Future-proofing Supply Chains
As discussed in a previous blog on post-pandemic fabrication supply chain, the COVID years were harrowing for supply chains with the imminent threat of lockdowns creating volatility in demand and supply patterns. With the return to normalcy, the future of global logistics has become significantly brighter — however there are lessons to be learnt during the pandemic and which should be avoided in case of a similar situation in the future. There is a gradual realization that many forces need to be considered when creating truly resilient, dynamic supply chains. So, what are these forces and how should they be leveraged correctly? This writeup looks to decode this subject in greater detail.
Supply-Demand Mismatch
In a perfect world, supply and demand sync evenly but in the real world, often one outpaces the other – such as the shortage of certain consumer goods of 2020. Oversupply can also cause issues which can pile up and quickly eat through a business’ bottom line. A common issue is where to store the overstock and how to continue to sell it and profit, and this can cause issues up and down the supply chain of heavy steel fabrication companies. These pockets of exponential demand will continue to exist as will moments of oversupply. Both need to be built into forecasts to help stakeholders better manage inventory and adapt as forces shift the balance.
Commodity Shortages
Commodities like lithium and cobalt are in high demand but not always easy to procure. Producers that need hard-to-replace materials must factor in forces such as potential tariffs, weather patterns, upcoming environmental regulations, and variable pricing of mining plant and equipment to ensure production does not suffer. The emergence of innovative design is a trend which can be used to resolve shortages. Engineers are using smaller geometries, so the required amount of the given commodity is reduced without sacrificing product capability. An example would be the small size of computers today compared with earlier days when they were the size of a room and exponentially less powerful.
Economy and Pricing
The state of the economy is a major factor which is a bell weather for consumption trends, such as using local steel companies in Australia. With rising inflation, consumers are looking to spend less but still get that bang for their buck — and that translates all the way up the chain. At the same time, between labour, the rising cost of materials, tariffs, and more, suppliers are getting squeezed on cost. While there will never be a perfect model for economic forecasting, knowledge of known forces and their impact on consumer behavior can be built into pricing projections.
Labour Shortages
Forces such as labour shortages always impact product availability. For instance, Japan needs more than 200,000 engineers in the next couple of years to maintain current production levels. In 2030 it is expected that Japan will not be able to fill 270,000 artificial intelligence and IoT jobs. One of the drivers of this trend is ageing populations. The engineers who have been designing and building components worldwide are now retiring and there are fewer people available to fill those gaps. Not only is there an inverted population pyramid at play here, but the increased need for these products is driving up the demand and exacerbating this skill gap. Consider how many things require technologies that did not exist even 10 years ago. The demand is going to skyrocket, which means even more engineers and IT professionals will be needed going forward.
Final Thoughts
In the context of future planning for supply chains, none of these forces are new but the need to accurately build them into supply chain forecasts is increasingly important. The pandemic helped highlight the need to take all these forces into account to ensure that disruptions are limited when a black swan event occurs. Hence, supply chains are ever-evolving and it is up to us to keep pace with its evolutionary development!