High prices and empty shelves, but why?

Grocery shoppers are paying more for their favourite foods.  Assembly factories are waiting for comp...

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Posted by Dave Food on Dec 2, 2021 3:55:24 PM
Dave Food

Grocery shoppers are paying more for their favourite foods.  Assembly factories are waiting for components. Car prices are sky-high, trucking companies are struggling to recruit new drivers, the lowest record on inventories in the Chemical industry and all health sectors depending on this industry. To add to all this, it is the time in which everyone is worried about gifts arriving in time for the holidays. At the same time, inflation is currently climbing to 6% whilst retail shelves are practically empty.

What is slowing SC down?

When we talk about SC, it relates to the company operations and networks needed to manufacture goods and deliver them to the final consumers.  The SC links encompass manufacturing components, the labour force, and the transportation of goods across borders and oceans. 

There were SC previous issues before the COVID, so leaders say it could take months to work through the bottlenecks aggravated by labour shortages and other SC related disruptions. The effects from everyday shopping, home remodelling, holiday shopping, travelling on holidays in the last months of the year are even putting much stress.

The global SC is constrained for many reasons; however, leaders mentioned the ongoing pandemic as the primary driver. In 2020, the crisis shut down factories, displaced workers and debilitated production globally, disrupting the supply of essential goods, causing the consumer’s demand for multiple products to fall, thriving economies worldwide into a deep recession.

The long period of staying at home caused people to have little cash due to the working conditions at their workplaces; they are currently eager to buy more products to upgrade their living circumstances.  But as demand continues to boom, SCs are still encountering challenges to overcome the pandemic. 

Businesses and consumers are suffering the pressure on global Supply Chains whilst the global economy finds the way out, not to the latest but the third and fourth pandemic waves.  Experts state that the long-existing SC problems worsened during the pandemic. Years of narrow-minded leaders prioritised the cheap production of products over SC resiliency, giving rise to a long-string dependent SC.

While we will recover quickly in retail (moving from inventory shortages to a surplus), the Chemical industry will take longer to recover sitting back in the SC. The value chain that sustains all industries is fed up, demanding an urgent leadership change. 

Chinese, Middle East, Korean, Danish and French, Korean interests control shippers. Factories remain constrained in Asia, making transportation and logistics more overpriced. Additionally, global warming is causing more disruptions from natural disasters; the shortage of critical raw materials such as rubber, lumber and steel, and capital infrastructure outdated; semiconductors and shipping containers pile up at ports. 

To make things even worse, the lack of essential workers, including skilled port workers, truck drivers and rail crew, leading to delays, retirements and the CORONAVIRUS Delta variant, all resulted in significant disruptions.  So, there is no room to handle with the haste of demand.

The worldwide economy demands a fast coming back, starting with the immediate vaccination covering for all citizens to avoid the virus dispersing its severe mutations, the higher commitment of governments, and changes in spending habits. The fast rebound in demand has left processing plants, manufacturers and businesses struggling to keep up.

Another big problem is that countries worldwide have fallen out of synchronising when responding to the pandemic.  Every government decides on protocols such as lockdowns, closing or opening up frontiers, flights and other restrictions.  Experts state the long-existing SC problems worsened during the pandemic because of years of narrow-minded leaders prioritising the cheap production of products over SC resiliency, raising a long-string dependent SC.

Unfortunately, in many countries, the access to vaccination is not stabilised (e.g. Vietnam.) factories in China are now overflowed with orders, whilst others have a surplus of products for months. Those countries assemble many products there.

 “Over the last decade, SCs have become more functional and less effective. The gaps among business leaders grew. Especially significant are the gaps between Finance and operations, manufacturing and Procurement, and the operations and commercial teams. We are to blame.”  Lora Cecere  

What should we do?

-        Design your Value Chain. Establish financial strategy teams to enhance capabilities in-network, design tools and build up a Supply Chain Planning master database.  

-        Invest in enterprise solutions to build value networks capabilities; reach out to Supply Chain Operating Network suppliers to begin building a bi-directional SC.

-        Understand the latency and distortion of the current demand planning programs. Use Data Scientists and different cloud-based solutions; ask for a renovation of existing approaches to building outside-in capabilities.  

Use the market indicator to create exception management. Align the budget and forecast, and explain the role of everyone in this unpredictable world.

-         Build robust SC sourcing development practicesHave active supplier development groups to reinforce SC relationships.  Keep responsible for sharing spotless and accurate data with minimum latency. 

-        Re-design Metrics systems and openly describe SC efficiency in unpredictable environmentsline up your company on a balanced growth, customer service, margin, inventory turns and Return on Invested (RoI) capital.

Conclusions: people must understand that SC issues did not happen suddenly and that we are not isolated economies but global ones. SC leaders must realise that SC transformation is imperative.

What are you doing to align all areas in the company and transform your Supply Chain?

Prophetic Technology

 

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