The supply chain crisis opens door to resilience
It is time to accumulate all the crisis period lessons and convert them into appropriate strategies, to make the supply chain more resilient and vibrant
The term 'supply chain' was not very popular in the industry, even back in 2019. After the Covid-19 outbreak, most businesses felt the need to reconsider the formation of a supply chain team. While this was already present in some companies, they further concentrated on forming a robust team. Other companies immediately hired or looked to hire professionals, which then created a shortage of potential resources in the market.
We are also now more focused on adopting current supply chain trends such as blockchain, AI and IoT in the supply chain, digital transformation etc. But we need a skilled workforce to operate and understand these technological features within our existing supply chain models. The enhancement of technical or digital features within the existing supply chain model surely requires the right person to do it.
Thousands of people lost their jobs due to Covid-19 and this has had a negative impact on their mindset with regard to joining another company. This dilemma is also creating a significant scarcity in the potential supply chain human resources.
It has been found that less than 3% of individuals with the right skills are entering the supply chain job market. In a survey conducted on 68 industry professionals, 47.1% of respondents claimed that problem-solving and analytical skills are the core competencies to handle any unpredictable situations like the Covid-19 pandemic.
Another unforeseen event, the Russia-Ukraine war, has also shaken the industry and taught us to be more resilient in the supply chain. While the world was preparing to minimise the impact of Covid-19, the sudden onset of the war pulled us backwards. Before Covid-19, companies were more focused on Just In Time techniques, but now it seems that building inventory at an optimal level is the best option to mitigate crisis time.
When the war started, import-export between countries was mostly hampered, as many countries depended on imported items like food, fuel etc. Before the war, there were shortages of containers for freight forwarders and the freight price was too high. Even at high prices, finding a container in due time was uncertain.
But when the war started, we faced the opposite scenario. There are containers but shipping lines could not operate on their regular route and had to stop shipping on that route.
The Covid-19 outbreak and the Russia-Ukraine war have kept the world in a vulnerable position. On one hand, for instance, it's encouraging us to store products, but at the same time, if not distributed or shipped, then there's a high chance that the inventory will become obsolete. The same goes with import-export. Customers accept the higher freight rate but containers are either in another port waiting for clearance, or the shipping lines stopped their services on that particular route.
Our common supply chain planning is no longer effective. We need to embrace the reverse shift from our actions as well. Moreover, the ''what if analysis'' is much more required nowadays. Forward planning is now much more dependent on the reverse shift or after the actions have taken place.
The word on everyone's lips these days is "Dollar Inflation". Inflation is having a ripple effect on the supply chain - wages, raw materials, energy or fuel, and transportation costs are increasing enormously. In response to this inflation, procurement managers are placing orders very promptly, in large quantities, resulting in a large inventory.
Up until 22 June 2022, the year-to-date increase in the producer price index (PPI), which measures the costs of goods' inputs, was 24%. Up until 22 June, producers charged 16.5% more for those goods. The cost of services has likewise expanded from 4.2% on 22 March to 5.4% in quarter two.
Time has come to sort out the supply chain by mapping critical points and being prepared to overcome any disruption that may occur in the future. To increase resilience, we need to identify the risks and risk mitigation plans have to be in place. Suppliers should be considered an integral part of the organisation, so continuous monitoring and a contingency plan should be in motion.
The world has survived many crisis periods like the recession of 2008 and Covid-19 in 2020, and it will definitely survive many more in the days to come. But now is high time to accumulate all the crisis period lessons and convert them into appropriate strategies, to make the supply chain more resilient and vibrant.
Md. Minhaz Rahman Chowdhury is a supply chain enthusiast and is currently working as a Manager of the Procurement section in the Tekken Corporation. Tekken Corporation is a Japanese construction company, working as one of the main contractors of the Dhaka Metro Rail project.
Disclaimer: The views and opinions expressed in this article are those of the author and do not necessarily reflect the opinions and views of The Business Standard.