SUPPLY CHAIN DISRUPTION
NAVIGATING TODAY’S CHALLENGES
Amidst the lingering pandemic, shortages keep arising in many corners of American life, from rental cars to paper goods, food products, furniture, clothing and more. As fall began, supply headaches once viewed as temporary were predicted to extend well into next year. Executives involved at various stages of the supply chain shared their thoughts with Crain’s Content Studio.
How is your organization involved with supply chain issues? Chandra Brown: MxD, which stands for “manufacturing times digital,” advances and optimizes supply chain performance with sensors, software and analytics, and we also serve as a convener of supply chain organizations. Additionally, we’re making the manufacturing supply chain more secure by offering low-cost solutions, raising awareness and creating targeted training programs. Terry Ruhl: H.W. Lochner provides planning, environmental,
engineering, project management and construction management services to multimodal clients across the United States, developing innovative solutions that transform transportation infrastructure challenges into opportunities for enhancing economic growth and quality of life. Vishal Garg: Wynnchurch Capital is a private equity firm with expertise in strategic sourcing, logistics, demand planning, sales and operations planning, and materials management. By leveraging our broad market knowledge and long-term industry relationships, we can quickly
“THE ABILITY TO QUICKLY ALTERNATE AND PIVOT IS THE KEY TO MINIMIZING DISRUPTION.” —ALEXANDER BURGESS, BCD
evaluate needs and provide the appropriate resources to implement sustainable solutions. Because there are few issues that we’ve not seen, we can provide guidance to management teams on how to best navigate current challenges. Alexander Burgess: BCD is a source for innovative, purpose-built IP video and analytic solutions, helping protect everything from retail stores to critical infrastructure, hospitals, water treatment facilities, power grids, prisons, schools and stadiums. We work with key partners throughout the supply chain. What’s the biggest impact of the COVID-19 pandemic on the supply chain? Burgess: The pandemic has changed how we operate. As so many companies have had to
pivot their business structure, the economy pivoted as well. Shopping in-person greatly decreased. More work was being done on houses, causing a labor backup. Parts needed for repairs became scarcer. In our industry, graphics cards and SSD hard drives became as sought after as toilet paper. This change in everybody’s environment completely re-prioritized how the economy runs, and in turn, the supply chain fell further behind as it had to adapt to this new economic model. Ruhl: COVID-19 caused a step change in consumer demand, resulting in a severe imbalance to commodity and container flows. At the same time, demands for personal protective equipment and other supplies resulting from the pandemic caused a massive outflow of products from Asia to points all over the world, including areas not familiar with such high concentrations of container terminal traffic nor the exports available for a return container trip. In the United States, I’ve heard anecdotal numbers like four to six times the imbalance between inflow container demands compared to outflow needs. Hence, we not only have a sizable backlog in U.S. ports, but the Asia ports don’t have containers for new shipping orders. Brown: The pandemic has exposed fragile aspects of supply chains that perpetuate wide-spread disruptions, driving a need to secure the U.S. manufacturing supply chains by strengthening their current structure, improving transparency and increasing resiliency. One of the largest impacts is that it’s increased the adoption of digital and has highlighted the need to accelerate adoption. Companies that do it fast and well are going to thrive. Garg: Ultimately, the most impactful aspect of the pandemic has been the uncertainty of demand and supply which has created an unusually challenging environment. To maintain high service levels, our teams have developed creative ways to collaborate with suppliers to satisfy demand. As many of our customers are seeing growth well
into 2022, we’re working diligently with our portfolio companies to develop processes, infrastructure and organizational flexibility to react to quickly changing demands. Besides the pandemic, what other factors are causing supply chain shortages? Garg: Many companies are experiencing labor shortages. Our leadership and HR teams are developing retention and career growth plans, and improving employee engagement to retain and attract talent. These efforts have helped meet customer demand, but the issue remains a primary focus. Burgess: Freight overall is backed up, causing a huge bottleneck—a key example is the California port situation. The rise of cryptocurrency has resulted in people hoarding graphics cards for data mining purposes, expediting the Intel chip shortage. Tariffs have raised international costs. Bots have wiped out online inventory of products. Labor is scarce now, as companies are having trouble filling vacancies. The pandemic has had such a massive ripple effect on the economy, flooding all of these other regions. Ruhl: I’ve been discussing this very question for some time with the University of Denver’s Program Director of Supply Chain, Jack Buffington, and his detailed analysis conveys that the current disruption is symptomatic of a greater underlying issue—one of supply chains and national infrastructure and systems not keeping pace over time with the changes in consumer demand protocols and available technology. With the opportunity for people to use ecommerce to a greater degree, the systems that supply goods are susceptible to the classic industrial engineering and operations research paradigm that illustrates instability in one critical component in the system can break down the entire network. The change in consumer demands has exposed a deficiency in the lean, just-in-time delivery network that companies involved in the current