What Are the Next Challenges Facing the Supply Chain?

In many ways, the COVD-19 pandemic was a catalyst for the current disruption in the supply chain. The virus certainly wasn’t the only trigger responsible for the chaos, but its impact has been enormous, affecting nearly every aspect of the flow of goods around the world.

As we enter the third year of the pandemic, we’re reflecting on the current and ongoing challenges we expect to see in the supply chain and addressing what solutions are in the works to help create a more stable trade network in the future. 

Ongoing Challenges

While the entire world hopes the pandemic is on the verge of easing up, the supply chain will continue to struggle in many ways. Even if the health crisis does disappear, much of the damage it has caused will continue to be an issue.

Many experts predict the backlogs, labor shortages, price surges, and material shortages will carry on through 2022 and beyond,

which spells out continued port congestion, shipment delays, and inflation that might be a long-term issue we are left to deal with rather than transitory and passing with the pandemic.  

COVID-19 Variants 

We have seen the effects that the Omicron variant has had on the supply chain since its recent emergence and viral spread. The food supply chain, in particular, has been affected, leaving many concerned about the impacts on potential rising food prices and inflation.

As more workers have been exposed to the variant, farms and factories have been unable to meet production, deliver shipments, inspect the food, or stock the shelves.

There is fear of further variants with more severe effects that could not only disrupt global trade but also cause a severe health crisis and any of the downstream effects an event like that may have.  

Climate Change

Just as the pandemic threw a wrench into the supply chain, climate change is expected to continue causing disruptions with unprecedented weather events like major hurricanes, tornados, floods, storms, droughts, and blizzards. Because of the unpredictable nature of the threat, climate change-related issues have the potential to cause several issues in an unprepared supply chain.

Critically inclement weather can destroy warehouses, close ports, and delay deliveries, while extreme temperatures can impact or ruin raw materials, crops, and supplies. 

This great threat will become an issue that world governments are forced to confront. As they continue to pass more environmental-driven legislation, we can expect stronger sanctions aimed at reducing greenhouse gasses. This will put increased pressure on companies to adapt to these climate initiatives, which could mean anything from increased operating costs to major changes in their production processes. The global shipping market is a perfect example of this. For years, regulating bodies such as the IMO (International Maritime Organization) have been passing regulations and guidelines of clean fuel, scrubbing technology, and operating practices. While adoption has been widespread, it has not been without opposition or incidents such as some engine failures on older ships adopting the new low-sulfur fuels.  

Supply Chain Solutions

Some experts foresee the supply chain chaos coming to a close this year, while others are not so optimistic. Regardless of the status of COVID-19, there will always be new challenges that the ever-increasingly connected world has to face. Companies need to take a multifaceted approach to help prevent and respond to arising issues yet to come.  

Mapping out Supply Chains

If there is one lesson that companies have learned, it is that they must expect the unexpected. The impact of the pandemic goes to show that there needs to be more visibility into every stage of the supply chain. Companies must know exactly where their supply is coming from (especially in the event of climate change) and what potential setbacks are along the production line or delivery route.

This means more collaboration and communication between manufacturers, suppliers, shippers, and third-party players. 

Moving Suppliers Closer to Home

A part of the solution involves finding suppliers closer to home to alleviate supplier issues overseas and reduce reliance on imports. When Kellogg’s recently faced supply shortages with their Korean supplier, they found a new supplier in neighboring New Zealand to accommodate their orders, thus avoiding an inventory crisis issue.

Kellogg’s quick thinking and ability to adapt led to the brand enjoying increased market share despite the raging pandemic. 

Investing in Technology

To further help foresee and respond to setbacks or breakdowns, many companies are beginning to rely more on data and technology. In some cases, that will mean investing in big data analytics and software. During the pandemic, the footwear brand Nike was one example of a company that came out on top after turning to technology to help ease supply chain issues. The company used radio-frequency identification (RFID) technology to identify and track its inventory to more easily and efficiently respond to consumer demand. 

Taking a Different Approach to Inventory Planning

What’s more, companies are also expected to reconsider their approach to inventory planning. In recent years,

Just-in-Time (JIT) manufacturing has become widespread, as companies have focused on reducing excess inventory, only fulfilling orders on an as-needed basis.

While this method is great for reducing costs and increasing efficiency, it leaves little room for responding to issues or pivoting during a crisis. When consumers slammed the supply chain with their e-commerce purchases during the onset of the pandemic, these companies were left scrambling to fulfill orders with limited inventory on hand. Post-pandemic we are likely to see the industry lean more towards keeping some excess inventory and materials on hand in a more Just-in-Case (JIC) hybrid approach, so they can respond to sudden demand surges.

Accepting Government Intervention

Finally, there is only so much these companies can do to respond and adapt to global challenges, and we have seen governments around the world step in to offer aid. The Biden administration for example has developed a “disruptors task force” to address some common pressing issues, specifically the back-up of goods and container congestion at California ports. The government is also promoting domestic manufacturing to reduce the reliance on imported goods. Furthermore, Congress’ latest infrastructure plan allocates funding to improve U.S. railways, ports, and roads. 

These solutions alone will not solve the supply chain issues overnight, but the more agile and adaptive companies can become, the easier it will be to respond to future challenges.