2020 will be called the year of supply chain disruptions. A new wave o supply chain analysts emerged, guessing when it would end without luck. Many supply chain consultancies and other solutions providers also emerged, who promised to solve or ease the supply chain disruptions. But heck, we are already dealing with the supply chain disruption for full two years. And still, we do not see any end here.
Every organization with wide-opened eyes looks at how to solve those issues and what to do and expect next. This article will answer the question: Who is to be blamed for the disruptions. Moreover, we will identify short-term and long-term solutions to solve those problems. Quick spoiler: COVID is not the primary reason global supply chains suffer. Scroll down to find out more.
The anatomy of global supply chain disruption
Who needs to be blamed for the supply chain disruptions? You most likely will receive the answer: CD-19. But this is, of course, not true. In reality, global supply chains were stretched for many years. And those who really need to be blamed for that are all global players who invested in creating efficient supply chains for extra profits. Those efficiencies push logistics companies and other supply chain participants to make their operations as lean as possible. If you looked at every study done in logistics or pools where shippers provide what they need to get from logistics service providers, you would see two crucial things: Lowering costs and improving delivery times and quality. We have seen the same answers for the last decade or so. Therefore, all asset-based logistics companies were forced to build more extensive warehouses and bigger ships, to automate their operations and press their employees to do more in a shorter period. As a result, every asset-based company’s employees were forced to work long hours, drive more kilometers, and sacrifice life balance.
And yeah, we need not forget that asset-based companies, nevertheless creating all of the operations efficiencies, were operating at a peanuts profit margins. Of course, some intermediaries get the fixed commission fees, but small or medium asset-based companies, in most cases, were struggling for survival. And in fact, they are still struggling (excluding container lines).
And then, of course, we need not forget that consumers are putting even more firewood fueling the global supply chain disruptions. We all have adopted cheap merchandise, fast delivery times, individual merchandise options, etc. Without actually realizing that someone else pays for our convenience.
And who pays the toll?
Well, the toll is paid by cheap workers from developing countries. It’s also paid by each supply chain participant working at unimaginable working conditions so that we would get the newest Nike snickers at the door the next day of ordering.
In other words, the supply chain disruptions are happening not because of the pandemics but because of the labor shortage issues. Pandemics are the consequence, not a cause. I have many friends and colleagues working at manufacturing and logistics companies in the operational and procurement parts who have either quit their job or are looking for new options.
The same situation is seen in almost every logistics company (you can read more on the logistics issues here). Even the new hybrid initiatives of amazon (amazon relay, etc.) and transportation companies (owner-operators, leasing options, etc.) are facing problems related to churn rates. Individual entrepreneurs leave when they understand how little the pay is compared to the working hours.
And if someone believes that this disruption will end soon, believe me, it won’t. We need to understand that the modern lifestyle and changing geopolitics will create other disruptions in the future. It is a new reality, and we need to learn how to deal with those situations. Moreover, new generation employees will pick influencers’ careers rather than a supply chain career. So we need to fix this situation fast.
Four instant solutions for solving supply disruptions
I believe that disruptions and labor shortages can be solved with the help of technologies in the long run. But for this to happen, we still need to go a long way, wherein we will have even more problems related to employee shortage, as digitization is still a human labor-intense process. Moreover, different skill sets are needed to operate modern supply chains, where again, we will need more time to develop those skills.
Some companies think that disruptions can be solved with nearshoring initiatives. Those initiatives are good, but they will even deepen the existing employee bottleneck in the short term. Just think how many citizens of China, India, and other developing countries develop the merchandise. Do we have them in Europe, the USA, or Australia? I do not think so.
Those who follow me know that I’m a big fan of technology. And I believe that every company needs to invest in technologies. Still, I will be frank with you today, existing technologies can help minimize supply chain risks and make your employees a little more efficient, but this is not a panacea yet. For the panacea to happen, many technologies need to be combined to solve existing labor shortage issues: AI, automation, autonomous trucks, ships, and aircraft, big data, IoT, robotization, 3D printing, etc.
Moreover, each supply chain participant, including consumers, needs to be connected to the system. We can only then move away from push and pull planning systems to AI-driven supply chain planning, eliminating waste and ensuring fully automated deliveries.
And before technologies come to the help, organizations need to think about other short-term solutions, which we will discuss further in the article.
Assessing labor shortage issues
As Bill Gates once said, information is the king, and organizations working in the supply chain need to understand that employees are the new king. Therefore, organizations need to find ways to retain and attract the best employees quickly.
