How to navigate and overcome supply chain challenges

By |  November 2, 2021
 Photo: Lumigraphics/E+/Getty Images

A truck driver shortage is one dynamic imposing pain on the supply chain. Photo: Lumigraphics/E+/Getty Images

Businesses are grappling with recurring supply chain issues in the wake of a rebounding U.S. economy.

Faced with robust consumer and commercial demand, companies are beefing up costly inventories and wooing second-level suppliers to help close the gaps when shortages arise.

Product shortages and delays – and associated price hikes – have been no strangers to companies in recent years, thanks to international tariffs. The bottlenecked ports and shuttered production facilities of the pandemic, however, transformed an exercise in efficient materials distribution into a full-scale crisis.

“Everyone in manufacturing and wholesale distribution seems to be dealing with supply chain disruptions,” says Bill Conerly, principal of his own consulting firm in Lake Oswego, Oregon.

The economic rebound now underway in the U.S., while a welcome development, increased delivery pressures just at the time when many companies were starting to get things under control.

“Many companies are telling me the problem seems to be getting worse as pent-up demand creates additional pressures,” Conerly says.

And steep production cuts of early 2020 – instituted to obviate excess inventories – only made more difficult the establishment of reliable delivery patterns.

Broad effects

The supply chain imbroglio has engaged a broad spectrum of industries.

“Close to 95 percent of our members are experiencing supply chain issues,” says Megan Tanel, senior vice president of the construction sector at the Association of Equipment Manufacturers. “More than half say the issues are getting worse, especially on the agriculture equipment side. There are transportation bottlenecks, materials and component shortages. For the vast majority of our members, these issues are both domestic and global. And they are causing huge constraints on production.”

The construction industry rebound is not helping matters.

“According to Oxford Economics, our U.S. construction machinery output is set to grow at a double-digit pace in 2021, after contracting in 2020 due to the lockdown restrictions and weaker global demand,” Tanel says.

Labor shortages are one of the most persistent causes of distribution slowdowns.

“One banker told me that his four manufacturing customers could each hire 50 additional workers if enough applicants were to show up,” Conerly says. “When a company I work with in Portland was awaiting a shipment of brass from Los Angeles, it turned out there was no driver for the truck.”

The reasons for labor shortages are varied.

“Part of the problem is that people are not yet willing to come back to work,” Conerly says. “But the fact is that there were not as many pandemic-related layoffs in manufacturing as in, say, food service. A larger issue is demographics: Older people are retiring, and younger people don’t want to go into dirty, noisy factories. And then you have government cash payments for people who get laid off. And finally, there are childcare issues.”

Comments are closed