A major disaster in British Columbia is once again putting supply chain organizations to the test.
Across the globe, companies — not to mention governments and consumers — are reeling from pandemic-related supply chain disruptions. As we wrote about in a recent article, global shipping remains bottlenecked at many ports due to shortages of shipping containers and other disruptions. Skyrocketing container prices, combined with unexpected consumer demand, has led to shortages for a variety of consumer products, and the longer-than-normal delivery times that most readers will have experienced.
These problems are mounting, threatening revenue in the all-important holiday shopping season. They’re also contributing to price inflation at levels that haven’t been seen since the 1970s. It’s causing governments to take notice, and place a huge priority on clearing supply chain bottlenecks to help the economy — which is doing well, by many other indicators — get back to normal.
In the supply chain world, we recognize the importance strategic supply chains to business success. But the pandemic has truly revealed how crucial supply chain management is not just to organizations, but to society as a whole. For companies, if you can’t get your products to consumers, everything else, from sales to marketing to product development, is irrelevant.
It’s hard to find a consensus about when these disruptions will clear, but experts agree: resilience is the new name of the game in supply chain management. For decades, companies have competed to trim their inventories and supplier bases to the leanest levels possible to maximize efficiency. Now, many firms are reorienting their supply chain strategies to diversify their manufacturing and distribution networks, source from multiple suppliers, and introduce buffers in their inventory.
These strategic changes are meant to bolster supply chains not just for this disruption, but the next disruptions as well.
Now, the next disruption has arrived — for many Canadian companies, at least. As we’ve seen on the news,record breaking rainfalls in Southern B.C. last weekend caused major flooding and landslides in a number of areas, leading to big disruptions in daily life, livestock, and commerce, and tragically leading to loss of life. Speculation is rising that this could be one of the costliest disasters in Canadian history. This cost is far greater than the insurance claims and federal aid required to rebuild — it’s also the tremendous cost to Canadian businesses whose supply chain operations will be impacted.
And over the past few days, the full extent of the supply chain implications have started coming to light. A number of crucial arterial highways have been impacted, cutting BC — a crucial supply chain hub — off from the rest of Canada. With flooding visible from space, it’s no wonder that the disruptions are far and wide.
Anyone relying on B.C. overland freight for their supply chains is impacted, including anyone shipping products in to B.C. From Asia, but here are a few of the bigger disruptions to mention:
- All road and rail transport in and out of Vancouver, the largest shipping up in Canada, was cut off. One of four road routes, Highway 7, was reopened to westbound traffic on Wednesday, but companies and freight brokers are still at risk of losing perishable inventory.
- The Trans Mountain pipeline was temporarily shut due to flooding around Hope, B.C. As the only pipeline carrying oil from Alberta to the West Coast, this is a major adverse effect for Alberta firms.
- Canadian companies exporting commodities like grain and fertilizer from Vancouver are finding it hard to find alternate sources of export.
- The retail council of Canada stated in a post that consumers should expect temporarily empty shelves due to disrupted trucking patterns, hurting companies who don’t have safety inventory stock to hand. The B.C. Trucking association President said that carriers will find alternate routes, including through the U.S., which will increase shipping costs.
- Goods are becoming backed up in the Port of Vancouver, which creates a further bottleneck that may take weeks or months to clear.
Among others. All of these disruptions — like many one-time disasters — are temporary. But it’s another supply chain woe in a period that’s already seen unprecedented disruption. And the implications are profound going forward. B.C. Premier John Horgan described this disaster as a “once in a 500 year event,” but these kinds of disruptions are only going to become more commonplace as climate change continues to disrupt weather systems and cause greater human impacts.
We are living in an era of supply chain disruptions. These disruptions are hard to predict. They can strike at any aspect of a supply chain, from manufacturing, to shipping, to freight. The damage from this disruption has been done, but organizations everywhere are making efforts to future-proof their supply chains, making them more resilient for the next disruption coming down the pike.
There’s no way to make a supply chain completely bulletproof. But companies are implementing a plethora of strategies to mitigate risk and strengthen their supply chains. Research firm Gartner had a great distillation of some of the most effective strategies earlier in the pandemic that are still relevant today:
- Implement inventory and capacity buffers. On a most basic level, companies can increase their inventory levels and manufacturing capacity above safety stock requirements. This can by tremendously useful when disruptions hit, but is costly.
- Diversify your manufacturing network. Companies can no longer afford to put all their eggs in one geographic location for manufacturing. Many of the most successful supply chain organizations have added manufacturing capacity on multiple continents, and this is only picking up steam. As Gartner put it, “the cost of maintaining multiple supply locations must be seen as more of a cost of doing business, rather than an inefficiency.”
- Broaden your supplier base. Natural disasters, political changes, and other global changes can cause major disruption when supply chains rely on single-source suppliers, especially for components in manufacturing. Adding alternate sources of supply requires a deep understanding of your supplier network, and the relative risks to each node on the chain.
- Consider nearshoring. Localized production adds complexity, but it has a lower lead-time to market, and gives you more control over your inventory, making it easier to pivot in the face of disruption.
- Harmonize plants or products. Companies can add redundancy to their supply chains by standardizing components across multiple products (especially ones not visible to the user), plant equipment across facilities, or packaging to more easily navigate disruptions to each individual part.
- Develop ecosystem partnerships. Supply Chain organizations benefit from treating their suppliers as partners in the process, building opportunities for collaboration, and increasing communication about potential risks before they become problems.
These strategies often involve extra costs, but they’re not just to shore up risk. They can have other major benefits, like providing increased visibility into your supplier network, and finding innovation from supply chain partners to launch new products or simplify production. The top supply chain performers can implement them in a lean way, with the minimum possible cost, and the maximum possible advantage.
These pivots are done at an extremely high level, and they’re not easy. Redesigning your supply chain to be more resilient is a deep strategic undertaking, requiring high performers with very specialized skills. It’s like turning around a cruise ship. It’s a medium and long-term proposition, with short-term costs.
But it’s worth it.
We want to take a moment to send our thoughts to all of our friends and colleagues in B.C. as they navigate these challenging times. Events like these have profound supply chain implications — which are relevant to our work at Argentus as supply chain recruiters — but we never want to forget the human cost.
Thank you for your article. I am a supply chain pro from Vancouver BC. The recent events in BC just highlight supply chain issues that have been developing for years.
The concept of buffers is not new. Yet most companies use static safety stock and or reorder points. The needs to be dynamic and flexed for risk conditions.
A complete industry methodology including software has been developed. Do check out http://www.demanddriveninsitute.com as a starting point. These new methods include the best thinking of MRP, Lean, 6sig and TOC.
Thanks for the comment, Roberta!