If there is one thing that is certain about a crisis, it is that there is rarely anything that is certain about how, when—or whether—it will end. But that lack of certainty did not stop these experts from predicting the future of the supply chain crisis in the new year.
The Four Ps of the Supply Chain Crisis
Sridhar Tayur, professor of operations management at Carnegie Mellon University’s Tepper School of Business, said the future of the crisis depends on these 4 Ps: Product Prices, People and Politics.
- “Product availability will continue to be difficult, especially in semi-conductors and in items that require them as components.”
- “Prices of supplies will continue to be high, and may even go higher in some raw materials, and companies will likely have to pass some of these onto their consumers. Inflation is here to stay for a bit and is not transitory. Wages may have to be higher.”
- “People (labor) shortage, due to new (and better) opportunities absorbing existing talent as well as [a] shortage of appropriate STEM skilled ones will continue to be an issue.”
- “Political decisions related to mandates, inflation, multi-national trade policies and immigration (both high skill and low skill) will have a sizable impact. Companies should be alert to these moving pieces as well as actively lobbying to gain advantage.”
Impact On Consumer Loyalty And Trust
Swapnil Jain the chief executive officer of call center company Observe.AI said that, “Product unavailability due to ongoing supply chain issues will negatively impact consumer loyalty and trust in 2022 and beyond.”
He noted that consulting and research firm Forrester “predicts brands will lose 50% of sales on backordered items unless they compensate with [a] proactive customer experience. Managing this churn puts tremendous pressure on contact center agents who must not only deal with angry customers but also recommend alternatives to products stuck in the supply chain.”
Demand Will Exceed Capacity
Paul Greifenberger is the president of the Americas at FarEye, an intelligent delivery management platform. He predicted that, “Demand for shipping and home delivery will exceed industry's capacity to deliver due to consumer's increased appetite to spend on physical goods.
He said that companies that embrace technology in order to get the most from their drivers and other assets, “will more successfully and profitably meet the challenge.”
Stu Bradley is senior vice president for fraud and security intelligence at analytics company SAS. He noted that, “While supply chain fraud is nothing new, it will be a major challenge globally in 2022 as the ongoing pandemic continues to disrupt everything. Businesses have focused on the agile activation of alternative supply sources and organic versus well-planned supply chains.
“While concentrating on continuity and survival, businesses have de-emphasized risk management for supply chains. Fraudsters and criminal rings won't miss the opportunity to exploit this situation. Analytics will drive supply chain transformation as organizations strike the balance between continuity and survival on one hand, and risk management and fighting fraud on the other,” he concluded.
Scott Gravelle is the founder and president of Attabotics, a robotics supply chain company. He believed there will be an over-reaction to the supply chain crisis. “Based on fear of not having enough inventory, the larger retailers will order significantly higher quantities of what is available, putting deeper stress on manufacturers while making it harder for medium to small businesses to provide goods to consumers.
“In turn, this will put a strain on manufacturers, which will then cause higher prices, decreased selection, and longer delivery times, reducing the selection of goods. The market will be flooded with things consumers don’t want, with even more limited selections of goods and services. Downstream this will impact manufacturers as their focus will be on these higher inventory demands, distracting them from producing goods that consumers do want,” Gravelle said.
“Businesses of all kinds will invest in supply chain and logistics, including tracking, last-mile logistics, and e-commerce,” according to Lindsey Gray, a partner at early venture capital firm Two Sigma Ventures.
“Covid-19 exposed vulnerabilities in the supply chain and the continued meltdown combined with increasing consumer demand for real-time delivery will drive more investment in logistics and e-commerce capabilities. Retailers like Sephora are launching single-day delivery to compete with Amazon and get ahead of supply chain issues, and more companies will follow suit—including small businesses,” she observed.
Upgrading And Adopting
Mike Edgett, product marketing director at Sage thought that, “Businesses will look to upgrade and adopt the latest technology solutions for supply chain management...”
“The businesses that adopt these technologies will experience increased visibility and transparency into the entire operations process—an invaluable tool when managing such an unpredictable supply chain,” he said.
Advice For Business Leaders
Jonathan Eaton is the principal and national supply chain practice leader for audit and advisory firm Grant Thornton. He recommended that business leaders take the following 12 steps to address the impact of the supply chain crisis on their organizations:
- Recalibrate supply chain strategy and focus on stability
- Rationalize underperforming stock keeping units (SKUs) and segment the customer base
- Quantify supply chain cost to serve and differentiate order fulfillment
- Conduct make versus buy analysis and augment with external capacity
- Eliminate high priority operational gaps
- Proactively and creatively address labor constraints
- Optimize the network based on strategy and customer needs
- Integrate demand and supply side planning
- Deploy a strict category management mindset and source your spending
- Identify failure modes and proactively manage supply chain risk
- Build business continuity planning framework into management cadence
- Accelerate investments in digital capabilities and automation