What Can You Learn from These 3 Supply Chain Catastrophes?


Insights for ProfessionalsThe latest thought leadership for Management pros

Thursday, November 18, 2021

Businesses around the world have faced major supply chain challenges recently. What lessons can you learn to protect your organization from similar risks?

Article 4 Minutes
What Can You Learn from These 3 Supply Chain Catastrophes?

Businesses in various industries across the globe have had to contend with a perfect storm of supply chain challenges in 2021, from shortages of essential goods and components to the blockage of the Suez Canal, a crucial shipping route connecting the Middle East and Asia to Europe.

Supply disruptions can lead to various negative outcomes for a company, including missed delivery deadlines, dissatisfied customers and employees who can't do their jobs because they don't have the necessary materials.

Here are some of the biggest logistics problems that have emerged recently and the lessons you can learn from them.

1. The semiconductor shortage

The global shortage of semiconductor chips - which are essential components in a huge array of products, including smartphones, cars, games consoles and domestic appliances - has impacted some of the world's biggest and most powerful brands, including Apple, Tesla and Sony.

In a quarterly earnings call with investors, Tesla CEO Elon Musk listed the chip shortage among the "insane difficulties" the company has faced this year. He said the recent supply chain challenges are some of the toughest the automaker has ever had to deal with. Other obstacles it’s had to overcome include port delays, container ship shortages and COVID-19 restrictions in China, which have made it more difficult to scale production.

Lesson: The benefits of supply chain diversity

Shortages of essential components and raw materials can be extremely difficult to manage, and the root cause of the problem might be outside your control. This has become abundantly clear to countless businesses in recent years, as the consequences of the pandemic have led to unavoidable disruption in various regions and sectors.

However, you can mitigate logistics problems and achieve some protection from the worst effects of shortages by diversifying your supply chain and building relationships with a range of vendors.

Writing in The Engineer, Simon Beresford-Wylie, CEO of Imagination Technologies, highlighted that geographical diversification of semiconductor manufacturing needs to be a global priority. At the moment, production of these components is concentrated in East Asia, which makes global supplies vulnerable to geopolitical, meteorological and technical disruption in the region.

2. The Suez Canal blockage

On March 23rd 2021, the container ship Ever Given ran aground in the Suez Canal and blocked the route for six days, preventing hundreds of ships from navigating the waterway and delivering supplies to their intended destinations.

An estimated 12% of international trade, one million barrels of oil and 8% of liquefied natural gas are transported along the canal every day. As well as having a big impact on global trade and the shipping industry, the six-day blockage affected countless businesses that were awaiting goods deliveries.

Lesson: Supply chain resilience is a must

If you have a high level of resilience in your supply chain, you're in a better position to adapt and respond to unpredictable events like the Suez Canal blockage. If you're able to gradually build up inventory and capacity buffers, for example, you're less exposed to short-term shipping delays.

According to Neil Murphy, Global Vice-President at ABBYY, supply chain leaders need to recognize there’s no effective 'one size fits all' approach, particularly where logistics automation is concerned. He said a holistic strategy is required to build a truly resilient supply chain.

3. The UK's HGV driver shortage

Many businesses in the UK have faced severe supply chain challenges due to a shortage of heavy-goods vehicle (HGV) drivers. The country was hit by a fuel crisis in September and October 2021 as there weren't enough trucks available to make deliveries to forecourts, while earlier in the year, McDonald's was unable to serve milkshakes due to insufficient supplies.

The driver shortage was attributed to various factors, including the pandemic, which reportedly led to a fall in the number of people passing HGV driver tests, and Brexit.

Lesson: Efficiency is everything

When you’re faced with a shortage of the key staff, skills or materials you need to function effectively, it's essential to prioritize efficiency in how you use the resources that are available to you.

Where drivers are concerned, technologies such as route optimization tools can help you reduce unnecessary mileage and make quicker deliveries. You could also benefit from apps designed to track shipments and flag delays and other issues in real time, so you can keep customers informed.

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