We are already nearing the halfway point of 2024. Doesn’t that just make you shiver a little (even though it’s finally getting warm out)? The year seems to be passing by very quickly, yet the one constant throughout the year has been the level of global disruption. Let’s take a look at where we stand in terms of global disruption and its impact on supply chain strategy, supply chain resilience, and supply chain planning. Nothing in this blog should be construed as political in any way; these global events are being examined with regard to how they impact supply chain planning and how we can anticipate and manage the disruption more effectively to build a more resilient supply chain.
Elections and Their Impact on Supply Chain Stability
Elections happen every year, but this year – 2024 – is different. Not only is the United States heading into a very contentious election season, but as TIME explains:
Globally, more voters than ever in history will head to the polls as at least 64 countries (plus the European Union) – representing a combined population of about 49% of the people in the world – are meant to hold national elections, the results of which, for many, will prove consequential for years to come.
How do elections impact supply chains? Some of it is simply uncertainty.
Additional considerations include:
- Will the elections in any given country result in civil and social disruption?
- Is the country in question home to a manufacturer of something necessary for your product?
- Do trains, planes, or ships have to pass through the border of a country in order to reach you?
- Will the policies of the newly elected administration have an impact on the costs, tariffs, or rules pertaining to your organization?
So much is in question that it makes it difficult to plan effectively with this much change in the air.
Geopolitical Conflict
When Russia invaded Ukraine, we experienced an almost immediate impact on the global supply chain. Prices for certain commodities went up; ships were stranded at port. Many companies were scrambling to find alternative solutions for procuring the raw materials needed to produce goods and alternative means of transporting those goods.
KPMG summarizes the situation:
The [Ukraine] war is exerting widespread pressures on global trade. Manufacturing giants such as Boeing and Ford are suspending operations in Russia. Hundreds of ships laden with wheat and corn have been stranded at Ukrainian ports, as the war restricts shipping in the Black Sea, leading to food shortages and inflation around the world. In turn, these price hikes directly impact a company’s raw material costs in select markets and transportation spend in nearly every market. The impact is felt across industries, from food and beverage, to high tech.
Now, the Israel-Hamas conflict is further jeopardizing global supply chains. Luis Juarez, chief executive officer and founder of BabelusAI, has provided an in-depth analysis of the risk created by this conflict and how it has already impacted the region. He writes of the threat to the Red Sea and the Suez Canal, which handle 12% of global trade and 30% of global container traffic. After the November 2023 Houthi attack on Galaxy Leader, a Japanese-owned cargo ship, some shippers started using the most readily available alternate route: the Cape of Good Hope. But as Juarez explains:
The Cape of Good Hope route is the most common alternative route for shippers who want to bypass the Red Sea and the Suez Canal. However, this route adds an extra 5,530 miles (8,900 kilometers) to the trip and can take up to two extra weeks to complete.
Read more about these challenges in the Wall Street Journal’s article, “New Disruptions, Geopolitics Hang Over 2024 Supply Chains.”
And because those ships are taking longer to get where they are going, the extra shipping time will have both an economic and an ecological impact. The additional 5,530 miles means more fuel is used, driving the cost of shipping up while also having a negative impact on the environment.
Building Resilience in Supply Chain Planning
Building a resilient supply chain makes good business sense, whether you’re talking about enduring labor shortages, extreme weather, or geopolitical disruption. As I revealed in my white paper, Revolutionizing Supply Chain Excellence through the Integration of AI and Machine Learning, supply chain disruption has become an expected part of doing business. “Supply chain disruptions” was a top-five high-impact issue for global CEOs in both 2022 and 2023 in the Conference Board Survey but drops all the way to 18th in the current survey.
The number-one adjustment this year is introducing AI and digital technology to improve performance tracking. Request a copy of my white paper to learn more.
So how do you build resilience into your supply chain?
Upskill Employees
As more routine processes are completed by technology, your team’s current roles may become obsolete. Yet the human element in supply chain excellence is more crucial than ever. Accenture identified the following skills needed for the future of supply chain excellence:
Tech Understanding and Data Literacy
As supply chains become more intelligent through the deployment of advanced technologies, businesses need individuals with expertise in AI and machine learning who can take advantage of these revolutionary capabilities and other technologies to solve the business’s problems. In other words, they will become the technology interpreters for the business.
Fewer Siloes, More Big-Picture Leaders
While deep specialization in procurement, operations, manufacturing, and logistics will always be important, there’s a growing need for more cross-supply chain thinkers – individuals who can solve for important outcomes like greater resiliency, enhanced business responsibility, and significant and sustainable cost reduction.
Elevated Supply Chain Leaders
As the lines continue to blur between the CFO, CSCO, COO, and CSO, the CSCO will be increasingly expected to connect the dots between integrated business planning, integration with customers, on-demand sales and service, talent rotation, and new skills, thereby driving greater collaboration and shifting from the role of doer to that of orchestrator.
Strategic Sourcing
Strategic sourcing enables the business by building relationships with strategic partners as a customer of choice. Many companies are adding new production locations, providing second- and third-tier alternative sources, and implementing technology to help manage the process.
According to WSJ, “Apple Inc. is shifting some smartphone production from China to India, toy maker Mattel Inc. is among companies expanding operations in Mexico, and even a Chinese manufacturer, Hisense Co., is looking to make appliances in Mexico for the U.S. market.”
Partner with a Supply Chain Expert
Even as you are ramping up your internal talent, the shortage in procurement and supply chain leaders is growing. To address the challenges associated with talent acquisition and retention in procurement, many organizations are finding it beneficial to outsource their procurement and planning needs to industry professionals.
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