Chaos is the new normal for supply chain

Just as scientists and public health officials dare to suggest the Covid pandemic may be entering its final stage, China announces tough new lockdown measures, sparking fresh fears that trade disruptions will be with us for a while. some time yet.

Is China really on the brink of an Omicron outbreak that could cripple the global economic engine room? Or is China just doing what China does – be authoritarian and weld its citizens internally as the Beijing Winter Olympics approach? It’s probably the latter, but only time will tell.

Either way, it’s a stark reminder that we live in uncertain times, and with 100,000 Russian troops gathered on the Ukrainian border, things aren’t about to get any less uncertain.

In the supply chain, uncertainty is the only certainty

Today, it seems, uncertainty is the only certainty – and because supply chains are inherently global in scope, C-suiters protect supply from shocks by reducing its exposure to risk.

Multinational companies are responding by reducing supply chains. Small chains, small risks. Samsung US is relocating its chip manufacturing, for example, and Apple is expected to follow suit, making its own ARM-based microprocessors.

And everywhere you look, supply chains are being digitized, increasing visibility and agility as companies seek to roll with the punches.

Where does the next punch come from? China? Ukraine? A new flesh-eating virus from outer space? Or maybe a container ship captain will attempt a three-point turn in the Suez Canal?

Whatever the cause of the next episode of chaos, there is no escaping the fact that ours is a shrinking world, with everything seemingly global. If this makes the trade more reactive, it also means that a shock to one part is a shock to the whole. Just ask your nearest supply chain manager.

Logistics – once on the periphery – is now a C-suite priority

Edward Sweeney, professor of logistics and supply chain management at Heriot-Watt University in the UK, says globalization has followed a fall in barriers – to the cross-border movement of goods, services, capital , people and information.
Sweeney explores the impact of globalization on logistics and supply chain management in his book, Global Logistics: New Directions in Supply Chain Management.

In it, he shows how logistics is now at the heart of long-term strategic plans in almost every company, whereas not so long ago it was on the periphery.

In an article for The Conversation – a source for news and research written by experts and scholars – Sweeney says uncertainty in a shrinking world “is a feature of the international trade landscape in which supply chains now operate”.

He adds, “As a result, large companies have focused heavily on supply chain risk management. This means identifying where risks of any kind exist in the network, assessing the potential impact of those risks and putting in place mitigation strategies.”

He says these strategies are wide-ranging, covering all sorts of risk – for both demand and supply. There is also environmental risk, linked to socio-economic and socio-political factors, as well as common business risks, such as the bankruptcy of suppliers.

With so much uncertainty and risk, it’s amazing that a CSCO or COO wakes up in the morning for fear of being hit by a bus or a meteorite.

So what could 2022 hold for supply? Few are better placed than Sweeney to try this one.

Sustainability ‘will be the next shock for the supply chain’

Along with the evolving situation in China, the likelihood of new Covid variants and international shipping costs remaining high, Sweeney believes the biggest upheaval will come from the global supply of sustainability.

“Freight transportation and supply chain processes will change as more environmentally sustainable strategies are adopted,” he says.

According to him, the most important changes will be the switch to fleet electric vehicles and the relocation of distribution centers, in order to minimize the distances travelled. He also expects to see more collaboration as the industry embraces sustainable practices. This can already be seen in the UK, in the work of the Center for Sustainable Road Freight, he points out.

The sustainability effort, he writes, “will inevitably create short-term challenges as new practices are incorporated.”

He concludes: “Businesses will need to be resilient and able to adapt to major disruptions.”

Which is another way of saying it’s a mixed, confusing, and disrupted world – and there’s nothing supply chain teams can do but get on with it.

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