Supply Chain Chaos Sends Companies Scrambling

Denis Storey
December 7, 2021

Jan. 6 Webinar: “Overcoming Disruption in the CPG Supply Chain”

Register Now

Jan. 6 Webinar: “Overcoming Disruption in the CPG Supply Chain”

This webinar features Professor John Keogh, strategic advisor and managing principal of Shantella, and will reveal what steps to take to build a more resilient supply chain. Discover the strategies leading companies use to de-risk supply chains and emerge from disruption stronger than ever.

Register Now

American manufacturing has been outsourcing production overseas for so long that “Made in China” labels are as pervasive as price tags.

But a series of unfortunate events, including a trade war, a global pandemic, and creeping inflation, has knotted up the supply chain so much that manufacturers have started looking closer to home. While companies like Walmart and Costco have embraced short-term solutions – like chartering their own cargo ships to circumvent supply chain bottlenecks or switching to more expensive air freight – many of them have started pondering longer-term answers.

Forbes reported this month that manufacturing heavyweight Samsung rolled out a proposal to build a $17 billion microchip factory in Taylor, Texas, while Ford Motor Co. plans to boost chip orders from an Albany, New York, manufacturer. And toolmaker Stanley Back & Decker accelerated efforts to build new production operations in Mexico and Texas.

“With the pandemic, it really has radically shaken the supply chain,” Stanley CFO Don Allan told the Washington Post. “It does drive home the importance of our strategy of getting closer to where we sell. The more you can minimize the amount of time your product is in transit, the better off you’re going to be.”

In the food space, J.M. Smucker announced plans for a new $1.1 billion production plant in rural Alabama and an expansion of its Colorado facility.

In its latest “State of North America Manufacturing” report, Thomas Publishing revealed that “83% of manufacturers indicate they’re ‘likely’ to ‘extremely likely’ to reshore.” That’s up from 54% in March 2020.

And the problem isn’t limited to the United States. This month, the Confederation of British Industry (CBI) reported that U.K. manufacturers face the worst supply shortage since the mid-1970s.

Nearly two-thirds of U.K. businesses surveyed cautioned that component shortages could cripple factory output over the next three months.

“The last quarter has been undoubtedly overshadowed by firms facing shortages of materials or components, struggling to fill roles and grappling with increased energy cost pressures,” Tom Crotty, chair of the CBI’s manufacturing council, told The Guardian.

Diversification, not isolation

But the solution isn’t as cut and dry as packing up and moving out of mainland China. Companies don’t have to make a binary choice between China and domestic sourcing and production.

But the pandemic has underscored the danger of relying too heavily on China for suppliers and manufacturing partners. So, when the country effectively shut down in early 2020 to stop the spread of COVID, companies scrambled to find alternate suppliers.

Archer Daniels Midland’s senior vice president of global supply chain and procurement Camille Batiste told Food Dive, “We need to build a supply chain that can also receive material from other places. We just need to always have ... multiple sources.”

It’s not just China: The pandemic laid bare the folly of sourcing from a single region. Instead, securing the supply chain meant embracing diversification and establishing supplier relationships from multiple locations.

Vietnam emerged as a viable alternative even before the pandemic, as the escalating trade war forced companies to look outside of China to skirt tariffs. For example, TraceGains Market Hub boasts 300 supplier locations for more than 500 items in Vietnam alone.

Other emerging sourcing options include Bangladesh, Thailand, Indonesia, and Malaysia. Overall, Market Hub features suppliers in 120 countries.