Managing Supply Chains in a Volatile World

Supply chain volatility certainly isn’t a new concept, but it is one that’s come to the forefront in 2021 as companies struggle under the pressure of supply shortages, labor constraints, rising freight costs, and fluctuating transportation capacity.

Defined as unplanned variation of upstream and downstream material flows resulting in a mismatch of supply and demand, supply chain volatility is an ongoing challenge for modern supply chain managers, with even the most accurate predictions and forecasts not always able to ward off the disruption that’s lurking around the next corner.

Right now, the Washington Post says U.S. companies should be keeping a watchful eye on what’s going on overseas, where factory shutdowns in manufacturing centers like Vietnam and Bangladesh are exacerbating existing supply chain issues.

“The overseas work stoppages are just the latest twist in almost 18 months of pandemic-related manufacturing and transportation woes,” David Lynch writes. “The new infections come as two of the largest U.S. railroads last week restricted shipments from West Coast seaports to Chicago, where a surge of shipping containers has clogged rail yards.”

Addressing Railyard Congestion

Port congestion and ocean container shortages have claimed a lot of the supply chain-related headlines over the last few months, but now a brighter spotlight is being put on the nation’s railways and railyards. The Washington Post says inland rail yards have emerged as the latest pain point for companies trying to move goods internationally. 

“Trains full of clothing, computers, furniture, and appliances have been streaming for months into Midwestern hubs,” it says, noting that when the system works as designed, a container is lifted from an arriving train and placed directly onto a wheeled chassis, which is then hauled away by a local driver. The chassis is quickly unloaded by the final customer and returned to the rail yard.

Now, rather than a single movement from train to truck, containers are lifted off, placed in storage, and then moved a second or even third time before eventually exiting the yard. “This year’s flood of cargo has overwhelmed the system, leaving the yards without enough chassis,” the publication adds, “so containers have piled up by the thousands.”

Even as the U.S. economy is slated to enjoy its fastest growth since 1984, supply lines now are expected to remain snarled through the first half of next year or longer, according to corporate executives. “Whatever the new normal is, it will happen a lot later than people assume,” Whirlpool’s Marc Bitzer said at a recent analyst meeting, as reported by the Washington Post. “Everybody hopes for the new normal to be next quarter. It’s not going to be.”

Outside the Four Walls

Addressing volatility within your company’s own four walls can be difficult enough, but extending that power out into global networks of suppliers, customers, business partners, and other stakeholders is getting more difficult as those very networks expand.

“There has never been a time when supply chains have been more challenged than right now,” RanPak’s Omar Asali writes in Supply & Demand Chain Executive. “A simple glance at recent annual reports and earnings statements often reveals more mentions of supply chain disruptions and logistics challenges than product or service innovations.”

To companies looking for ways to combat the current volatility and prepare for the future, Asali recommends focusing on systemic improvements over the long term. Rather than trying to tackle every single challenge reactively, come up with strategies that systemically reduce your company’s exposure to supply chain volatility over the long term.

“Pressure, over time, can create gems, the kind of brilliant discoveries that add tremendous value to business,” Asali writes, “ultimately making them more economically and environmentally sustainable.” For example, the global pandemic may ultimately result in a greater strengthening of the supply chain. “Companies that witnessed systemic shortcomings and are willing to embrace change may emerge stronger.”

Use Technology to Your Advantage

A recent EY survey of senior supply chain executives found that in the wake of the pandemic, many plan to overhaul their strategies in order to become more resilient and collaborative, but without compromising on efficiency. 

“More companies are thinking about diversifying their vendor base, localizing more of the supply chain, and investing in their infrastructures,” Asali points out. 

“And, nearly two-thirds of the executives said the pandemic accelerated the supply chain’s adoption of digital technologies,” he continues, “including artificial intelligence (AI) and robotic process automation, which can increase real-time responsiveness and predictability.”