Parts of the global supply chain saw major disruptions in 2019 and more in 2020. Companies looking to ensure their supply chains remain intact have two choices: They can plan, prepare and be ahead of the trends, or stay in a wait-and-see mode.
Forward thinking companies are using analytics found in today’s enterprise resource planning (ERP) software to anticipate changes in customer behavior and balance their supply chain. They are closely watching fuel prices for changes that might make obtaining raw materials and shipping finished products more expensive. They are verifying that the quantity of product leaving their facilities meets demand while avoiding compromising quality.
Three supply chain disruptors in 2021 include:
Figure: 1Major supply chain disruptors in 2021
US logistics costs dropped 4% to reach $1.56 trillion, or 7.4% of 2020’s $20.94 trillion gross domestic product (GDP). The pandemic forced many global supply chains to screech to a halt and then start back up. Again and again.
Let’s take a look at the first disruptor: transportation costs. The strong economic growth of 2018 caused commercial transportation costs to rise. 2020’s pandemic made transportation worse as demand continued while the availability of truck drivers and airline flights plummeted. Those were just two of many activities impacting pharmaceutical and chemical companies’ supply chains.
Among the current transportation issues are:
Pandemic quarantines meant fewer consumers were making trips to stores. This in turn boosted online orders through companies such as Amazon.com, boosting pressure on the commercial transportation sector.
Figure: 2Current transportation issues
Truck driver availability is another major issue plaguing supply chains. Commercial transportation companies are facing major challenges recruiting and keeping drivers, including:
Adding to this issue are safety regulations limiting drivers to work no more than 14 out of every 24 hours.
To address the rising shortage of drivers, freight companies are providing incentives to attract more people into the field and increase employee retention. Methods listed by SHRM include:
Another growing supply chain transportation issue points to international regulations impacting ocean-freight based shipping. At the start of January 2020, new limits came into play in order to protect the environment and improve air quality. IMO 2020 restricts the amount of sulfur in the fuel oil used by ships. The previous emission limit was 3.5%. Under IMO 2020, this compulsory limit drops to 0.50%.
The emission limit was reduced to 0.10% in four emissions control areas:
Reducing the sulfur content of fuel oil helps minimize sulfur oxide emissions that negatively impact human health and contribute to acid rain.
Compliance is expected to boost container shipping fuel costs by $25 billion – $30 billion through 2023, according to a report by BCG.
To date, the Covid-19 pandemic has killed more than 4 million people worldwide, more than 606,000 in the U.S. alone.
Firms reporting a positive impact were in the life sciences sector, especially those producing essential products such as vaccines, Ernst & Young’s report noted.
Compliance in the supply chain is nothing new. Companies in every sector conform to Occupational Health and Safety (OSHA) regulations plus state and local versions. Pharmaceutical companies work on FDA compliance every day.
What is new however, is increased visibility.
Especially when dealing with large, diverse supply chains that might involve hundreds or thousands of suppliers, many companies are switching to integrated networks. Using these networks, though, requires retraining the workforce to adjust to the new digital way of doing business.
“Increased visibility is the TOP priority over the next 12-36 months and a top 3 priority in the next year,” a 2021 report from Ernst & Young states.
Ernst & Young’s survey found that 63% of companies were investing in increasing automation such as using internet of things (IoT) connected devices, machine learning and artificial intelligence (AI) to boost productivity and increase efficiency.
Using enterprise resource planning software lets companies achieve a 360-degree view into supplier performance, customer review and manufacturing outputs while crunching millions of data sets. ERP systems are designed to help companies anticipate potential problems and find solutions before the issues become acute.
For example, a chemical manufacturer installs sensors on reactors that can alert production staff when temperature changes occur. An alert sent from the sensor through SMS messaging directly to maintenance and production crews can let them take action before an expensive batch is ruined.
ERP software such as Microsoft Dynamics 365 Supply Chain Management allows companies to stay on top of issues before they become problems.
For more information on implementing Dynamics 365 Supply Chain Management to manage your supply chain disruption in your company, book a consultation with our expert.
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