Evolving Supply Chain: Just in Case!

For the last 2 years, we have read and have been discussing supply chain disruptions whether it is the Suez canal 'Ever Given' crisis or the semiconductor shortage issue. What are these and are they going to persist and if so for how long! These are a few of the questions that are hounding this industry.

The blockade of the Suez Canal has not only affected the shipping industry but also affected various industries and businesses globally such as retailers, supermarkets, manufacturing, automobiles, etc. The blockage had caused disruption to deliver?over $9 billion worth of goods each day which is equivalent to $400 million worth of trade per hour. Since it had been stuck for over 6 days, an approximate $54 billion trade loss had been estimated.?

Similar to the Suez Canal crisis, the global chip shortage has affected various industries such as smartphones, medical devices, and automobiles. What with pandemic bringing in lockdowns and in turn, the rise in demand for electronics, the supply chain became overwhelmed. Many companies started to build up a backlog and expand their production capacity. Even after the lockdowns were lifted, the majority of the logistics supply chain could not cope with the congestion in the ports as they did not have the facility to handle such situations. According to research by Susquehanna Financial Group, the lead time—the gap between the ordering and delivery of semiconductors—increased from four days to 22.3 weeks last month as compared to October. Intel, Samsung, Taiwan Semiconductor Manufacturing Company (TSMC), and many such companies have announced new chip fabrication plants over the past few months but these will take years to build.

This can make the shortage last longer than anticipated and in turn, is definitely going to impact us, consumers. We are already seeing the rise in prices of increasing costs of electronics, longer waiting time, unavailability of goods, and so on.

Why is this happening, was the supply chain at fault or Governments or the Virus!

Let us look at the Supply Chain currently in place globally [Please feel free to put in suggestions as I know I may not have captured all the parameters in my mindmap]. And also how we can address the broadening gap between demand and supply. Please excuse the watermark on the image.

If we analyze the brain map then there is one point very clear: that the 'Just in Time' model is not going to work anymore, period. Keeping production/manufacturing hubs in BCCs and supplying globally has its own challenges, complexities, and now added unpredictability due to global events in recent years. But that does not mean I am supporting the move completely away from BCCs but rather a more analytical and predictive approach to the problem.

As is evident from announcements by Intel, Samsung, TSMC and many others having fabrication near to the demand regions will cut the challenges to a certain extent. But the problem of the Just in Time model will still persist. So with the introduction of new technologies such as AI/ML, Big Data, Blockchain, and so on, there is a new model or I would rather say that opportunity for an older school of thought 'Just in Case' model to be realized.

Yes, yes I know many of you will say that these occurrences are one in million or so! And I would agree with it but isn't supply chain resilience the main focus here and if so then we need to explore newer methods to keep it so. Let me know your thoughts!

P.S. Next article will elaborate more on the usage of Digital technologies and the advent of Autonomous Supply Chains. Stay tuned!