Human civilization was built on supply chains. Be it the silk route that connected Asia to Europe or today’s phone in your hand that is designed in one place, produced in another, sold in a third; supply chain makes the world go round.
In today’s world of 1-day deliveries, and always-available retailers, supply chains are even more crucial and that makes disruptions even more adverse. Disruptions come in all shapes and sizes. There could be labour shortages, excess supply when there is low demand, excessive demand etc.
But the biggest disruption to supply chains has been Covid-19. And what’s worse, it wasn’t alone.
Supply chain disruption is possibly the most pertinent example of the butterfly effect we see in today’s world.
In 2021, car sales dropped 18% during Diwali, a time when they usually go up. In Diwali 2021, people wanted to buy cars. There was no demand shock. It was a supply shock. Manufacturers were not able to produce them fast enough. Why? Because of the shortage of semiconductor chips which is essential in the manufacture of cars. Semiconductors are made from silicon. There is a global crisis of silicon currently. Some industry experts say the chip shortage will continue until 2023 which is bad news for the auto sector. This is because even if manufacturing reaches pre-COVID levels, it’ll take time to cater to every auto manufacturers’ needs.
As if COVID wasn’t enough, this year also saw the Suez Canal crisis of March 2021. One container ship was grounded, blocking the canal. Hundreds of ships were stranded affecting the global supply chain including the semiconductor chips mentioned earlier. This caused a domino effect, wherein, ships either had to wait for days for the canal to clear or take longer routes. Longer routes meant longer transit times and delays further affecting the supply chain. This not only affected the supply chain but also our environment. Longer routes meant higher fuel consumption by ships which inadvertently affected our environment through more carbon emissions.
The Suez Canal crisis was however not the only shipping crisis of this year. As of November 2021, 111 ships were clogging Los Angeles ports, waiting to unload. This issue was brought about because of the increased demand for products as COVID restrictions have eased in the US. Similarly, as demand increased, the ports were crowded with ships. Since these ships are unable to unload, manufacturers and retailers aren’t able to receive parts or products on time. What do we call this? A supply chain crisis.
Another rather grave image is when recently there were long queues outside petrol stations in the UK. The shortage of truck drivers meant that fuel couldn’t be transported to these stations. While this situation can be attributed to Brexit and the fact that European drivers can no longer work in the UK without proper visas or documentation, the pandemic has worsened the situation. With travel bans still in place, it has become more difficult for foreign nationals to travel to the UK and get their documentation in place.
When we look at all these examples, there is one thing in common. Most of the crises that affected 2021 did not stem from COVID itself but systems not in place to handle the demand, and more importantly, the supply shocks.
But all is not glum.
A lot of manufacturers realised that there are no shortcuts. The supply chain is a very complex system and will remain to be. Vaccine manufacturers had a contingency plan in place and stored raw materials so that there is a lesser chance of running out. Collaboration is also extremely important.
From embracing the complexity of supply chains and having a contingency plan to being more flexible and creating unique solutions, suppliers are taking a leaf out of vaccine manufacturers’ books.
Moreover, 2021 was a great year for innovative thinking. The supply chain crisis didn’t change the fact that online retail, health and engineering innovations took a step ahead.
Things turned on their head. Now, you didn’t go to things you needed, they came to you. Entrepreneurs and local players saw an opportunity in adversity. New jobs were born. New roles flourished. The show went on, albeit slowly at first. The so-called ‘new normal’ was accepted faster than all of us imagined. There was a surge of cloud kitchens, who in turn depended on cloud deliveries, who in turn depended on servers. A supply chain that had been built but not built up, had been now. The future was fast-forwarded into.
Self-driving cars also played an important role. In Wuhan, China where the pandemic first broke out. Self-driving vans were the answer when millions of people were stuck in their homes. The vans would deliver essentials to their homes. The empty roads during the pandemic only made it easier for this task. Hence, engineering innovations such as these were able to come to the forefront. Self-driving trucks are also being tested. The need for these trucks were brought about by the truck driver shortages during the pandemic. The companies have been able to fastrack their plans and we could even see it roll out in the market as early as 2023.
But possibly the biggest positive is the health sector. 2020 and 2021 taught us that the current health sector is not enough to handle a COVID level crisis. With better contingency plans and a lot of money being put in for medical research we may leave the pandemic with a much better health sector than before. This would also mean having better supply and contingency plans for essential equipment such as oxygen tanks, PPE kits, medicines, vaccines etc.
So is the supply crisis over? The short answer is no. But, the situation is improving. And there are positives from this difficult year as well. Suppliers have learned from the mistakes they have committed and have adapted to the situation.
And with this, we can say with confidence that the supply chain will only get better from here. Here’s wishing all supply chain professionals a very successful and happy new year ahead!
Published on 31 Dec 2021
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