Supply Chain Risk in 2022
Global supply is increasingly complex.
Are you protecting your supply chain?
Over the past few years, the world has faced a massive upheaval. The covid-19 pandemic, trade disputes, tariffs and civil unrest are disrupting every aspect of life, everywhere on the globe. Global supply chains have been profoundly affected by rising shipping costs, travel bans, quarantine requirements, lock-downs, and emergency measures, as governments struggle to regain stability and restart economies… and it is not ending anytime soon.
By now, you’re probably already in the thick of things trying to manage rising costs and maintain continuity of supply so a discussion of supply chain risks is redundant. The risks are your day-to-day, but there are things you can do during the crisis to protect your supply chain from further disruptions.
Addressing your supply chain risks now can help you protect your supply chain, as the slow recovery continues to unroll—and in the years beyond, as the world recovers and adjusts to new realities.
and If it isn’t obvious by now, here it is again: 2020 and 2021 had seen nations begin to shut down their entire supply network, and even now at the beginning of 2022 we’re not out of the woods yet. If you haven’t done it already, you need to diversify your supply chain right now.
You also need to be smart about how you do it, by picking suppliers and countries that represent the lowest risk, while still offering the economic models you require.
The supply chain crisis was caused by backlogs across major supply chain hubs. It will almost certainly continue throughout 2022
So forget what you’ve read about the top risks facing your supply network. Here’s where things stand right now:
This has always been a problem, but travel restrictions have made it a critical vulnerability. You can’t simply fly to your supplier to oversee production or fix problems, certainly to the extent that was taken for granted pre-pandemic.
If you’re in the dark about your supply chain right now, you’re vulnerable. You need to get real-time access, or at least as close-to-real-time access, and to trustworthy data—and you need to have the capability to do something about it.
Many companies have relied on informal processes and have no long-term strategy to effectively protect their supply chains against risk. Without a plan, you are forced to react to changes rather than anticipate and respond to them.
Having a plan is only half the battle. You also need to be able to move to a new supplier without breaking your supply continuity.
What can you do right now?
In the short term, there are some tactical actions you can take to protect yourself and keep your supply chain as stable as possible.
It is equally, if not more crucial to maintain localized face-to-face executive relationships with C-level members of your suppliers, including CEOs/owners.
A Matter of “When” Not “If”… Supply Chain Protection in the Long Term
At the time of this article, there’s still no consensus about when things will stabilize. What is certain is that there is no longer a “normal.” To ensure continuity of supply you need to develop a long-term risk management framework.
Your strategy should include:
Supplier diversity is your best protection when things go wrong.
Supplier diversity has always been one of the basics of supply network management, yet many companies pay no attention whatsoever to it because they still operate on the basis of “plan for the best, and hope for the best.”
Companies must start adapting their global strategies to “plan for the worst, and hope for the best,” or end up facing the worst… and wishing for something better.
It is equally, if not more crucial to maintain localized face-to-face executive relationships with C-level members of your suppliers, including CEOs/owners.
During periods of disruption, companies sometimes fail to realize that their own suppliers are facing those same disruptions, and are unable to operate as usual. They need to make judgment calls regarding which customers to prioritize and which customers should take a back seat.
This is especially true when they have to operate at less than fifty percent of capacity, which is precisely the case in India right now due to domestic lockdown measures introduced by the Indian Government. Unless you have a lot of leverage over a supplier—based on the fact you are their largest customer by spending, for example—the likelihood is that your only alternative for prioritization is to ensure you have a local resource who maintains a very strong relationship at the C-level with that supplier.
It also makes your supply chain more intelligent and flexible.
You’ll have up-to-date information so you can anticipate changes, and proactively respond to them, quickly, rather than waiting for something to break and then fixing it—by which stage it is usually too late, ineffective, and very expensive.
Peter Agnew
We are the ideal future advisory partner for our clients. As businesses embrace new global strategies to achieve competitive advantage, they require a partner that provides the expertise, flexibility, agility and global reach to guide and support their journey. A partner that reduces complexity, understands global markets, and offers realistic solutions. That partner is MPK.