Global Supply chain disruptions and supply shortages are expected to persist through the remainder of 2022, with forecasts saying they may persist into the following year — even as global economies see substantial recovery and consumer demands for the speedy delivery of goods and services continue to rise.
But what exactly are supply chain disruptions? What impacts do they have on businesses, and what can companies do to avoid supply chain challenges in an increasingly digital and interconnected world?
What are Supply Chain Disruptions?
Supply chain disruptions happen when “links” in the supply chain are strained or broken. These links include everything from manufacturers and distributors to logistics and freight-forwarding companies — in short, any business that handles or interacts with products on their journey from creation to customer.
Strained links are most common in supply networks, and often happen when a particular supplier runs into material challenges or logistics providers face delays in moving goods from point A to point B. In this case, disruptions are frustrating but not fundamental. Goods will still get where they’re going but will take longer than expected.
Broken links, meanwhile, have become the hallmarks of a pandemic-weary world over the last two years. Starting in 2020, many previously-stable supply chains were put under extreme pressure as nations implemented both operational and staffing restrictions to reduce the total risk of coronavirus outbreaks. The result? Many supply chains snapped under the weight of lockdowns and closures, leaving companies scrambling to find alternatives. For companies able to navigate the changing landscape, the message was clear: Multi-faceted supply chains are now critical for sustained success.
The Effects of Supply Chain Disruptions
When supply chain disruptions occur, what’s the result? The answer depends on the severity of the disruption. Three broad categories help frame this disruption discussion:
- Mild
Mild disruptions are characterized by short-term issues that have an identifiable resolution and cause minor delays. They might include logistics issues tied to fleet maintenance, production problems due to process or software updates, or challenges with sourcing raw materials.
- Moderate
Moderate disruptions can lead to weeks or months’ worth of delays. They may be caused by problems at the manufacturing source — such as specialized machinery failures that require hard-to-find parts or serious injuries that demand long-term shutdowns and reports — or may stem from component concerns around sourcing and transporting goods to manufacturing facilities for production.
- Massive
Massive disruptions have long-term impacts on the ability of organizations to meet supply obligations and ensure consistent operations. Consider the ongoing semiconductor shortage, which has created an ongoing supply chain crisis that shows no signs of ending. These disruptions often require companies to find new supplier sources or create entirely new supply chain frameworks from the ground up.
Examples of Supply Chain Disruptions
Supply chain disruptions can take many forms. The common thread? These bottlenecks make it difficult (or impossible) for businesses to ensure products reach their intended destination on time.
Let’s start with one of the biggest disruptions in 2021: The Ever Given. In March 2021, the massive container ship carrying $1 billion worth of cargo entered the narrow Suez Canal. While the canal provides a three-week shortcut for vessels, it’s also narrow and subject to strong winds. In the case of the Ever Given, winds off the Egyptian desert reached 40 miles per hour, pushing hard against the side of the ship and causing it to veer off course. Despite best efforts, it became wedged in the canal for six days, causing massive disruptions and billions in cargo lost or delayed.
Milder supply chain disruptions include a lack of staff at manufacturing and logistics facilities as Covid outbreaks continue to occur. Even with substantive safety precautions, it’s impossible to eliminate all risks, meaning companies can experience supply slowdowns with little to no warning. The results could be anything from a few days to a few weeks’ worths of delays, which could in turn have significant impacts on the bottom line. Consider the abrupt disruption in toilet paper supply at the beginning of the pandemic. While the issue was resolved relatively quickly, it came with a global impact.
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Moderate issues, meanwhile, continue to persist in the form of port congestion. As noted by S&P Global, as of November 2021, 11.5 percent of global operational capacity was unavailable, in part due to ongoing congestion and delays at major ports worldwide, such as the port of Los Angeles in the United States and Shanghai Port in China. Pre-pandemic, just 2 percent of operational capacity was typically unavailable, but continued challenges with evolving import regulations, staff absences, and the increasing use of ultra-large container ships have conspired to put ports under pressure.
Effectively Managing Supply Chain Disruptions
So how do companies effectively manage supply chain issues?
It starts with a supply chain audit — a detailed examination of your supply chain operations to identify current challenges and eliminate potential vulnerabilities. For example, if audits reveal issues with a partner in terms of price or performance, companies can take steps to reduce their reliance on this specific supplier and instead opt for supply chain leaders in the same space. In practice, regular audits help companies see the big picture across their supply chain to help drive increased visibility and supply chain resilience and sustainability from end to end.
Next is a supply chain assessment, which leverages purpose-built solutions to assess the current health of your supply chain in real time and identify areas for improvement in both supply and demand. From in-depth protocol checklists to supplier self-assessments and technical reviews, the right supply chain software can help pinpoint potential problems before they become big issues. Also worth noting? Regular assessments and audits play a critical role in compliance — to ensure regulatory obligations are met, it’s essential to understand your supply chain from start to finish.
The result is improved supply chain risk management that helps businesses better understand where supply chains are solid, where they’re struggling and where they need a new approach.
Bottom line? Supply chain disruptions aren’t going anywhere. To navigate the new reality of rapidly-changing regulations and risks, companies need robust supply chain management frameworks to both to identify current issues and remove potential roadblocks
Keep your supply chain on track with Certainty Software. Let’s talk.
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