Get control of your supply chain

During Covid-19 some countries re-established border controls. It created very long queues of trucks. I spoke to an economist about this situation and asked him if this couldn’t spark nationalistic tendencies, such as step away from Schengen. His answer was “that cannot happen, because they need us as much as we need them”. It presumes all parties of international trade behave rationally and put trade and balance above all.

When it became obvious that inflation is out of control and part of the reason were disrupted supply chains, it was red flag. Producers stopped production because they missed one or few key components that were stucked in Ever Given ship, or in quarantined port in China or other reasons. All leading to supply delays and costs increases. Surprising reaction of supply managers was “we wait until situation gets back to normal”.

Europe has believed for long, that Russia will be reasonable, because they need our euros. Have we learned enough in the last 2 years, that stability, balance and trade relationships aren’t priority for many actors in world trade? Economists say, that European supply resilience is impossible, because it would be too expensive and take too long. Yes, exactly. Therefore we should start immediately.

We need short-term and long term steps

• First of all governments as well as companies need to know which are their critical supplies, need to know what happens if critical suppliers fail to supply (they can also fail due to accident)
• We need to know which suppliers we have available near shore immediately (regardless of quality or price difference)
• We need to have a long-term plan how to develop capacity, quality and productivity (costs) of these suppliers to the levels we need
• It can happen, that situation comes earlier than later and we are not fully ready yet, but even 50% solution is better than none temporarily. I am sure many of you have seen pictures of the Russian laptop, that they plan to build. Yes, it looks funny, but that is the way forward.
• One of the simpliest immediate solutions is proper safety stock — it seems that period of lowest possible stocks might be over
• Another quick solution is having suppliers for Plan B, Plan C, perhaps keeping their supplies minor, but still have the technology and capability available
• Here I might speculate, but an approach to outsource manufacturing and keeping just final assembly might be reconsidered in many companies — Europe has historically outsourced many heavy industries for environmental reasons to Asia, now we start to understand this is not going to save our planet — perhaps we might do better for planet if we produce it here, but apply new environmental technologies, that we have developed in previous years

Yes, this will take years, or even decades, but there is nothing worse than being unable to control our supply chain.