Supply chains are living, breathing organisms that constantly evolve and reshape. Sometimes, it's necessary to take a deep breath before clearing the next hurdle — especially during the constant and extreme volatility that we’re experiencing today. But even amid the strain, we must remember that every new challenge is an opportunity to become smarter and stronger.
The news cycle is full of examples of this paradigm: For starters, freight rail companies and unions representing tens of thousands of workers just reached a tentative agreement to avoid what would have been a hugely damaging strike. The unions want an updated contract that includes more favorable working hours and better provisions for sick days. According to The New York Times, the agreement now heads to union members for a ratification vote; while being tallied, rail employees have agreed to keep working.
As I told ABC News, this type of disruption cannot be underestimated. As much as 30-40% of U.S. goods are moved by rail, and almost every aspect of the supply chain relies on efficient systems to move materials and goods from ports to warehouses to consumers. Widespread interruptions would result in the loss of as much as $2 billion a day in economic output and prevent critical materials — including food, health products, and chlorine for wastewater treatment — from reaching their destinations. In addition, this would amplify the burden on other transportation modes and further increase inflation.
This brings up the second point: Many supply chains are revisiting their spending plans and bracing for the Federal Reserve to again raise interest rates — the fifth time this year. While this measure can help combat inflation and restore price stability in the long run, it does make loans more expensive, which means that companies might not have access to needed capital. This can deter growth and innovation plans. And there are knock-on effects, such as consumers having less borrowing power and therefore buying less. Suppliers also may pass on higher costs to customers, which will affect procurement budgets.
Meanwhile, supply chains are rethinking their reliance on foreign suppliers. China’s COVID-19 lockdowns and Russia’s invasion of Ukraine continue to set off waves of supply chain disruption. Ukraine is a key producer of materials and components including neon gas for the lasers used in semiconductor chips and car wiring harnesses. Russia is a supplier of nickel for stainless steel and electric vehicle batteries and palladium for catalytic converters. It's also a major oil supplier, and sanctions on its oil sent costs skyrocketing — and, in turn, raised the prices of just about everything else. But most critically, Ukraine is a breadbasket for the world, as a major producer of agricultural products and fertilizers. Without these contributions, global food insecurity is escalating. McKinsey & Co. projects that the combination of COVID-19 and the invasion will result in a deficit of 15-20 million metric tons of wheat and corn.
A fourth case illustrates needed reforms in workplace safety. Amazon, America’s second-largest employer, is reconsidering safety amid criticism about lax protocols. During the pandemic, Amazon was operating in full force, which led some to argue that the company didn't do enough to protect its workers from both the virus and workplace injuries. Amazon has pledged to halve recordable incident rates by 2025.
Rethinking forecasting and visibility
As our global supply chains continue to advance, we must be proactive, rather than reactive, in this progress. More accurate data, better analysis and enhanced visibility are required. To that end, be sure to check out the Industry 5.0 learning pillar at the ASCM CONNECT Annual Conference, which starts Sunday. These educational sessions point the way to forward-thinking supply chain management through the power of advanced data analytics, artificial intelligence, machine learning, the internet of things, cybersystems and much more.
If you haven’t made plans to come to Chicago, join us virtually. Virtual attendees have access to live video feeds of the keynote presentations, 12 live-streamed and 24 prerecorded educational sessions, the ASCM Awards of Excellence ceremony, and exclusive in-platform networking. Explore the full agenda, then register today!