Nearshoring and onshoring will reduce the level of sea and air freight © Image by Anucha Sirivisansuwan via GettyImages
Nearshoring and onshoring will reduce the level of sea and air freight © Image by Anucha Sirivisansuwan via GettyImages

Expect less efficient and more costly supply chains, warns logistics boss

8 June 2022

The logistics boss at Unipart has warned firms using a just-in-time model to expect “immense” disruption to production planning.

Ian Truesdale, logistics managing director at Unipart, said in some industries it was impossible to operate just-in-time and firms had to accept that supply chains would be less efficient, less flexible and more costly.

Truesdale, speaking at a roundtable to launch SAP's report Tomorrow’s Supply Chain: Disruption Around Every Corner, said: “We're effectively going into a period now where as inventory levels are being increased, where you're putting in extra levels of safety stock at certain points along that supply chain, you're actually hiding some of the fundamental problems.

“So we're going to have a period where this disruption that we've experienced is actually going to make supply chains less efficient, less agile, less flexible, and more costly.”

He went on: “Right now in certain industries it is impossible to run a just-in-time approach. There's just too much risk and too much unpredictability to run an efficient just-in-time model. That's where the trend is heading – to just-in-case.

“If you're relying on a just-in-time model, the level of disruption to your production planning will be immense.”

He said costs would consequently be passed onto customers. “It would be great if there were some simple solutions to the problems that we're facing, but there aren't. It's going to be a very difficult time for people operating,” he said.

The report, which included a survey of 200 senior decision makers responsible for logistics/supply chain strategy in the UK and Ireland, found 85% of businesses are switching from just-in-time models to just-in-case strategies following “unprecedented” levels of disruption caused by Brexit, the pandemic, and Russia’s war in Ukraine.

Truesdale said Unipart was responding by investing in new technology “to give us this advantage that we need” and nearshoring.

“Nearshoring will absolutely help,” he said. “Fifteen to twenty years ago a simple solution to reducing supply chain cost was to outsource everything and get it manufactured in Asia.

“But of course, that massively increased freight cost. It did reduce our overall end-to-end supply chain. But certainly nearshoring and onshoring will increase. It'll reduce the level of freight – sea freight, air freight – which will reduce the amount of emissions.”

The survey found over half (58%) of businesses believed their supply chain needed “a lot” of or “significant” improvement.

Two-thirds (66%) had experienced delays in production of goods and delivery of services, 64% had seen revenues decrease, and 58% had experienced a loss of customers. 

Almost a quarter (23%) of businesses expect supply chain issues to last until summer 2023.

Michiel Verhoeven, managing director at SAP UK & Ireland, said: “With the end of just-in-time models, businesses have to start putting the same expectations on their supply chain as they do on their wider business, structuring themselves to be just-in-case, so that when the inevitable disruption occurs, they can adapt. Those who don’t make this change are in for a very tough 18 months.”

However, he warned just-in-case models mean greater upfront costs for businesses and “profit pressures are going to increase”. He added: “There's an economic squeeze in the making.”

Shahid Latif, industry value engineer at SAP, said supply chains had been neglected during a period of stability, which was now adding to the current disruptions.

He said: “When times are good – and I would argue that for the last 20 to 25 years times have been good – the ebbs and flows of the tide, when the water’s in, it hides a lot of sins. 

“I would say the waters are receding, strongly. The water is receding, and it's revealing all of those inefficiencies. And these are the moments when I would advocate strongly that technology is ready and willing to play its part to tackle those inefficiencies.” 

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