The impact of Covid, the blocking of the Suez Canal and the invasion of Ukraine have sent shock waves through the global economy. Some of the problems are direct such as the loss of food production as a result of the war in Ukraine or the closure of factories in China. Others are indirect such as the increased cost of shipping containers, fuel and labour due to restricted supply, and items that have a profound effect on the cost of transport.
Cost and delivery times of globally sourced products, long considered as relatively predictable, have been thrown into chaos resulting in major cost increases and delayed supply resulting in halts to production. Only now are some companies finding out that a component perhaps made in one Country contains parts made in other parts of the World that they knew nothing about.
So, where do we go from here?
We hope that a ceasefire and a peace deal can soon be reached in Ukraine and, in return from assurances from Russia, sanctions may start to be eased. What cannot be undone is the sense of unease as to how vulnerable supply chains are and their impact on Just In Time Supply. Sabre rattling by China over Taiwan will continue to add to the perceived future risks. Business thinking is now in a completely different place to two years ago when interdependence was thought to add to global security now, in many cases, the opposite is true.
Security of supply including logistics are now at the top of many companies’ agendas. Understanding where the risks are and how they can be mitigated are and will remain a primary focus. Resilience and the cost to serve are likely to rank higher than speed of response for many organisations. ‘Just In Case’ is likely to take precedence over ‘Just In Time’ for the foreseeable future.
Key to effective future decision making will be detailed analysis of the costs and risks associated with supply chains, the identification and evaluation of options and management teams that can effectively balance a new set of competing demands – cost, service, ESG issues and resilience. Understanding options available and how to evaluate them will be of increasing importance in the years ahead.
Davies & Robson with a lifetime in the evaluation of costs, service and risks associated with alternative solutions are well placed to provide support you as you embark on your next stage of development. If you would like to discuss how we could help your organisation please call 01327 349090.