Weathering the Storm: Supply Chain
People talk about the supply chain on all major networks, and how it is impacting the availability of products today. The situation is currently getting worse, with no signs of improvement.
• Chip reserves the manufacturers who use them are at an all-time low (down 80%). The last two years have resulted in approximately $500 Billion in lost revenue and is expected to remain constrained throughout 2022.
• Aluminum shortages are getting worse due to closing and reduced capacity at factories from increased utility rates and efforts to curb carbon emissions, not to mention one of world’s largest supply comes from Russia. The expectation is for supply to be 1 million pounds short of demand world-wide.
• Container storage space in California is not getting any better as the backup of approximately 100 ships on West coast facilities continues.
• Container storage space on the East coast is filling up. Some locations are creating pop-up storage locations for containers to continue offloading ships. Double digit (>10) ships holding for offload at a time is becoming the new normal on the east coast for the first time.
• Component prices for items early in the value stream are just reaching price increases from contractual obligations and will take months to roll through to end customers. Certain companies have already announced price increases due to inbound material price increasing.
• Items purchased from China will potentially be shut down at any time due to China’s approach on zero Covid cases or lockdown area.
• Lead times have increased, and there are currently no signs of them becoming shorter.
In order to improve or maintain the supply chain, management needs to review the following and act where possible:
• Update lead times in planning systems, be sure they include transport lead times and queues at ports if applicable
• Identify potential alternate sources of supply for critical materials
• Negotiate contracts for expected volume for the year
• Adjust safety stocks to avoid typical supply variation
• Make sure manufactured capacity has a labor constrained capability to better understand impacts of workforce availability
For more information on how to weather the current supply chain storm, contact Beckway’s supply chain practice leader, Stacy St. Julian, at firstname.lastname@example.org.