Just-in-time supply chains have collapsed due to a toxic mix of poor timing and bad luck.
Even the most reliable supply networks have been interrupted as a result of Brexit, a worldwide pandemic, and the war in Ukraine, in the UK, Europe, and beyond.
Sprinkle that with a shortage of haulage drivers and a spike in the costs of shipping and the spiral intensifies. Some are now labelling ‘just-in-time’ thinking a far too short-sighted policy.
As Patrick Penfield, a supply chain professor at Syracuse University commented on this issue, “It just takes one supplier — and it could be the base ingredient supplier — to fully screw up your supply chain.”
No immediate solution
With so many variables in an equation for global crisis, some believe that bringing supply chains ‘home’ by reshoring or onshoring, to the home-nation or even in-house is the answer. In fact, a global survey of manufacturing executives conducted in March 2021 reports a sharp increase ( 54% to 85%) since the start of the pandemic in the number of companies that are “likely,” “very likely,” or “extremely likely” to seek to reshore supply chains by replacing overseas producers with domestic sources.
Data-driven decision making
It is difficult for many companies to rebuild their entire supply chain model, which has been optimised for just-in-time and supported by offshoring . As a result, some companies have been moving to a ‘just-in-case’ approach, where the just-in-time model’s boundaries are being stretched to accommodate a larger number of supply chain disturbances. This necessitates increased supply stockpiling to account for fluctuations in demand and availability. Toyota is one of the companies that has followed this strategy. The cost rise is, nevertheless, an unavoidable trade-off.
Other companies such as Asda and IKEA have resorted to chartering their own ships in order to combat the supply chain delays! For the majority who cannot take such drastic (and expensive) steps, what can they do to steer a path through this crisis? Visibility of the upstream chain is the one aspect that organisations can – and must – control in this setting. From raw material to finished product, the entire supply chain (which may involve many moving parts and a variety of suppliers) is exposed to political and environmental interference. Right now, that visibility is sorely missing. This reactive stance is destined to fail. Where visibility of your own supply chain is clear, it is easier to flex and adapt to external factors that may affect it. You can plan ahead but also react with pace and agility to unforeseen issues.
Unfortunately, most organisations have significant gaps in supply chain which only contribute to the uncertainty of external forces. If you don’t know where your stock or supplies are or who owns them at any given moment, you can’t respond quickly to disruptions and prepare for uncontrollable swings.
It is the responsibility of supply chain leaders to ‘own’ visibility across the whole chain - not to leave this to suppliers to manage. This is where gaps start to widen. In today’s world, supply chain leaders need their own lens to view transportation clearly so that they can act quickly and decisively when issues arise.
Supply chain visibility technology is now not a ‘nice-to-have’ but an essential facet of today’s supply chain that must be able to flex and adapt to a world where change is inevitable.
☛ Adam Compain is global head of supply chain insights at Project44