Disruptions from every angle the last two years have left some global supply chains in shambles, and others looking like the stars of the show. Most companies are somewhere between these two extremes, somewhat satisfied with how their supply chains performed, but ready to make changes for the new year.
Companies continue to grapple with higher e-commerce order volumes, an uncertain global tariff environment, and stiff competition for both labor and warehousing space. To overcome these issues, supply chain managers more carefully pondered how their people, processes, and technology converged to create effective supply chain networks.
In certain cases, companies were forced to tear down the walls of their current networks and develop alternative approaches that they wouldn’t have considered just three years ago. Immediate reactions included reshoring manufacturing operations to the United States, seeking new, non-Chinese sources of supply, transforming physical stores into full-blown delivery hubs and investing in more technology and automation.
With all eyes on supply chains, companies are retracing the steps they took the last two years, searching for more enduring ways to shore up their operation with a longer-term view in mind.
Facing the forces of change
Companies are holding their breath, waiting to see the affects the new U.S. infrastructure bill, how long material shortages will persist, when port congestion on the west coast will clear up, and where the next disruption will come from. Everyone is paying attention, knowing that these overarching factors will affect their supply chain design strategies in 2022.
Here are three more forces of change that are affecting supply chain design and prompting organizations to rethink how they run their global supply chains.
Balancing cost, service and profitability
After experiencing the 10-year period of economic expansion following the Great Recession, many companies were thrown into a tailspin when the global pandemic emerged during the first quarter of 2020. And, while an economic downturn was in the cards anyway, based on the cyclical nature of the economy, few would have predicted the swift and merciless impacts of a pandemic. To adapt, many organizations revamped their delivery operations to focus on customers who began working, shopping and teaching their children from home overnight. Demand for essential goods went through the roof, leaving companies scrambling to shore up their upstream supply chain operations. Through it all, organizations got a quick lesson in how to balance cost, service and profitability in a challenging environment. Carrying those lessons learned into the next five years, companies also realize that there are a lot of tradeoffs when you’re working in a dynamic, uncertain operating environment.
In response, some companies are converting a portion of their physical store space into micro-fulfillment operations dedicated to buy online/pickup in-store (BOPUS). Others are picking up now-empty retail space and using it to get their fulfillment operations closer to the end customers. Finally, this trend is being sped up by the deployment of more flexible solutions, robotics, and AMRs at the fulfillment level.
Leveraging advanced tech to improve resilience
The volatility and shifts in consumer behavior as the global pandemic emerged and took hold made predicting demand almost impossible. As panic-buying ensued, forecasting errors spiked to levels almost 45% higher than their pre-pandemic baselines. Things leveled out about halfway through the initial response phase to create a “new normal” that was nearly 30% higher than the pre-pandemic error levels.
By combining that now-historical data (that companies previously lacked) with artificial intelligence (AI), companies can design their supply chains to withstand future shocks and disruptions, all in the name of creating more resilient networks.
Preparing for more macro and micro shifts
Any company that didn’t already put its customers at the center of every supply chain decision found itself in a real predicament in 2020. Now, more companies are redesigning their supply chains with their customers front-and-center, knowing that both B2C and B2B buyers have the upper hand for vendor selection, cost, and shipping preferences.
To compete effectively, supply chain managers have to ask themselves questions like: What are our customers’ expectations? How does our supply chain measure up based on those expectations? And, what actions can we take or what trade-offs can we make to improve upon that? Involve the C-Suite in these discussions, and then use the input to make excellent investments in technology, processes and people.