Here, logistics companies are usually taking the easiest way of increasing salaries and starting to work on employers’ branding. It’ is good, but before increasing wages and kicking off branding initiatives, I recommend assessing your current employee’s state (it’s better to hire a third party to do this to avoid misguidance).
Secondly, organizations need to be super clear about what employers fit best into the culture or what culture to create for employers to fit better.
Finally, organizations should start to pay attention to different trade-offs and create short-term and long-term retention and branding plans when they get the whole picture (you can read more about this here).
Do not underestimate assessments; they can help you avoid unnecessary employee losses if done correctly and quickly. As in some cases, only minor work-life balance improvements or perks can often stop them from leaving.
If you need help with assessments, click here.
And do not underestimate branding initiatives, as this is the only thing that can help your organization retain and attract the best employees in the long term. However, it’s essential not to forget that employers’ branding is not only related to showing how good it is to work for your organization. Instead, employers’ branding is related to actually making your organization the best place to work for certain types of employees and then communicating with your key audience properly.
Again, hiring a third party to help you with the employer’s branding is highly recommended. As it’s a tricky initiative, where marketing, Human resource departments, and C suite need to collaborate, therefore a moderator can help achieve results faster.
If you need help with branding, click here.
Long supply chains, high consumption, and next-day deliveries are putting an unimaginable burden on the global supply chains. The shorter the last miles delivery cycle, the more hours someone needs to work ensuring your goods reach the destination on time. And more sourcing locations means more handling operations and vulnerabilities for future disruptions.
Sustainability plays a crucial part in solving the above issues. And here, I do not talk about production and logistics sustainability; they are, of course, super important for the environment. But to solve existing disruptions, we need to think about consumers’ related sustainability, which aims to lower consumption levels and build awareness that next-day delivery and excessive inventory cost extra.
I know that modern consumers have become so addicted to cheap merchandise delivered the next day and that delivery times and product availability are directly linked with service levels. But look, if this continues, service levels will drop anyway, as there will be no one to deliver the merchandise. So why not work out this situation today by educating your customers and ensuring that they understand that fast delivery and excessive inventory have its cost.
Moreover, if you think that customers will never pay more, it’s not true. Customers are willing to pay more, but for this to happen, they need to receive more value, or they need to be taught to understand why they suddenly need to pay more. Again, it can be achieved with the help of public relationships and marketing activities.
If you need help with this, click here.
Doing more with less.
Many Logistics organizations have internal inefficiencies that can be worked with more innovative business ways to achieve more with less.
For example, if your organization could shorten your sales cycle or find ways to reach more leads with the help of marketing, you would need fewer sales employers. Or, if you could find new ways to arrange your sales organization with lesser qualified employees, you would again speed up your sales development with lesser qualified employees.
We recommend performing your sales and marketing audit to find out if there are any efficiencies to be found which could speed up sales, lower labor costs, and get more business faster.
If you need help with audit, click here.
And Of course, there are many other ways to speed up the productivity of your existing employers by using all of the automation technologies available today. Moreover, those technologies clean repetitive tasks from the process, which is favorable for your employees and your customers as many operational errors can be avoided.
If you need help with technologies, click here.
Stipulating Collaboration between channel partners
Today, everyone in the industry is in conflict and blames each other. For example, container Carriers blame freight forwarders, as they believe they take a too big margin and provide no value and vice versa. Shippers blame logistics service providers for the cost increase. Trucking companies blame brokers for the same reasons and vice versa. As a result, big companies are looking for ways to eliminate the competition and become even more significant to achieve leverage. Finally, shippers are fighting with each other for capacity and better freight prices, leaving smaller companies behind.
But this eventually will stipulate future bottlenecks. As all value chain participants are equally important, neither can coexist without another (at least for now). For example, who will buy used trucks if small players are eliminated? If lesser profitable commodities are banned from using container carriers, who will fill the capacity after the disruptions are over? Will container carriers be able to provide quality door-to-door operations without the help of freight forwarders? And we could find many more unanswered questions, which led us to the conclusion. That Collaboration is a way better option than fighting.
For me, it’s crystal clear that If we all had more trust and transparency, we would have lesser inefficiencies, better space utilization, better predictability, lesser pollution, and more happy workers in the industry.
I won’t lie is not an easy job, but every organization needs to look for ways to craft Collaboration. If organizations can’t achieve this individually, you can form moderator organizations or look for technological solutions which could help you with that.
If you need ideas on this topic, click here.
Thank you for reading; this is it for this week. Stay tuned for more and subscribe to the Logistics Newsletter.
You can subscribe by pressing here.
About the Author: