In the past few years, many industries have seen effects of supply chain disruption. Labor shortages and difficulty obtaining hard-to-source components delayed or even halted production in construction, automobile, technology and other industries. The pandemic brought these delays to regular consumers, putting a spotlight on the impacts of the supply chain on every aspect of modern life. By evaluating the causes and impacts of supply chain shortages on production, manufacturers can find solutions that will minimize their risk.
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Causes of Supply Chain Shortages
Supply chain disruption can happen for a variety of reasons. An increasingly global marketplace for materials and components can introduce possible complications, particularly during periods of political or economic instability in the region controlling access. Manufacturers that keep minimal inventory are the most likely to experience delays due to these conditions.
Global interdependencies
In the present day, manufacturers are more dependent on global supply than before. A global marketplace means that manufacturers might draw supplies and components from all over the world. While the globalization of production offers opportunities to lower costs or source unusual materials, it can also increase delays when one part of the supply chain experiences a disruption. Although issues with the supply chain can be region-specific, many delays relate to interruptions in shipping processes.
Regional changes
Manufacturers that are dependent on specific regions for materials or parts may experience supply chain interruptions based on the region. Political instability can disrupt shipping and export activities, related to border access, regulations, trade conflicts and more. During the recent pandemic, many countries set new guidelines for foreign transactions. These guidelines affected the rate and volume of transportation and other activities requiring engagement with foreign entities, disrupting the global supply chain.
Economic instability
Economic changes can become a primary driver of supply chain instability. During periods of price volatility or inflation, manufacturers and suppliers may become wary of both producing and consuming. If a particular material or component rises dramatically in price, manufacturers may also increase their prices to offset the rise in overhead costs. The resulting inflation can change demand, particular for customers who worry about the effects of the instability on their own ability to make ends meet.
Material scarcity
Some high-demand materials are scarce or hard to source, whether it results from a low supply or artificial scarcity in the region that controls access. Access to certain metals or semiconductors featured prominently in recent supply chain shortages, due to limited production and increasingly limited access. Mining is still a complicated process requiring a lot of human intervention, which can be interrupted during strikes or government closures. In some cases, countries controlling the supply may use that control as a way to leverage higher prices or other advantages.
Lean inventory management
Trends toward inventory management focus more on efficiency, which can lead to delays when the supply cannot be renewed. Many manufacturers emphasize the importance of maintaining a just-in-time inventory, so they rarely have more than they need. This approach can help to reduce necessary space in a warehouse, cutting costs for storage. If manufacturers cannot replace their supplies when they need to, however, they may have to cut back or even halt production.
Supply Chain Impacts on Manufacturing
With a host of possible interruptions to the supply chain, manufacturers must try to anticipate changes and get through them as smoothly as possible. Supply chain disruption can lead to various negative effects for manufacturers, including:
- Delays in production, which can disrupt other parts of the supply chain
- Higher costs for materials with high demand and low supply
- Greater labor expenses in relation to production
- Decrease in customer satisfaction, which can lead to lower demand
Ultimately, the supply chain can make or break a business. When manufacturers fail to anticipate their supply needs in advance, they may find that their customers go to a competitor with a robust plan to maintain production.
How to Minimize Supply Chain Disruption
Because supply chain problems can lead to higher costs and fewer revenue-generating opportunities for manufacturers, minimizing the effects becomes the most important goal. By employing these improvements, manufacturers can identify the most common sources of their own supply chain interruptions and reduce their risk of major delays in production.
Diversify supply chain
Manufacturers that depend on a single supplier for a particular component are most likely to experience problems related to the supply chain, and diversification can reduce the risk. Diversifying the supply chain might involve considering multiple suppliers for the same materials, looking for local producers to minimize transportation delays, or bringing some of the services in-house. In some cases, manufacturers are using 3D printing to create components on their own, to minimize production times and limit the effects of supply chain interruptions.
Optimize inventory
Optimizing inventory has the potential to minimize the damage that supply chain delays can do to a manufacturer. Organizations should evaluate the potential for disruption in their supply chain and change their procurement strategies to suit. Maintaining an ideal inventory can allow production to keep running on time, without devoting space to manage an excessive supply. This process improvement may require the integration of supply, inventory and production systems.
Improve technology
Upgrading technology can help manufacturers anticipate supply chain disruption and eliminate other delays in processing. Many manufacturers have implemented supply chain technology into their processes, so that they can maintain real-time inventory management and increase the resiliency of their supply chains. Improving material handling equipment can reduce waste, which makes production more efficient and cuts down on the amount of supply a manufacturer needs to order.
Supply chain interruptions are a fact of life, but they can seriously disrupt a manufacturer’s production goals and timelines. Major supply chain issues can be difficult for manufacturers to anticipate, which emphasizes the importance of a robust management plan. By diversifying the supply chain, optimizing inventory and improving technology, manufacturers can find ways to reduce the effects of global shortages.
Author bio
Annette Harris has been with American Equipment for 23 years and in the industry for over 40. Her roles include Service Manager, Outside Service Sales and — most currently — Head of Sales Operations for American Equipment. She has a passion for service in the industry and loves to discover customers’ needs and find a solution for them.
SOURCES
https://www.allthingssupplychain.com/supply-chain-shortages-and-its-impact-on-manufacturing/
https://www.velosio.com/blog/causes-of-supply-chain-disruption/
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