The global pandemic highlighted the importance of the supply chain and its effects on manufacturing worldwide. Rapid shifts in demand, coupled with economic instability and interruptions in transportation, led to extreme difficulties in accessing even basic goods. Supply chain shortages increase costs and production times for manufacturers. With this information, businesses can determine how to minimize the effects of supply chain disruption.
What Causes Supply Chain Disruption?
A supply chain interruption only takes a failure in a single point of the process between the collection of raw materials to the delivery of a finished product to a customer. As such, supply chain shortages can come from a variety of causes, including:
- Economic Instability: A regional economic change can affect demand, as well as the supplier’s ability to produce materials, components or finished products.
- Changes to Trade Regulations: Changing political environments can affect the cost or efficiency of trade, which can decrease the viability of certain supply chains.
- Labor Shortages: Low availability of properly trained staff can put a halt on assembly and other processes needed for manufacturing or increase costs to find acceptable workers.
- Increasing Raw Material Costs: High demand and low supply can cause raw material expenses to increase dramatically.
- Logistics Issues: Transportation of materials or goods can cause delays due to closed ports, strikes or other interruptions.
- Shifts in Demand: Fluctuations in demand due to consumer behaviors can force manufacturers to source more material or try to keep systems running during an economic downturn.
- Dependence on Foreign Suppliers: Global markets rely on steady supplies worldwide, which increases the likelihood of interruption due to these factors.
Even the most robust supply chain can encounter disruption due to these causes.
How Do Shortages Affect Manufacturing?
Not being able to get raw materials or products for manufacturing, or failing to deliver finished products on time, has several effects for manufacturers:
- Longer Production Timelines: Waiting for a delayed delivery increases the time between a customer ordering an item and receiving the finished product, which can increase costs for the manufacturer.
- Increasing Expenses: Manufacturers dealing with low material supply or labor shortages will likely have to pay more for each item produced, often leading to higher costs for the consumer.
- Negative Customer Satisfaction Impacts: Customers who must wait months for a product, or choose an alternative due to unavailability, may look for other manufacturers who can provide a more reliable option.
Shortages can put a strain on businesses already working with lean margins.
How Can Manufacturers Minimize Supply Chain Shortages?
Supply chain disruption creates obstacles for companies, but adjusting the supply chain can make significant improvements. By integrating technology to improve supply chain visibility, adjusting inventory management and creating a resilient supply chain, businesses can avoid many of these problems.
Improve Supply Chain Visibility
Manufacturers who embrace technology can find faster solutions to supply chain issues or even predict them in advance. AI can evaluate a business’ supply chain and identify weaknesses, allowing time to build solutions that handle anticipated changes to supply or demand. Companies can automatically manage inventory, order more supplies and arrange for crane maintenance on a schedule.
Adjust Inventory Management Strategies
Inventory management should be efficient so that businesses do not store more than they need but do not constantly run out of materials and components. A robust, electronic inventory management system allows companies to immediately assess what they need and compare this data to production timelines and forecasts. Automated ordering makes a seamless process to maintain inventory.
Build a Resilient Supply Chain
Dependence on a limited supply chain increases the likelihood of disruption, highlighting the importance of diversification. Businesses should build relationships with multiple suppliers, especially those located near the warehouse or manufacturing plant. Fewer stops along the line often translate into shorter production timelines and lower costs.
Supply chain disruption happens on occasion, and stronger companies will have a way to address the common causes. By evaluating individual risk and finding ways to diversify the supply chain, businesses can pave the way for effective competition despite supply chain issues.
