When discussing your supply chain, a lot of the terminology is related to flowing water.  We talk about our suppliers as being upstream and the outgoing product flow as being downstream. Inventory is often talked about in terms of the level of the stream while the actual movement of goods is couched in the terms of flow.  For operations and supply chain executives the last two years have required a lot more agility due to the upsets the Coronavirus pandemic created.  In normal times supply chain management always required some degree of skill as there have always been unforeseen incidents that serve to disrupt normal operations.  Be it strikes, weather-related challenges, or fluctuating transportation costs due to various factors, supply chain managers needed the skills to navigate what could be considered Class II whitewater[1].  Covid changed the dynamics of supply chain management to resemble Class III [2]or nearly Class IV whitewater [3]depending on your industry, location, and the variant that was dominant at any point in time.  Government-mandated lockdowns, material embargoes, labor shortages, and an evolving understanding of how to best protect the workforce and the public all made pre-pandemic supply chain plans inadequate.

To navigate the pandemic organizations invested in technology that has proven adequate for most to at least survive the last two years.  Automation has helped plug labor shortages, AI-based advanced analytics has helped improve plant reliability and improve capacity, and 3d printing/additive manufacturing has helped alleviate some critical part shortages.  In the longer-term companies are looking to reshoring to shorten supply chains and continue to invest in the technologies that have helped keep them afloat during the last two years.  In my last post, I talked about why these investments are, at best, a life preserver so this post will focus on how the next couple of years are going to make the last two seem calm by comparison.

Hyper Polarization is Going to Make Supply Chain Management Class V Whitewater

Just as businesses are beginning to see some semblance of relief as Covid restrictions are loosening thanks to increasing, albeit slowly, vaccination rates and the coronavirus variants seemingly becoming less deadly, global geopolitics is about to make the last couple of years seem calm by comparison.  The war between Russia and the West over the future of Ukraine, increasing animosity between the pro-Trump camp and the rest of the political spectrum or even the political right versus left, and ongoing tensions with China are all going to turn supply chain management into a class V whitewater [4]experience.  Let’s look at some of the “rapids” ahead.

Ukraine

As Russia invades Ukraine expect significant upsets to supply chains even if it does not launch an all-out war.  The economic sanctions already imposed are going to seriously disrupt markets, drive much higher inflation, and most likely, result in multiple aggressive cyber-attacks against the West.  Suppliers may be impacted even if your business isn’t.  Price volatility will also likely increase counterfeiting as unscrupulous suppliers look to cash in on business desperation.  As energy costs skyrocket transportation costs will as well.

Left/Right Hyper-Polarization

Ever since the 1990’s right-left polarization has been steadily increasing.  It accelerated during the Obama administration and has become what most historians a calling “nearly as bad as the north-south polarization before the Civil War” in the last two years.  This post isn’t going to debate the role of media/social media in creating a polarization or how to rectify the problem.  The simple fact is that it is going to have real and escalating impacts on business that will impact supply chains.

The Ottawa trucker protests which shut down the Ambassador Bridge between Detroit and Windsor Ontario cost the auto industry about $1 Billion in just one week.  With some Republican members of Congress urging similar protests across the entire US it is inevitable more disruptions will occur.  Almost every week we see politicians calling for boycotts of companies that take a social position and civic and political action groups calling for the same against companies that continue to support politicians that they believe to support legislation that discriminates against minorities or un-democratic actions.  While your firm may be able to walk a tightrope and behave neutrally if some of your critical suppliers become the target of boycott actions it is likely to spill over into your business if it becomes known they are part of your supply chain.

Covid

While some aspects of the ongoing coronavirus pandemic are reflected in the right/left polarization such as vaccine mandates and masking rules, it remains that Covid is still going to impact business going forward.  Even if the pandemic is reclassed as endemic, it will likely still cause business disruptions for the next several years.  As new variants emerge there will continue to be spot shortages, labor issues, and the potential for new safety regulations if the variants change transmission vectors.

China

All three of the previous topics intersect with China.  With China aligning with Russia over the invasion of Ukraine, left/right polarization over the origins of Covid and extended Biden family business dealings with China that Republicans are hyping, and the China zero-Covid policy, China-based suppliers as an element of your supply chain will become far more difficult to reliably manage.

Running the Rapids

The keys to running a class V rapid are:

  • Appropriate skill level – Businesses need to make sure they have the most experienced supply chain professionals they can find in key positions.  Just as in rafting, the helmsman and the spotter must be first-rate so they can both “read the water” and steer the raft while instructing the rest of the team on how to paddle.  Now is the time to invest in your people.
  • Proper equipment – Just as class V whitewater demands more than an open canoe or lightweight raft, the coming supply chain turmoil means you should make sure your technology is all current, that you are investing in the right technology given the expected risks to your business and that your SCM packages can deal with an ever-increasing dynamic environment.
  • Reconnoitering – Now is the time to establish an early warning system.  Companies that have teams that actively monitor global events and have mapped their vulnerabilities to geographic regions and have predetermined recovery plans have weathered Covid the best, not surprisingly.  Subscribe to services that monitor newsfeeds to provide alerts on events in the regions where you have suppliers.

While it might be tempting to think that the worst is over and your supply chain issues of the last couple of years are finally going to level out, the reality is that 2020 and 2021 were just precursors and the water is about to get a lot rougher.

[1] Class II – Moderate/Medium-quick water with rapids that require navigating around rocks, ridges, and under overhangs but with large stretches of open water.  Easily dealt with by those with intermediate skills.

[2] Class III – Moderately difficult fast water with waves, fast rapids with many rocks, ledges, and other obstacles.  Open water passages tend to be fast and narrow.  Best left to hose with expert skills.

[3] Class IV – Difficult long and powerful stretches of water with standing waves, violent eddies, and extremely dangerous obstacles.  Requires advanced skills capable of powerful maneuvering and complex navigation.  Potential for rescue work.

[4] Class V – Extremely difficult with long and violent stretches of water that extend without interruption.  The river is filled with dangerous obstructions, steep gradients, and violent currents.  Even reconnoitering may prove to be difficult.  Only should be attempted by experts in specialized equipment.