Master the Modern Supply Chain
Nearly 30 months after a pandemic crippled the global supply chain, suppliers and manufacturers are still scrambling to return to something resembling normal.
But most brands fail to acknowledge – at least publicly – that the pandemic didn’t create this supply chain crisis; it simply shined a spotlight on its already festering vulnerabilities. Think about it:
- About 43% of small businesses don’t track their inventory. And the ones that do typically rely on off-the-shelf accounting software.
- More than a third of supply chain managers used Excel spreadsheets to manage their operations.
- The average supply chain accuracy of U.S. retailers hovers at a hazardous 63%.
Supply chain stakeholders were already suffering in the frying pan before COVID tossed them into the fire. While only 12% of retailers worldwide reported substantial supply chain disruptions because of the pandemic, nearly 30% reported stock shortages and sought replacement suppliers.
That’s why some people – such as Brandon Hernandez, senior partner at Whole Brain Consulting – argue that the supply chain is beyond repair.
“We all must accept that today’s supply chain is broken,” Hernandez recently told TraceGains. “It’s not something that was all COVID’s fault, but the pandemic certainly exacerbated an already existing – if less visible – problem. And, from our experience, the supply chain is not a frequent topic of discussion operationally within businesses. They’re looked at. They’re a necessity. But there was – and is – a ‘set it and forget it’ mentality when it comes to the supply chain.”
Lingering supply chain challenges
China’s zero-tolerance COVID strategy maintains a tight grip on the supply chain. As a result, it’s a significant contributor to extended holding times at ports of entry.
“The second-largest port in China is still holding a vast majority of the freezer and refrigerated containers, which they’re tying into their electrical grid and causing rolling blackouts in the region,” Hernandez pointed out.
This congestion at the start of the supply chain continues to have a ripple effect, leading to a container shortage and slowing down aluminum production since a significant chunk of the country’s magnesium production comes from the same region suffering blackouts.
Hernandez added that the Ukrainian-Russian war has had an impact, too. Russia and Ukraine account for 24% of global wheat production, 57% of sunflower seed oil, and 14% of corn. Before the invasion, Ukraine moved about 51 million metric tons of grain exports through its seven seaports. The latest estimates suggest that flow has all but dried up.
“So, you have these suppliers warring with one another and creating problems at ports of entry, as well as global suppliers in countries that have started to limit what they’re going to release – if they release any at all,” Hernandez said. “Indonesia has said that they’ll restrict palm oil exports. And they account for nearly 52% of palm oil globally. Then you have Argentina clamping down on soybean exports. And Russia’s still stuck with its sunflower and wheat products.”
How brands can cope
It seems simple enough, but Hernandez said that brands must double down on forecasting and production planning. Brands need to make the most of the materials at hand and what they’re able to secure from suppliers, especially if they have a short shelf life.
“Keep utilizing historical demand, but expand it beyond a forward-looking 60, 90, and a backward-looking 90. You should be doing your year-over-years,” Hernandez insisted. “You must examine your numbers against the previous year and integrate them into your sales and operations reviews. It seems simple, but it’s worked for us and many of the brands we work with. Pay close attention to Amazon, Kroger, and other platforms. Because they have direct point-of-sale numbers, which is real-time data.”
Hernandez also added that it’s critical to remember that COVID wasn’t just a supply issue; it was a demand-side issue, too. That part is starting to cool down, especially as COVID restrictions lift.
“But you still want to have an eye on that demand-side because every time anybody talks about a lockdown, demand spikes in a region or a given state,” Hernandez said. “So, you want to make sure you’re reviewing that regularly. Once a month isn’t enough anymore. For some of you, especially high-volume manufacturers, you must get your sales and operations teams tethered together so your operations team can continue supporting the sales team. It’s routinely not done well enough to support the business.”
Don’t forget about suppliers
This broken supply chain threatens supplier relationships, too. The pandemic also pushed on their pain points, but they’ve been here before. Hernandez pointed to the almond crop three or four years ago, when almonds tripled overnight because Spain had a massive drought that wiped out their supply. As a result, brands should always maintain a stable of secondary or tertiary suppliers.
“It’s not enough to have a ‘set it and forget it’ mentality,” Hernandez said. “We must move away from that. We need to focus on the problem. What you must consider, especially as an operations team, is that finding a supplier isn’t just finding a supplier. Quinoa is not just quinoa. Quinoa from the Andes is different than quinoa from Bolivia, which is different than quinoa from China. Brands must remain vigilant about ingredient specifications and secondary supplier relationships. Have I created a good enough relationship that I can pick up the phone, call them, and have them fill in for an emergency? Have I cultivated that relationship, so they want to do me that favor?”
Digital solutions can help by nurturing what’s at the heart of those relationships: communication. A robust digital document management system offers manufacturers a unified view of products, data, and processes across the business and the supply chain. Brands can benefit from instant access to millions of supplier documents to help fast-track sourcing, formulation, and recipe development. And with the a robust sourcing directory for ingredients, items, packaging, and service providers, manufacturers can quickly match up with alternate suppliers.