continue into the third year of COVID, it is clear that time alone will not fix our global supply chain climate. The supply chain outlook for the remainder of 2022 is an open question. So far, businesses are still grappling with a wide array of supply chain challenges.
This blog evaluates key industries forecasting supply chain impacts for 2022 and offers recommendations to navigate continued supply chain hairballs.
Appliances, Tesla, and Amazon Supply Chain Outlook – 2022 and Beyond
Leading home and industrial appliance manufacturer whirlpool announced that appliances are likely to remain hard to get in 2022 as COVID supply chain issues are persistent.[1] “Washing machines, refrigerators and other appliances are likely to remain hard to get this year as Covid-19 infections continue to fuel supply chain problems”.[2]
Over the past couple years, some appliance distributors have explored dual sourcing and near shoring strategies. Ultimately, most appliance companies make these products in China and greater Asia. The Olympics and Chinese New Year recently concluded and were already causing delays. Adding to the chaos are ongoing waves of new COVID variants. Most recently Omicron is hitting China particularly hard and the government is reacting with stringent lock downs and measures. China is reporting higher mortality rates than Western nations and opening of full capacity factories should continue to lag. Material costs and availability challenges coupled with cluttered ports are adding to the negative supply chain outlook.
Tesla reported increased profit and demand for their electric cars but also highlighted challenges in meeting demand with computer-chip shortages. Relative to other electronic car manufacturers, Tesla has weathered the supply chain crisis quite well. Musk’s team took drastic and immediate action by building a vertical supply chain and taking control of some production domestically. While this is the case, the general availability of chips will continue to impact their business. Tesla and other electronic vehicle manufacturers rely on Asian nations for most chips.
Reportedly, Amazon has spent more than $164 million to construct new warehouses in 2021 to meet the increasing demands.[3] Irrespective of business size, process owners have realized the importance of digitizing supply chains to make data-driven decisions.
Steps Towards Achieving a Resilient Supply Chain – Evaluate Internal Operating Procedures
As per Peter Drucker’s old saying goes, “You can’t manage what you don’t measure”.[4] Evaluate if you have the necessary information to make informed decisions. Central visibility across supply chain operations like product development, purchase orders, and shipping, is challenging. Having this helps in identifying key challenges and making data based informed decisions. Learn how GRID helps in efficiently managing processes across Product Development and Purchase Order Management. The negative supply chain outlook for 2022 does not need to be a reality for your business.
Reevaluate the Tech Stack
AI and machine learning are going to be a huge value add in 2022. These algorithms use volumes of IoT and social media data from people, devices, processes across the supply chain to automate decisions and processes. The focus for supply chain technology should be to escape away from using siloed systems that do not provide a single source of truth. The essential characteristics to look out for while evaluating supply chain tools are below:
Purchase Order Exceptions Management
There are certainly dozens of purchase order management solutions available in the market. What matters the most are the feature sets embedded within these applications to ensure compliance and visibility across the purchase order processes. As purchase orders are shared with vendors, there are multiple data points that need to be updated based on requests triggered by vendors. The vendors could potentially propose changes to pricing, ship dates, quantities, etc. It is essential for brands to not only track and manage these change requests but also approve/reject these updates to ensure PO compliance.
Reason Code Management
As vendors and internal teams update purchase orders or product development data points, it is essential for project participants to record the appropriate reason for the change. PO compliance is an integral aspect of purchase order management and it is vital to ensure every change request triggers a reason code. Reason code management allows brands to ensure tracking of pain points across supply chain operations. Brands track these key data points to recognize patterns for potential lags in the supply chain operations. This provides brands the ability to implement strategies to streamline their operations and address key issues causing delays in production and or product development lifecycles.
Delivery Schedule Management
As purchase orders are issued to vendors, there are certain key documents that are part of the purchase order package that are handed off to the vendors. One of the key documents is the packing list. A packing list allows brands to propose a tentative delivery schedule to vendors while issuing them a purchase order. Delivery schedule management provides brands an opportunity to split PO items into multiple deliveries based on the vendor’s capacity. Vendors review these delivery schedules, propose changes and achieve alignment with brands in terms of delivery schedules.
Communication and Collaboration
Brands claim that vendor errors and exceptions across the procurement processes are a result of lost communication across email threads. The line level and global communication capabilities across supply chain components like purchase orders, costing, shipments, and invoicing allow Production Managers to drive alignment across both suppliers and customers. Centralizing communication helps in ensuring that communication is not lost in email threads.
“Do not wait; the time will never be ‘’just right.” Start where you stand, and work with whatever tools you may have at your command, and better tools will be found as you go along.
The first step is often the hardest, for after that we have forward momentum. To help you take the first step in the supply chain digitization journey, get connected with the GRID team to help you make the right decision.
[1] https://www.wsj.com/articles/whirlpool-says-omicron-will-keep-appliances-in-short-supply-11643236131
[2] https://www.wsj.com/articles/whirlpool-says-omicron-will-keep-appliances-in-short-supply-11643236131
[3] https://www.nytimes.com/2022/02/01/business/supply-chain-disruption.html
[4] https://hbr.org/2012/10/big-data-the-management-revolution
