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Staying Hyper-Aware of Supply Chain Challenges

You do not need to be in the manufacturing or distribution industry to understand that supply chain challenges are in great supply.
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One doesn’t need to be in the manufacturing, distribution, or retail industry to understand that supply chain challenges continue to be in great supply! As the world tries to establish a “new normal” following the multiyear pandemic, the global economy remains strongly dependent on a relay system of great complexity. Many companies now realize that supply chain challenges are not going away and in some instances have escalated.

Once an overlooked component of business operations, the supply chain continues making headlines, thanks to the COVID-19 pandemic and its forward-reaching consequences, giving consumers a free economics lesson as they face empty store shelves and an inability to purchase on demand. According to the U.S. Bureau of Labor Statistics, food prices were up 10.8% for the year ended April 2022, the largest 12-month increase since November 1980.[1] "These rising costs, delays, and product shortages continue to bedevil businesses large and small, and confront consumers with an experience once rare in modern times: no stock available, and no idea when it will come in.”[2]

What consumers may not understand are all the reasons behind today’s supply chain challenges and why they are so complex. Almost all parts of the supply chain, for many industries, are experiencing the bullwhip effect,[3] causing disruptions to every facet of the supply chain. If one link in the supply chain bends or breaks, the rest of the components could grind to a halt and the unpredictability of post-pandemic consumer spending trends doesn’t help.

Additionally, the Federal Reserve continues to promote inflation through increased rate hikes, leading to reduced consumer trust and spending confidence and a potential recession or worse.[4] As a result organizations, especially manufacturers and retailers, must continue to be hyper-aware of their supply chains and develop strategies to adapt to changing consumer sentiment and buying behavior. This article focuses on the key components of a supply chain strategy.

Supply Chain Transparency

The aftermath of the COVID-19 pandemic, severe weather events, nationalist policies, and geopolitical disruptions, such as the prolonged conflict between Russia and Ukraine, continue to impact the supply chain. The consequences of a drawn-out war include the possibility of a global economic recession and increased socio-political tensions. “The trade disruptions, inflationary pressures, and security concerns have started to weigh on consumer and investor sentiment, reduce real incomes, and depress global demand for imports.”[5]

Manufacturers and retailers must remain aware of and study these events to prepare for everything including COVID-19 lockdown protocols in China, energy and commodity price variability, extreme weather events, and port and warehouse congestion. When core commodities are concentrated in a geographical area a world away, a supply chain manager must now take into account any disruption to those resources to minimize the impact on manufacturing operations.

Companies are struggling with a host of supply chain visibility challenges, such as disparate management systems and siloed teams, lack of real-time data on supply chain operations, and poor communication between supply chain stakeholders.[6] Maintaining organizational transparency is directly related to the next key challenge—data. Organizations are increasing investments in advanced analytics and capabilities to capture and evaluate data from disparate sources to make more informed decisions which are critical as pre-pandemic trends are now often unreliable. Additionally, companies are investing in the internet of things (IoT) and blockchain ledger technologies that enable surveillance capabilities requiring more real-time data.

Focus on Supplier & Business Partner Data

As previously noted, investments in advanced analytics and technology tend to be aimed internally. Since much of the supply chain, by definition, relies on the interconnectivity of multiple suppliers and business partners, the same focus, quality, and governance are needed for vendors and business partners. Organizations must be sure that internal data and information from outside suppliers share the same criteria or issues like inventory management will be skewed, which impact sales, labor workload, and other components of the supply chain.

Focus on Core Processes

Over the past 20 years, most company supply chains have evolved into a complex and disparate international network of suppliers, manufacturers, processes, and technologies. This ecosystem was based on just-in-time (focus on keeping minimal inventory) and lowest product cost (produce at the lowest possible cost) management principles. The COVID-19 pandemic and its after-effects highlighted that current ecosystem and management principles are somewhat brittle and inflexible and that companies might need to rethink and reengineer a new ecosystem and evaluate core processes that are more flexible and resilient, while still maintaining cost efficiency.


Focus on Talent

Recruiting and retaining talent is critical for all organizations, but the “war on talent” is disrupting the supply chain from end-to-end. All industries are scrambling to fill positions and competing for skilled workers can get expensive. The Bureau of Labor Statistics reports that wages and salaries increased by 4.7–5.0% for civilian and private industry workers over the 12 months prior to March 2022.[7] Workers are also demanding more schedule flexibility and that employers be more conscientious about environmental and social issues. Having to revamp compensation structures and adopt a corporate culture to the evolving needs of workers is a supply chain disruption that will demand consistent monitoring.

A key component of manufacturing supply chain disruption concerns skill gaps and a shortage of available workers. All industries, notably manufacturing, must develop a strategy to ensure that their workforce has the skill sets to move the industry forward. Manufacturers must use new technologies and virtual learning systems to reskill and upskill workers and boost productivity and worker knowledge, while establishing a pathway for more rewarding careers across the supply chain.[8]

Sustainability, Environmental, & Social

Environmental, social, and governance (ESG) concerns are impacting supply chains for many industries and will continue to do so. Companies are currently occupied with managing and navigating the ebb and flow of a post-pandemic landscape but should not lose sight of other supply chain challenges on the horizon. At this time, there is an intensified interest among businesses, governments, and academics to examine environmental, social, and governance (ESG) and supply chain issues. In today’s hyper-globalized economy, ESG measures are being explicitly incorporated into a firm’s end-to-end operations throughout its entire supply chain.[9]

Climate, governmental, investor, and societal changes and trends are rapidly focusing on a company’s sustainability practices, directly impacting decisions related to all aspects of a supply chain, not just sustainability. Not only will there potentially be new regulations and a new generation of skilled workers, but investors will desire that organizations be mindful of larger purposes like inclusion and diversity, social injustices, and the environment. Now manufacturers must adapt their corporate cultures, reengineer operations, and carefully vet vendors and partnerships to meet ESG standards as well as new post-pandemic norms.

In the past, supply chain strategies operated within a historical framework and were more predictable by studying trends, but post-pandemic times signal a new supply chain paradigm whose history is still being written.

How FORVIS Can Help

As supply chain challenges continue to expand and evolve, look to the professionals at FORVIS to help develop proactive strategies to keep your organization on pace. By teaming consultants from the manufacturing industry with our tax, advisory, and assurance professionals, FORVIS is uniquely able to collaborate with your business to address elements specific to your supply chain and business goals.

In FORVIS, you gain resources and innovation to help you with inventory management, data analytics, workforce strategies, and adopting ESG programs. We look forward to learning how we can best help you. For more information please reach out to a professional at FORVIS or fill out the Contact Us form below.












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