When the COVID-19 pandemic began in early 2020, most experts were hopeful that the pandemic-related supply chain challenges would be resolved before 2021 and certainly before 2022. And yet, we are still here. While certain supply chain problems have been overcome, old and new challenges continue to come up, further disrupting the modern supply chain. It’s impossible to predict when this nightmare will end, but staying informed of possible challenges can help you get ahead of them.
2022 Will Still Have Challenges
As far as 2022 is concerned, there likely won’t be an end to the current supply chain nightmare. There are some significant contributors to the problem that have not yet been overcome. And we have seen in the past that challenges can arise that could not have been predicted. This suggests that certain supply chain challenges may not be able to be foreseen.
Ongoing Labor Shortages
A shortage of available labor has been an issue across every part of the supply chain over the last few years. Specifically, warehouses, long-haul trucking, and last-mile delivery companies have struggled to stay fully staffed. The rate of employees quitting is high in transportation and warehousing compared to many other industries, although it follows the broader trend currently known as the “Great Resignation.” Many of these workers are simply changing jobs and not leaving logistics altogether. However, there simply aren’t enough employees to go around. Companies will need to continue their efforts to attract new talent to the industry.
Supply Chain Bottlenecks
The busy holiday season is behind us, but that doesn’t mean bottlenecks have disappeared altogether. Throughout the last two years, there have been historic wait times for ships heading into ports all over the world. For example, in October 2021, more than 50 container ships were backed up outside of Long Beach and Los Angeles. This year, U.S. ports are still struggling from backlogs along with truckers not having enough drivers to keep shipments moving. There is some hope that these bottlenecks may resolve in the second half of the year, but we all know how unpredictable it can be.
Rising Freight Costs
Both trucking and intermodal transport costs rose to historic levels in 2020 and they continued rising from there. This is a culmination of all of the supply chain challenges that are currently being faced. For companies to combat these rising costs, they will need to reevaluate, restructure, and even re-establish partnerships with their carriers.
Inflation
You don’t have to have a degree in economics to understand what happens when huge demand meets unsustainable supply. Prices inevitably go up. Like it or not, we are entering a period of inflation. Companies have already seen this happen and it is only a matter of time before they pass these higher prices onto consumers, if they have not done so already. In 2022, executives will need to face this supply chain problem by asking themselves one question. How can they keep procurement costs low without compromising the integrity of the supply chain?
Importance of Sustainability
For most businesses, the importance of sustainability will be more of an opportunity than a challenge. But for companies that have not made any strides to sustainability so far, it will be difficult. This focus on sustainable practices isn’t only coming from consumers. Investment funds are also taking a stronger stance on this than ever before. With both consumers and investors pushing for it, companies will have to move faster to reduce their impact on the environment. There is an opportunity for companies to raise the visibility of their strategies and operations in response to this. This change will benefit the environment as well as satisfy the customer and reduce delivery costs.
How the Modern Supply Chain Can Overcome These Challenges
For a long time, organizations have addressed supply chain challenges with one thing in mind – cutting costs. In other words, how can they address the problem without spending much money? Now, the perception has changed. Businesses need to view these challenges as a real possibility for their business and plan accordingly.
Prepare for the Unexpected
Every business in the supply chain needs to be prepared for major, rapid shifts to happen at any time. Automating platforms and services can be very helpful for this. If your supply chain is inefficient on an ordinary day, there is no question that it will fail if and when a major disruption happens. If you are unprepared, your competitors will be a few steps ahead.
Be Transparent
Real-time analytics are essential to effectively managing your supply chain. Every single action that occurs within your chain generates data. Investing in data collection that allows you to capture and interpret the data in meaningful ways can help you quickly adjust to major problems while experiencing minimal disruption. Real-time analytics and insights will make your business more agile than ever.
Better Risk Assessment
It’s important to be agile, but it’s also important to be able to manage risks properly. In fact, over-optimizing your supply chain can be just as detrimental as allowing disruptions to happen. To establish better risk assessment, there are a few things that you can do. First, perform audits on your supply chain. You’ll particularly want to identify weaknesses, whether they are social, environmental, or political. You can also conduct stress tests to see where your suppliers’ weak points are and how they impact your overall supply chain. Finally, build out a supply chain emergency plan based on your company’s needs and experiences. Then, you will have something you can fall back on when the next major disruption happens.
Facing Supply Chain Challenges in 2022
All of these supply chain challenges will make for another tumultuous year for supply chains around the world. This can be a frustrating, difficult time but it can also breed opportunity. Companies that are able to adapt and find new ways to address these problems will be at an advantage. Hopefully, supply chain problems will become more predictable and manageable as the year goes on, particularly for those companies that are willing to deal with them head-on.
