For manufacturers and supply chains, there’s a wide difference between reacting to the pandemic, getting through it — and tackling what’s next.
To be sure, we’re not done with the coronavirus, not by a long shot. But bottlenecks and stockouts and other frictions show how creaky some critical junctures are in supply chains — and how advanced technologies might salve those points.
As reported by The Wall Street Journal, U.S. consumers have been busy buying a huge range of tangible goods — everything from big-ticket items such as cars and appliances to electronic devices (computers, phones, you know the drill — pretty much everything that keeps us streaming and working from home).
Prepping for a downturn is one thing; grappling with a downturn that never materializes and is in fact a boom is quite another.
In a general sense, the push and pull goes something like this: When enterprises anticipate demand is going to fall off a proverbial cliff, they pull back sharply on ordering new inventory. That pullback has strong ripple effects up and down supply chains, and can lead to production pauses as existing inventory gets worked down — and restarting it all back up takes time.
“Everyone was caught flat-footed,” said Jack Springer, chief executive officer of Malibu Boats Inc., per the Journal. To get a sense of the imbalance, the financial publication noted that consumer spending on those durable good items was up 6.4 percent, but the domestic production of those same goods was down 8.4 percent. As has been well documented, the great digital shift has given consumers the ability place orders for anything, pretty much at any time.
That translates into strains on supply chains, where production and orders lag demand. Lead times have lengthened, said the Journal. And where supplier bases might be fragmented — or spread out globally — the pain points become more acute.
As reported in this space earlier this month, the pressures are especially evident in Europe, due in part to the scarcity of the last mile. There’s been a dearth of empty containers in China that has quadrupled prices on sea trade routes to Europe in the space of eight weeks.
In a recent interview with Karen Webster, Dr. Paul Sheard, senior fellow at Harvard’s Kennedy School, said COVID-19 has shown just how vulnerable supply chains really are.
“The idea that supply chains could be disrupted because goods may stop flowing or borders may close — we didn’t really need to worry about that too much in the past,” noted Sheard.
High tech helps, of course.
In a separate interview, Niall Murphy, CEO of EVRYTHNG, told PYMNTS that assigning individual items their own unique identities and data can help streamline supply chain production and delivery efforts. Tracking it all across the cloud, can improve workflows (and payments, too).
“What’s always existed and is extreme in the consumer products industry, is the fragmentation of the supply chain,” he told PYMNTS. And data can help link where things are going, and indeed where they are. As for making sure the supply chains themselves are viable: as PYMNTS reported late last year, for many large enterprises, there may be an area of operations that is too reliant on too few vendors. Vendor concentration may boost risk.
As Taylor Allis, chief product officer at Avetta, told PYMNTS: “The ability to see and predict which vendors could be having fiscal issues, so you can quickly source and replace them if needed, is one of the biggest issues we’re seeing.” As reported, Avetta recently rolled out Avetta Financial Risk, a collaboration with Experian that allows organizations to access financial metrics about their business partners.
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