April 13, 2023 Constant Disruption May Be the Supply Chain New Normal

Since March 2020, the supply chain has been rocked by constant crises. Unfortunately, the near-term forecast is for more of the same.

By Matthew Gordon-Box, Product Manager, Supply Chain, SYSPRO

Since the global pandemic turned the world upside down in early 2020, the supply chain has been in a state of constant disruption. The shutdowns in China and then throughout the world sent manufacturing reeling, with critical components and raw materials in extremely short supply. Demand cratered for some products and skyrocketed for others. And then once public health restrictions were lifted, manufacturing and logistics companies that had reduced capacity and laid off workers to survive suddenly had far more demand than they could possibly meet, which then triggered rising inflation.

Every time the supply chain has appeared to be stabilizing, some other event, economic trend or disaster brought another body blow that knocked everything out of equilibrium again. And while I’d like to say that something resembling “normal” is just around the corner, the most likely prognosis for the next six months is slow improvement marked by additional, unpredictable disruptions.

Here’s one example of the kind of disruption that could be waiting in the wings. Currently, the situation with U.S. ports is much like a game of whack-a-mole. In early 2022, the West Coast ports were overrun with container ships, some of which had to wait weeks to unload their cargo. Thankfully, the West Coast situation has cleared up and ports are running smoothly, but unfortunately, so many companies diverted their shipments to the East Coast that those ports are becoming constrained. Even more concerning is that West Coast port labor hasn’t had a contract since May 2022. If negotiations don’t go well, a strike could be very destructive to a supply chain that’s already fragile.

Then there’s Covid, which is still a threat to the supply chain, even three years after the initial outbreak. China’s Zero Covid policy was already disruptive, shutting down manufacturing operations in cities that would go into lockdown whenever infections would be detected. Then in December, the government abruptly reversed its policy. The Chinese government is famously not transparent about the state of Covid within its borders, but it appears that there have been severe outbreaks in multiple regions. It’s difficult to say what the long-term impact will be, but supply chain disruption certainly seems likely.

The ongoing war in Ukraine has caused immense human suffering, and has also severely constrained the ability to produce key raw materials, such as petroleum, grain, fertilizer, aluminum and nickel. The crisis in banking has spooked global markets, and while inflation appears to be coming under control, it’s still many times higher than it has been for many decades, putting pressure on all elements of the supply chain.

Dealing with a disruptive “new normal”

In a volatile, unpredictable environment, manufacturers and distributors need to plan and take measures to reduce risk and increase supply chain visibility. And the first step is digitalization. Advanced technologies like AI and analytics need access to data to make accurate predictions, and they can’t get that data if it’s locked away in paper documents. Purchase orders, invoices, inventory reports — it all needs to be digitized to the highest degree possible.

But internal data isn’t enough. Manufacturers and distributors need to build transparent, trusted relationships with suppliers and customers to share information so everyone will have deeper visibility into the entire supply chain, both upstream and downstream. It’s the only way everyone can take the right measures to mitigate risk. Shortening the supply chain so that it’s more resilient is another strong mitigation measure. Reducing the links in the chain reduces the risk that one of them will fail.

Manufacturers and distributors also need a strong technology foundation, and in this industry, that’s the ERP platform. It serves as the single source of the truth for supply chain management, and if it’s well designed, it will have built-in analytics capabilities that can provide timely intelligence so management can proactively take action. Additionally, the ERP platform should be flexible enough to connect to additional technologies, such as AI, that can provide further insights and predictive power.

The supply chain isn’t going to return to normal anytime soon, if your definition of normal is  pre-pandemic state of affairs. When you throw a stone the size of the global pandemic into the supply chain waters, it’s going to take a long time for the ripples to subside. But just because the supply chain is unpredictable, that doesn’t mean it’s impossible for a manufacturer or distributor to thrive. By forging strong and trusted relationships with supply chain partners and implementing the right technology base for digitalization, we can all reduce risk and see our way through these “interesting times” to a more stable future somewhere down the road.

About the Author:
As the Supply Chain Product Manager, Matthew develops and maintains the strategy for the supply chain capabilities of SYSPRO ERP. He has more than 20 years of experience within the SYSPRO ecosystem and holds a BA in Business Computing from the University of Sunderland.

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