As the walls of our 2020 toilet roll forts start to come down (because we have finally got through the stock pile) and we venture out into the world, the supply chain hangover rages on.
From the pandemic to container shortages, to factory fires, and unfortunately the disruption to supply chains doesn’t appear to be easing up any time soon.
The latest challenge was a 440 metre container ship blocking the Suez Canal. In what we can only assume was a Guinness World Record attempt for the tightest handbrake turn, gone wrong.
What these issues have highlighted is the need for a more resilient supply chain.
From January to May 2020 supply chain disruption was mentioned nearly 30,000 times in the earnings calls of the world’s 2000 largest firms, compared to 23,000 the year before.
Those businesses typically reliant on single source suppliers pre-covid, are now looking to use multiple suppliers in various locations to spread the risk. This creates added cost to business models with the move away from bulk purchasing.
During the pandemic we saw how a spike in demand for essential goods can result in unfair practice. For example, the increase in demand for PPE and hand sanitiser. Thankfully, regulators are now taking a stronger stance against price gouging and implementing restrictions preventing suppliers from breaking agreements to sell product to the highest bidder.
The term ‘uncertainty’ became a buzz word, you couldn’t have a conversation without dropping it in at least once, though it still applies to the disruption facing supply chain.
So what do we need to learn?
- Both Covid-19 and the Suez Canal blockage have demonstrated
the importance of planning for every scenario. The International Chamber of
Shipping (ICS) said that the blockage has highlighted the ‘fragility of global
supply chains and emphasised how important the container shipping sector is to
the global economy.’ Governments and markets are taking note as there has been
a clear economic fallout from the delay of goods the blockage has caused, which
is expected to continue for several months, as are the
- On a positive note, CAIRO (Reuters) – the Suez Canal
Authority (SCA) have just announced plans
to expand and deepen the southern stretch of the waterway. These proposals
were already in discussion, but the blockage highlighted the urgency to avoid
another record attempt.
- On a positive note, CAIRO (Reuters) – the Suez Canal Authority (SCA) have just announced plans to expand and deepen the southern stretch of the waterway. These proposals were already in discussion, but the blockage highlighted the urgency to avoid another record attempt.
- Brexit has been another supply chain disrupter affecting the
first quarter of 2021 and beyond. In terms of the importing and exporting of
goods, the EU-UK Trade and Cooperation Agreement will not impose any tariffs or
quotas on goods imported and exported between the two. However, this only
applies to goods coming from the UK to the EU, businesses that ship from a
third country will be charged import duties.
- The agreement also outlines how the tariffs are calculated for products which have multiple origins, though sadly it doesn’t outline how this will affect our online shopping habits. This means that companies will need to reassess their supply chains in order to understand the origin of their product components and factor in the financial ramifications.
- Alongside this, companies will now need to complete additional customs paperwork and declarations, which may cause delays in the transportation of goods. The UK have offered a transition period extending to July 2021.
The key takeaway from these disrupters is an understanding of the importance of supply chain resilience.
This will be accompanied by a move towards increased visibility across the supply chain, as in 2020 we saw a multitude of companies pledge to be carbon neutral by 2030, which will be achieved by identifying the weakest areas and in the creation of more circular supply chains. If you are looking to improve supply chain transparency or interested in sustainable product manufacturing, talk to us.