Supply chain expert, and SCS instructor, Mike Hanif explores big questions that will shape our economy in the months and years to come.
You may not think that supply chain management affects your daily life. But trust me: it does.
From shortages of paper products to the increase in prices for staple items like rice, flour, and petroleum derivatives, the health of our supply chain touches countless aspects of our lives. In fact, as the holiday season inches closer, you may rightfully worry about the availability of goods. Even the President of the USA recently addressed the nation on the state of the supply chain. As a Certified Supply Chain Professional (CSCP), I’m simultaneously concerned and fascinated by how supply chains have weathered the pandemic and the effect on the public. Here are some big questions, and related concepts and strategies, that supply chain experts like myself are mulling as we approach 2022.
Are we experiencing disruption or distraction?
The current state of operations and supply chain management has demonstrated many failure modes. Of course, the worldwide pandemic amplified those failure modes within the supply chain. As executives and shareholders place more emphasis on short-term gain over long-term success, it is quite evident that long-term capacity planning and strategy deployment is taking the back seat. But companies should not be distracted from their long-term goals; they must continue to focus on their competitive dimensions, such as cost, quality, delivery speed, delivery reliability, and coping with changes in demand and flexibility. Strategies, such as conducting a robust Failure Mode and Effects Analysis on an organization, can help companies address supply chain issues.
Are supply chain concerns transitory or transformational?
Many reports in the mainstream media suggest that the shortage in semi-conductor chips, the high inflation rate, and high job vacancies, are transitory. I think that this narrative needs to be examined critically. What is the definition of transitory? Normally when we think of transitory, we think short-term, i.e., months not years. The changes that the pandemic has brought to our supply chain is more than transitory, it is transformational. Successful supply chains have transformed their strategy and processes, shifting their strategies in regards to people, the planet, and performance. Those who have failed to adapt have been left in the dust, and in many instances, consumers have paid the price, both literally and metaphorically. This is no short-term affair.
How do we balance between supply and demand?
The management of supply chains has always been the science of balancing supply and demand. A supply chain has many tenants such as forecasting, capacity management, the design of products and services, logistics, distribution, and inventory management. These traditional functions were tested with the pandemic. As places of work were shut down and people were working from home, the demand for items such as computers, monitors, chairs, and other remote working requirements soared. The demand from these segments of business consumed the raw materials and components for their requirements. It introduced a strain in the supply to other segments in the supply chain. The result has meant good luck finding a desk or office chair in stock! Meanwhile, automobile manufacturers were hit hard as the shortage of computer chips reduced their ability to satisfy the demand for their products. Suppliers of chips are now reacting to this by opening more focused factories to meet the demand. But don’t be alarmed if the shortages start to affect industrial and farming equipment. Are you prepared for a shortage in food supply? A healthy supply and demand balance is critical.
Are we dealing with a supply chain or a consumption chain?
As we analyze all the constraints facing the processes that plan, source, make, deliver, and return goods and services around the planet, we should think differently about these processes. What if we consider the consumption chain? The consumption chain starts with the consumer and not the supplier. What if we turn the supply chain upside-down? Companies will need to encourage the concepts of Net Zero Product and the Circular Economy. Net Zero production goals will help reduce the carbon footprint of the organization. The Circular Economy goals will help reduce the amount of waste in organizations. Issues that are currently constraining organizations can be reduced, if not removed, with the careful use of the concepts of Theory of Constraints, which I explore in my course.
So…what might happen after the Pandemic?
The Transformed Organization
Organizations will need to deal with strained relationships between major countries like USA and China, and alliances and trading blocks. These geopolitical issues will force organizations to rethink their strategies of offshoring, nearshoring, and reshoring. Offshoring is having the source and making processes outside of North America. Nearshoring is putting these processes closer to where the consumption is. Reshoring is having these processes where the consumption is. This will create countermeasures for long lead times and port congestions. Essentially, organizations will need to use technology to enhance the speed and quality of operations, while diversifying their supply base. They can no longer rely on single or central sources of supply.
The Transformed Consumer
Consumers will continue to want lower prices as they normally do. So, competition for the consumers’ dollars will continue to drive changes within organizations. When interest rates start to rise, and if economic activities slow down, consumers will have less disposable income, which will also force organizations to pivot their strategies. In addition, consumers have developed an affinity for online and omni-channel shopping. This transformation of consumer behavior is here to stay and will only get more popular as time goes on. Consumers are looking for a reduction in prices and a reduction in their lead-time for goods and services; organizations will only be successful when they are able to match the behavior of the consumers to the capabilities of the firm.
Mike Hanif is APICS Certified in Production and Inventory Management (CPIM), a Certified Supply Chain Professional (CSCP), and a Certified Instructor. After graduating in Business Management and Electrical Engineering, Mike worked with several large organizations such as Canpar, Purolator, and Canadian Tire Corporation. During this time Mike added other academic achievements from Ryerson University, Humber College, Schulich School of Business, and University of Limerick. He held various positions during his more than 35 years within Operations and Supply Chain Management, and consults in various sectors of Supply Chain. Mike is an Accredited Training Associate with the International Association for Lean Six Sigma Certification. He teaches and mentors for Centre for Nimble Transformations, and the Leading Edge Group, and a is a former VP of the BOD for the APICS Peel Chapter. He is the recipient of the Excellence in Teaching award at the University of Toronto. The concepts discussed above (and many more) are part of the Certificate in Operations and Supply Chain Management program at SCS. Mike’s next course, Principles of Operations & Supply Chain Management, starts in January 2022.