SUPPLY CHAIN INTERRUPTED

BY MICHAEL POWER

ROCKY ROAD

DISRUPTION-PROOFING THE SUPPLY CHAIN IS MORE IMPORTANT THAN EVER

While risk is a permanent theme in supply chain management, recent trends have made the situation worse. A new year seems not to have slowed down disruptions, with the COVID-19 pandemic, labour and commodity shortages as well as other factors affecting the flow of goods.

“The two big elephants in the room that are already disrupting aren’t going to be necessarily new disruptors, but I think they will continue,” says Jeff Christensen, vice-president of product at Seegrid. A shortage of key supply inputs, such as microchips, affects downstream manufacturing. As well, labour shortages continue to rattle supply chain and logistics. The situation has worsened as the battle with COVID-19 grinds on.

“There was a labour shortage pre-pandemic,” Christensen say. “The labour shortage got that much worse when people weren’t even allowed in the building.”

That shortage will likely continue to disrupt supply chains even after the worst of the pandemic recedes, he notes.

This year, supply chain professionals are dealing with the aftershocks of disruptions that occurred in 2021 and 2020, says Denis Sanchez, vice-president, operational excellence, at Cognibox. Sanchez agrees that labour shortages will continue in 2022. This shortage will show up in both manufacturing and transportation.

“Logistics, both in terms of availability, lead times and prices will also continue affecting manufacturers who will face higher costs both on the logistics and commodity sides,” Sanchez notes. “All of this unfortunately translates to higher prices for consumers, so inflation is certainly an issue to continue watching closely in 2022.”

VACANCY RATES

Warehousing issues will continue well into this year, Sanchez says. Vacancy rates in Toronto, Montreal and Vancouver reached the lowest levels in North America last year. At one point, the industrial real estate vacancy rate in the Greater Toronto Area (GTA) hit 0.5 per cent. The situation will take time to normalize, he notes. Demand remains higher than capacity, as well as product and materials availability. This situation will persist for at least the first half of the year.

Supply chain professionals must continue to watch how the Omicron variant affects their operations and the global economy.

“More border restrictions, potential for lockdowns – we have all seen this movie before and it doesn’t end well for supply chains,” Sanchez says. “Even with lessons learned from 2020 and 2021, and recent improvements to supply chains, they are still fractured and very susceptible to anything that adds stress to the flow of goods. A prime example is all the disruption that’s been caused by the floods in BC.”

Whatever the circumstances, supply chains can’t operate seamlessly if different departments operate in silos, says Laura Lough, fulfilment and logistics partner with Digital River. Transparency and communication between different areas can help to break down those barriers.

“My first comment to anybody trying to improve their supply chain is, who’s talking to whom? Is everybody briefed? Has everybody bought into this? Does the manufacturer know what the warehouse setup is? You’ll find a client might say, ‘why does that matter?’ Well actually, it’s really important,” she says.

Just because a pandemic or other disruption hits doesn’t mean customers don’t want their orders delivered on time, Lough says. Warehouse automation can help ensure that deliveries run smoothly. That can include either fully automating a warehouse or a hybrid solution that includes some automation.

Other solutions include running warehouses all day and night, seven days a week. Largely automated “dark warehouses” keep productivity high while delivering savings through fewer staff and less energy used while the lights are out.

There are concerns that automation will take away jobs that people now do. Lough sees a shift in the kind of work people do, rather than full-scale phasing out of warehouse employment.

“I think what we’ll see is an upscaling in the types of jobs that are required in a warehouse,” she says. “Maybe less of the picking and packing sort of people, those on minimum wage. There will be much more of a need for managers to interpret data, to read the data, to understand the number of orders that are going out, and to understand the shifting in stock to replenish.”

With lack of labour a concern, Seegrid’s Jeff Christensen recommends first looking at operational areas most at risk of shortages. Find out what you can do differently. How can labour be applied to the highest-value tasks? From there, see if you can automate any functions that remain unfilled.

For example, moving material from one part of a facility to another may be critical to operations. But it’s not the highest-value task for employees to perform. Such tasks are ideal to consider for automation by mobile robot.

“The next step after that is, I can have AI making recommendations for me of what I ought to be doing.”

THE RISE OF AI

Going forward, Christensen sees potential for artificial intelligence (AI) to connect different areas and functions that have been automated. Such software would ensure those areas are interoperable, regardless of what technology is used. That frees up employees to make management decisions.

“The next step after that is, I can have AI making recommendations for me of what I ought to be doing,” Christensen says. “And then, eventually, AI making those decisions for me and doing a constant optimization. That’s the direction that I see it going. I think we’re still in pretty early days. That kind of AI overall operation optimization, I think it’s inevitable that we’ll go there.”

Digitizing supply chains can mean better optimization, risk mitigation and operational outcomes, says Sanchez of Cognibox. Digital supply chains also make inventory management more efficient, allowing continuous monitoring of inventory through sensors and other technology.

Supply chain disruption often happens in the second or third tier of suppliers, Sanchez says. Technology allows visibility across all tiers, helping to relieve those risks.

“At Cognibox, we see increased use of our subcontractor management technology that allows buyers to map risk and digitize supplier pre-qualification beyond the first tier,” he says.

Focus on the basics to deal with future disruptions, Sanchez advises. Resilient supply chains are built around the right suppliers, so selection remains key. A supplier’s location, capacity, capabilities and dependencies are important considerations when choosing suppliers.

Supplier collaboration allows for not only visibility, but leveraging partnerships to prevent and respond to disruption, Sanchez says. Working with tier-one suppliers can both ensure continuity of their service and mitigate risk across lower tiers.

“Technology is the driver of optimization across all these areas,” he says. “From supplier selection to collaboration, information exchange, data gathering and processing, to retaining visibility and delivering financial stability, it all happens through technology.” SP

21_2801_Supply_Professional_FEB_CN Mod: January 17, 2022 3:22 PM Print: 01/17/22 page 1 v2.5

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