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Any company that manufactures or sells products depends on a well-functioning supply chain. The supply chain connects manufacturers and retailers at every step of the distribution process, from raw materials to final delivery at the customer’s doorstep. The supply chain industry is a complex process, which means a minor disruption is a major hitch to the system. Disruption means any rapid change or crisis that harms any supply chain segment.
As the business world evolves quickly to meet the demands of a global economy, different supply chain obstacles prevent efficiency and disrupt the industry’s structure, preventing supply chain success in this current global setup.
The global economy is in flux, making predictions and plans challenging.
According to experts, global supply chains are not improving as they should. Various factors suggest declining economic momentum: inflation, supply shortages, coronavirus complications, and political conflict. The economy has been cruising for several years but appears to be losing steam. Inflation is rising, fueled by higher oil and gas prices and other commodity prices. Supply shortages are becoming more common as manufacturers struggle to keep up with demand. The coronavirus pandemic has caused disruptions in global supply chains and created uncertainties about future demand. And political conflict is adding to the mix, with trade tensions and the Russia-Ukraine conflict creating uncertainty and weighing on business confidence, potentially leading to a slowdown in economic activity.
Rapid technological changes make it challenging to keep up with the latest innovations.
In recent decades, the development and adoption of new technology have accelerated. The emergence of the blockchain and artificial intelligence disrupts the traditional supply chain model. And since the supply chain is multilateral, different software and hardware versions are available worldwide, making it challenging to make operations and procedures the same everywhere.
In addition, not all parts of the world have equal access to these new technologies. In many developing countries, various gaps still exist in adoption and implementation, which creates challenges for companies that operate in these markets.
The workforce is aging, and qualified people are few.
The supply chain industry’s workforce is aging, and there is a shortage of qualified workers. According to CNBC, there are millions of jobs but a shortage of workers. Supply chain disruptions and global labor shortages are now a big problem for businesses worldwide.
The median age of a supply chain worker is 49, which is significantly higher than the overall workforce median age of 42. The number of younger workers in the industry is declining, and the number of retirees is increasing. The Baby Boomer generation is getting close to retirement age, and there aren’t enough experienced professionals to take their place. The skills gap is widening, companies struggle to find employees with the necessary skill sets, and the talent pool is shrinking. The demand for qualified workers is outpacing the supply. The supply chain industry is facing a crisis and urgently needs to attract and retain young workers.
Political instability around the world has a significant impact on the supply chain industry.
Political instability has become a significant concern for companies operating in the global supply chain arena. From trade wars to Brexit to the U.S.-China tariff dispute and the ongoing Russia-Ukraine conflict, organizations with global sourcing needs have to contend with a rapidly changing political landscape. The resulting uncertainty and volatility have had a significant negative impact on productivity, quality, and relationships.
While political instability can significantly negatively impact businesses in any industry, it is especially troublesome for those in the supply chain industry. The global supply chain is highly complex, with products and materials passing through numerous countries before reaching the final customer. As a result, even a minor disruption at any point along the supply chain can cause significant delays.
Natural disasters can cause significant damage and disrupt operations.
In the United States, natural disasters cost the economy an estimated $265 billion in 2017, according to the National Oceanic and Atmospheric Administration. This figure doesn’t account for the indirect costs of natural disasters, such as lost productivity, which can be even higher. And while natural disasters are often considered rare, they’re becoming more common. The frequency of natural catastrophes has doubled since 1980, and the economic cost of these events has increased by nearly 400 percent. As climate change is expected to continue to make extreme weather conditions more likely, the impact of natural disasters on supply chains is only expected to increase.
The preferences of millennials are having a major impact on businesses.
The Pew Research Center conducted a study confirming millennials are now the largest generation in the workforce. This shift impacts businesses as companies scramble to adjust their offerings to appeal to this key demographic. Businesses offering flexible work options have increased as millennials value work-life balance.
As consumers, millennials are technologically savvy and socially conscious, putting pressure on businesses to provide products and services that appeal to millennial values. They want products and services that are high-quality and affordable, and they are willing to pay a premium for brands that share their standards. Millennials are also more likely to use technology to research products and compare prices before making a purchase. Aside from being the most educated generation, millennials are also the most diverse, making them an important target market for businesses.
The constantly changing economy has made it difficult for companies worldwide to keep up with demands in their supply chains. This is especially true when you take into account factors like an aging workforce, natural disasters, or other events that can disrupt business and cause shortfalls on both sides.
The pandemic on a global scale has brought to light the vulnerable nature of supply chain systems. Manufacturers have been forced to adapt to the new normal, and how they operate has changed dramatically. Recent global crises have highlighted the need for more resilient supply chains.
“So we’ve seen a significant impact from an event like Covid. Now, the other thing we’ve learned is that Covid is not an isolated event. This isn’t the only one we’ve seen in history. And nor will it be the only one we’ll see in the future. Just take the freeze in Texas and what it did to the capacity of plastics available for packaging materials, shipping materials, as well as the actual manufacturing materials in the consumer goods industry. So one of the things that companies have really learned, and one of the trends we see, is a move towards a high degree of resilience in supply chains.” – Andrew Hogenson, Global Head of Consumer, Retail and Logistics Practice Infosys
With the current supply chain challenges, companies must be proactive, resilient, and innovative. Applying dynamic solutions that are responsive to change can help businesses maintain a competitive edge and ensure continuous innovation is critical to overcoming the different challenges in the supply chain.