For decades, supply chains were engineered to be the equivalent of Swiss watches, where inventory and capacity were optimized for ideal conditions. Bonuses and accolades were bestowed upon executives who could create the leanest operation. Perfection was planned in every supply chain and low-cost labor and logistics were linchpins. Organizations trusted that supply chains would work and discounted significant risks as they blindly focused on the lowest price. The automotive industry may be the finest example of focused lean manufacturing adoption. And now, according to Seraph calculations based on multiple data sources, it is facing a combined revenue loss of $850 billion due to semiconductor shortages alone.
It started in 2020. Low-cost countries fell into disarray as the pandemic took hold and many still have yet to recover. With the stops and starts across regions, it has become increasingly challenging to refill supply pipelines. Shipping containers from China now cost more than $20,000 and delays are rampant as ship, port and trucking constraints impact the supply chain. Automobiles, paper towels and even children’s toys are in short supply. Shelves are often out of stock, highlighting the stark realities of the broken supply chain strategies companies have been using. As fall and winter settle in, look for an increased prevalence of more production stops and supply shortages.
We all should have known better. No room for error existed even as “black swan” events became common and expected. Supply chains need to be re-engineered across all industries to make them more resilient and enable companies to survive.
To read the rest of this article by Ambrose Conroy, Seraph’s founder and CEO, including the five immediate actions that supply chain teams should take to enable their organizations to survive, please go to SDC.
