November 15, 2024 Navigating Disruptions: Preparing for Worker Strikes

As worker strikes hit North American supply chains, procurement leaders must plan ahead, diversify, and adapt quickly to stay competitive.

By Edmund Zagorin, Arkestro

As the holiday season approaches, the interdependencies of our supply chains have never been more apparent. Recent events, such as the Canadian National Railway workers complying with government return-to-work orders and the recent strikes at East Coast ports, serve as stark reminders of the chaos that strikes can unleash on global supply chain operations.

For procurement and supply chain leaders, understanding these disruptions is critical to mitigating supply continuity risk and ensuring smooth operations during peak periods.

The Ripple Effect of Worker Strikes

Our ports and railways are the heartbeat of North American commerce, transporting everything from retail merchandise, to raw materials, to birthday presents, to medical supplies. The effects of worker strikes extend far beyond immediate employers; they create a domino effect that impacts suppliers, manufacturers, and retailers. For instance, the recent East Coast port strikes, which lasted only three days, continue to reverberate through the supply chain as ports still work to clear the cargo backlog.

Procurement leaders must recognize that threats from worker strikes, natural disasters, and geopolitical disruptions create significant costs and, unfortunately, are to be expected in the future. While we can’t predict major events, we can plan for better ways to respond to them.

Strategies for Procurement Leaders

The good news is that procurement leaders can overcome these challenges, but they need to develop response plans well in advance. Here are several key approaches to event response planning that can minimize the disruptive effects of crisis events on supply chain operations:

1. Geographical Multi-Sourcing & Rightshoring

Don’t put all of your eggs in one basket, especially when it comes to sensitive geographies. Relying on a single geo, supplier, or shipping lane creates fragility, not resiliency. One disruption and your entire operation could be at risk. By creating discipline around allocating demand through multiple geographies and suppliers, you can distribute that risk and build a more resilient supply chain that can better withstand disruptions and allow you to move quickly when unexpected challenges arise. This means not only identifying secondary and tertiary sources but also doing the relationship-building work to ensure they’ll take your call during a crisis.

2. Be Prepared to Adjust Safety Stock Levels Proactively, Not Reactively

Just-in-time inventory practices are great from an efficiency standpoint, but they can leave organizations vulnerable to disruptions. Famously, the equation for calculating safety stock is (Maximum daily usage * Maximum lead time)-(Average daily usage * average lead time). So, what happens when lead time changes due to a supply disruption? Maximum increase in lead time has consequences with orders to replace or maintain safety stock. In a lot of systems, managing lead team changes is challenging. However, by analyzing historical data and forecasting trends, you can better predict when lead times will spike and order more in advance. This approach, known as predictive procurement, helps ensure you have the stock needed to navigate unforeseen complications.

3. Engage Stakeholders To Enhance Communication and Collaboration

In the world of procurement, strong relationships are crucial, especially with internal business stakeholders. Maintaining open lines of communication with suppliers and logistics partners can be the difference between a minor hiccup and a full-blown crisis. Regular check-ins, relationship building, and collaborative business planning can ensure that all parties are aligned and prepared for any disruptions.

4. Invest in Technology and AI

The integration of advanced technologies, particularly artificial intelligence (AI), is not just a trend; it’s a transformative opportunity for procurement teams. Procurement teams using AI can analyze data, set price targets at the item level, and suggest alternative sourcing options within your existing supply base. For instance, during labor strikes, AI can quickly identify alternate suppliers and assess their capabilities that are already qualified to do business with you, providing procurement leaders with the data needed to pivot at a moment’s notice.

The Role of Policymakers in Labor Challenges

Procurement leaders cannot tackle these challenges alone. Policymakers play a crucial role in investing in infrastructure that supports supply chains. Enhancing transport networks and improving port facilities can significantly strengthen resilience against disruptions. When governments prioritize infrastructure, they enhance operational efficiency and cultivate a stable labor environment, reducing the likelihood of strikes.

Conclusion

While the role of policymakers is certainly important, we cannot expect these changes to happen overnight. So, as the holiday season approaches, the stakes for procurement and supply chain leaders are high. The potential for disruption from worker strikes and other unforeseen events makes the need for a proactive approach more urgent than ever before. Companies that are able to stay ahead of the curve and quickly adapt to find alternative sources will separate themselves from competitors.

About the Author:
Edmund Zagorin is a proud procurement nerd obsessed with the power of recommendations to fix broken processes and supply chains. Prior to founding Arkestro, Edmund worked as a consultant focused on data-driven supplier negotiations for large healthcare providers, contract manufacturers and multi-campus retail brands. Edmund is widely recognized as a thought leader on the emerging role of machine learning and artificial intelligence in procurement and has presented executive briefings on this topic to leadership teams at 3M, BASF, General Motors, Volkswagen, PwC, Kearney, EY, Accenture, OneValley, Plug & Play Tech Center and has been featured by Forbes, Shared Services and Outsourcing Network and ProcureTech.

Read more from this author:
How CFOs Can Manage a Shifting Labor Landscape
Navigating Generative AI in Manufacturing & Supply Chain

Watch this LinkedIn Live event on Everest Group:
Navigate Gen AI Risks in Supply Chain and Procurement: Planning for Success

Subscribe to Industry Today