For the past few decades, companies have been creating complex international supply chains designed for cost and efficiency. Unfortunately, supply chains we’re not built to fully withstand a disruption as massive as a global pandemic.
While the effects of the pandemic have started to fade in some areas of the supply chain industry, the Russia-Ukraine conflict has been sending shockwaves through global supply chains, particularly those chains related to mining, metals, chemicals and technology. Significantly disrupted by COVID-19, the supply chain for the tech sector is still in the process of recovering from the pandemic. An industry-wide chip shortage is still ongoing and COVID-19 lockdowns in China this year have exacerbated the situation.
Short-Term Relief Looks to Be on the Way
Expanding shipping capacity and decreasing demand should provide some short-term relief to supply chains.
It does appear that trucking capacity in the US has increased, and reduced restrictions related to the pandemic appear to be helping. According to a report from JPMorgan Chase, shipping capacity will also expand through 2024. Greater air freight capacity will expand as a result of more commercial airline flights.
Meanwhile, inventory recovery in major importing companies is helping on the demand side. Consumers are also expected to shift more of their spending back to services, decreasing the demand for products. Rising inflation will also likely force a drop in demand for imports.
Mitigating Future Disruptions with Transparency
Companies looking “learn their lesson” from COVID-19 and mitigate future disruptions to their supply chain should avoid getting into the business of making predictions. Rather than making prognostications about the next pandemic, cyberattack, or hurricane — companies ought to be analyzing the vulnerabilities in their supply chain, and this analysis can be much easier with greater transparency.
One of the biggest shortcomings in today’s supply chain is an inability to grasp the full scope of a company’s vulnerabilities. Companies know who their direct suppliers are, but they may not know from whom those suppliers get their materials. For example, a company’s second-tier supplier might be supplying materials to half of the company’s first-tier suppliers, and if something happens to that second-tier supplier, it can have devastating knock-on effects.
Risk analyses of a company’s supply chain often focus on areas where a company is single-sourced or where it relies on suppliers that are financially fragile. While those are legitimate risk factors, experts are saying a greater focus should be placed on vulnerabilities related to a lack of data.
Understandably, some supply chain entities may be reluctant to be completely open about their operations, but greater transparency can be a win-win situation. When all of the organizations in a supply chain are transparent about who their suppliers are, it makes the overall chain more resilient and allows stakeholders to effectively address vulnerabilities. Greater transparency also gives companies the chance to regularly reevaluate the structure of their supply network.
Protect Your Company Against Future Disruptions
At ZDA, we’re helping our clients guard against future disruptions by assisting with talent acquisition; making their process more flexible and efficient. If you would like to know how we can help your company, please reach out to us today.