Protecting your business from the supply chain crisis
Since early 2020, COVID-19 has forced many companies to change the way they do business. Many of the issues businesses have grappled with since the pandemic began have been lurking just out of sight for years. The lockdown has acted as a catalyst, amplifying these minor concerns to the point they could no longer be ignored.
When the pandemic reached North America, shutdowns and stay-at-home orders impacted logistical chains from New York to the Port of Los Angeles. The mounting pressure was even more noticeable across the global supply chain. The coronavirus has highlighted some of the weaknesses of our global trade system and nearly every business has been impacted by the supply chain issues brought on by this perfect storm.
Why is there a global supply chain crisis?
In the past, manufacturers of goods stockpiled raw materials or lightly processed precursors in bulk quantities. However, over the last 50 years, product manufacturers have shifted to a new model of sourcing components, known as just-in-time manufacturing. Pioneered by Toyota in the 1970s, just-in-time relies on delivering raw material, individual parts, or completed products, shortly before they are needed. This reduced the need for onsite storage, and therefore costs, at each step of the supply chain.
The sudden volatility of the coronavirus pandemic exposed major weaknesses in the global supply chain that had made just-in-time manufacturing possible. Lockdown orders created a labor shortage that affected each link of the chain from component manufacturers and producers of raw materials to trucking and eventually retailers. Production lines could no longer meet global demand. Longshoremen and merchant mariners all operated container ships with skeleton crews. The productivity and output of these operations decreased exponentially.
There have been more challenges than just the labor shortage. Consumer buying behavior moved aggressively toward online purchases forcing businesses to have to find ways to deliver products to homes rather than brick-and-mortar stores. Also, many logistics and manufacturing systems that were in place at the time were already running either at or close to their maximum capacity. This optimization made those industries more cost-effective, but it means there isn’t room to increase production or store excess goods and materials. So, when something goes wrong, like a pandemic, the fragility of the system becomes apparent.
How long the supply chain disruption is expected to last
The future is difficult to predict of course, but most economists don’t see the many supply chain issues being resolved in 2022 and some predict that we won’t see anything resembling a normal supply chain until 2024. Consumer habits are likely to change as interest rates rise but untangling the Gordian knot the pandemic has tied won’t be so easy.
Global and local economies will continue to see the effects of the supply chain crisis as container ships from long lines at the Port of Los Angeles and other ports around the world, unable to be unloaded quickly enough due to the labor shortage. Stockpiles up in warehouses as trucking slows from a shortage of trucks, truck drivers, and, perhaps more critically, truck chassis which are waiting, full of goods, to be loaded onto container ships by the same overworked skeleton crew.
Correcting the supply chain disruption is a slow process as each bottleneck that’s resolved reveals another bottleneck further down the chain. Meanwhile, retailers are faced with a backlog of orders and no clear indication of when the supply of products will be reliable.
Optimization in the face of uncertainty
With economists unable to find a clear endpoint in their forecasting, businesses must meet the challenge of the global supply chain crisis. Here are a few things to keep in mind that might help your business prepare:
Keep a close eye on your inventory
Keep a close eye on your inventory: If you haven’t invested in inventory tracking software, now may be the time to do so or to update your system if it’s past its prime. Knowing what you have available for purchase, what you're short on, and what you're out of before you’ve received more orders than you can fulfill is more necessary than ever. Consider software that allows you to manage your inventory, your eCommerce store, and shipping logistics enabling you to make real-time or even automated adjustments.
Evaluate your vertical global trade partners
If you are able to find suppliers physically closer to your customers, you will reduce some delays. While it is nearly impossible to have a modern supply chain within the borders of a single country, finding suppliers on the same continent can improve delivery times. land-based supply chains are more dependable as the biggest delays are at major seaports.
Overstock when you can
The most obvious way to make sure you aren’t caught understocked is to overstock. This will, of course, be limited by your budget, but spending a little extra to stock up on difficult to acquire items could give you the wiggle room you need until the production lines are more secure. Keep an eye out for discounted items and consider expanding your warehouse or renting additional storage space. Refine your forecasting tools to help manage the difficult balance between supply and unnecessary costs.
Keep your customers informed
Making sure that your clients know the supply chain issues you’re facing helps them set more reasonable expectations. Letting them know when certain products might be delayed, perhaps even posting that information on your website, allows them to plan well. As a retailer or wholesaler, being transparent about factors beyond your control can not only address customers’ potential concerns but can be a step toward building a trusting relationship.
Keep yourself informed
Supply chain disruptions can happen at any time and can impact several links of the chain at the same time. Keeping yourself informed is the best way to prepare for unexpected shortages and avoid backlogs. Politics, shutdowns, global economies, and even weather conditions can have effects, especially on a system that’s already under pressure. As with so many things, knowledge is a powerful tool.
How is Therma° responding?
As a producer of Internet-of-Things (IoT) hardware, particularly IoT monitoring systems, Therma° has also been affected by a shortage of computer chips, also known as semiconductors.
Simultaneously, demand for devices that utilize semiconductors has increased based on the exponential growth of IoT technology. Semiconductors are a critical part of most cars, cell phones, home assistants, and other products, like Therma’s temperature and humidity monitoring system.
At Therma°, our commitment to helping our customers reduce food waste, save money, and streamline operations is stronger than ever. We have revised and improved our manufacturing and forecasting processes to account for the semiconductor shortage and ensure that Therma° is continuously available for purchase.
For those interested in purchasing Therma° IoT monitoring or expanding to new locations, we recommend ordering as soon as possible to guarantee rapid fulfillment. Click below to try one today.