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The impact of supply chain disruptions on day-to-day life

Jonas Mehrhoff
Jonas Mehrhoff
June 21, 2022
5 min read

Note on the authors

Heiner Murmann is the founder and CEO of Orkestra SCS, a logistics, technology and services company. In addition, Heiner serves as Executive Chairman for Evolution Time Critical and President of The Five Inc., and as an Advisory Board Member for both Metro Supply Chain Group and Black & McDonald Limited. Notably, Heiner previously held various senior executive roles at DB Schenker, one of the top three global logistics companies, as a Member of the Board of Management responsible for Air and Ocean Freight, and as CEO of the Region Americas.

Arnold da Silva, Senior Ocean Freight Advisor for Orkestra SCS, is head of an ocean freight consulting company where he actively advises global shippers on ocean freight strategy and execution. With 40 years of experience in the ocean freight industry, Arnold served as Executive Vice President for Ocean Freight Region Americas for DB Schenker. Arnold's passion is to conceptualize and implement innovative ocean freight solutions that transform one’s supply chain and promote a shipper's success.

Imagine: you’ve just run out of hand soap. You go online and pick one out from the “One Day Shipping” section. The next day comes, and you find that your soap isn’t at the door, but an email saying your package will be delayed is sitting in your inbox. Supply chain disruptions impact everyone, from supply chain leaders to the average consumer. These disruptions occur in various forms across all modes of transport, with challenges rising based on origin and destination. While we might not be able to avoid disruptions entirely, especially unforeseen ones like a pandemic, companies can look to the past and learn to manage them. To understand why these road bumps occur, we need to go to the source; a deeper look into supply chain stressors and what might be stopping supply chains from running smoothly. This article outlines some examples of supply chain disruptions, and how they can be mitigated.

What are some external forces disrupting the supply chain?

When you don’t receive your fridge, bed, television, it can be difficult to understand what could possibly be taking so long. Take cars for example. There’s been a widespread shortage of cars recently, resulting from companies waiting on essential auto parts or assembly line related products. It’s not always as simple as a single breakdown in the supply chain. There’s a bigger picture that needs to be considered. Here are some of the external forces that could be disrupting the supply chain.  

1. Natural disasters

As climate change makes extreme weather more frequent and/or severe, it increases the annual probability of events that are more intense than manufacturing assets are constructed to withstand, increasing the likelihood of supply-chain disruptions.

McKinsey

There are many examples of natural disasters creating massive disruption to the supply chain, and with the changing climate, more extreme weather events are on the horizon. Take Toyota for example, who have been pioneers in supply chain management including the JIT concept. They’ve experienced extreme supply chain disruptions when their company was affected by the Tohoku earthquake and tsunami in 2011. They were unable to deliver or receive essential spare parts, ultimately leading to several losses. Climate change has also been linked to several unexpected weather patterns, especially in the Pacific leading to several cases of containers falling off at sea leading to losses and delays in the supply chain.

2. Covid-19 pandemic

Undoubtedly one of the biggest disruptions to the global supply chain has been the pandemic. It halted movement, production, and limited capacity across global supply chains. Outside factors also had a part to play, including initial misunderstanding of the virus transmission, panic buying, and a resounding surge in online shopping. The outcome of these factors are quite clear and still prevalent today, including:  

  • A surge in demand for products: At the start of the pandemic, we saw millions of people panic buying household items such as toilet paper, resulting in massive shortages. All personal protective equipment (PPE) and sanitising products were also among those in short supply as demand suddenly spiked. 
  • A drop in demand for products/services: Conversely, the pandemic resulted in a massive decline in demand for airline travel and tourism products.  
  • Raw material shortage: China and the US remain the primary suppliers of raw materials, with the pandemic impacting several sectors. The result was either shortages or much higher costs when buying day to day items like laptops, clothing, shoes, and medicine. Even Apple felt the effects of casing and memory chip shortages, as it placed a limit on the purchase of iPhones. 

3. Geopolitical conflict

Supply chains are once again being tested, this time by the extraordinary events in Ukraine. The time has long since passed when supply chain disruptions can be treated as one-off events, with organizations scrambling to mitigate the disruption to their business and to keep goods, funds, and information flowing across the supply chain.

Deloitte

Conflicts such as the Russian war in Ukraine are shining a spotlight on vulnerabilities in Europe’s over-reliance on natural gas and crude oil from Russia, as well as agricultural products from Ukraine. Consumers are also feeling the impact of this supply chain disruption in the food and agricultural sector, with sunflower oil and fertilizers spiking in price. 

4. Impact of Brexit

Brexit has injected considerable uncertainty into their supply chains. The uncertainty will not be short-lived: it is likely to persist for a decade or more, and will add to existing volatility and vulnerability in the supply chains of many industries.

McKinsey

The United Kingdom’s (UK) decision to leave the European Union (EU) has far-reaching effects on the supply chain, considering the EU accounts for the majority of the UK’s trade in the food, drink, chemical and automotive sectors. The implementation of tariffs and rise in border tensions mean that shelves in grocery stores are often empty, with consumers bearing the brunt of the rising costs. 

How to mitigate the risk of supply chain disruptions

While the nature of the disruption can’t always be anticipated, it’s clear that supply chain managers need to increase overall resilience and flexibility. Here are some of the ways this can be achieved: 

  • Digitally transforming your supply chains to ensure complete end to end visibility
  • Future proofing your supply chains and building resilient supply chains to counter and manage disruptions.
  • Preparing for changes in demand by reinforcing forecasting capabilities. Control towers and advanced supply chain analytics can assist with this
  • Consider alternatives to what is now considered a slightly outdated concept of JIT supply chain management
  • Procuring inventory and raw materials early on, particularly where they’re in potentially impacted areas. 
  • Ensuring your last-mile partners share the same supply chain philosophy and best practices  
  • Developing multi-modal transportation capabilities so cargo movement can be switched between modes quickly – like using air freight due to seaport congestions or using rail due to truck shortages
  • Redefining the sourcing strategy by working with local suppliers and exploring near shoring and regional opportunities. 
  • Strengthening capabilities and talent within your organisation through further skills development. 
  • Improving communication channels and update customers on any delays to improve customer satisfaction and build trust.
  • Performing risk assessments on critical business functions and making required adjustments accordingly. 

Key takeaways

Supply chains enable the production and distribution of various goods used in day-to-day life such as computers, cars, lifesaving medicines, and food to name a few. However, this trillion-dollar industry is facing constant risk from several disruptions as listed above. These external forces result in massive disruption to the supply chain, leaving customers without basic household goods, food, and medication. 

Supply chain managers can’t be sure of what threat is coming next, but they can be assured threats are usually closer than they think and need to be prepared. The best way to do this is by improving the flexibility and resilience of the supply chain through the solutions above. Digital and technological solutions that encourage communication, collaboration, multi-sourcing, and talent management are the best tools available to supply chain managers today. 

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The impact of supply chain disruptions on day-to-day life

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