Improving supply chain talent issues and port congestion and developing plans for meeting sustainability targets are among the imperative measures for supply management organizations as the third year of the coronavirus pandemic begins.
A key theme of Gartner’s “The Global Supply Chain Crisis: Steps to Take Now and for the Next One” webinar last week is that “2022 is projected to be a year of further disruptions, similar to those that impacted supply chains in 2021,” said Susan Boylan, director analyst with the logistics strategy and operations team at Gartner, the Stamford, Connecticut-based research consultancy.
She continued, “For organizations, there’s a call to arms, where they will need to be as resilient and agile in 2022 as they were in 2021.”
Said Kamala Raman, a Gartner vice president analyst, “Talent continues to be an issue in many parts of the world, not just the rich Western markets, but many emerging markets, which are all manufacturing at record volumes and have tapped out a lot of the available talent pool.” China’s zero-COVID policy could be a factor, she added, “because so many supply chains begin or end in China.”
Boylan noted that port congestion issues in the U.S. and elsewhere continue, but supply management organizations face another potential threat: pending contract negotiations between the International Longshore and Warehouse Union and Pacific Maritime Association. “There’s a real possibility of labor strikes across the West Coast U.S. ports, and (in) previous negotiations, there has been disruption,” she said.
Additionally, sustainability targets will likely be a disruptor this year. For organizations globally and locally to meet their emissions targets and commitments, Boylan said, there must be more development about sustainable logistics and supply chain practices. Organizations, no matter where they are in their sustainability journeys, need to be cognizant of the International Maritime Organization’s upcoming IMO 2023 requirements impacting ocean carriers, which were approved in 2018.
“(COVID-19) has diverted organizations’ attention away from this,” she said. “But it is going to have a big impact.” Older and smaller vessels are less likely to meet the requirements, potentially leading, she said, “to a situation where the impact is disproportionately heavy when it comes to smaller, regional trades rather than the deep-sea trades.” For big maritime operators, determining how to reduce their carbon dioxide (CO2) emissions “is one of the biggest challenges they face,” Boylan added.
To manage the disruption, organizations must consider near-term, mid-term and long-term risks — and be prepared to pay more. “All indications are that cost is going to increase,” Boylan said. “There’s noise around whether inflation will lower in (the second half of the year).” A wait-and-see attitude is prudent, “particularly around fuel, IMO 2023 (and) all the things that are going to continue to impact,” she said.
Additionally, organizations must increase talent retention measures. “When talking with Gartner clients, acquisition seems to be easier; it’s the retention elements that clients are struggling with,” Boylan said. She recommends tailoring employee value propositions to different age groups to secure current talent: “You do not want them going to your competition.”
Other recommendations include:
- Diversify suppliers to balance risk
- Keep customers up to date on lead times and potential disruption
- Improve strategic relationships
- Build network visibility
- Prepare the budget for buffered inventory.
To protect themselves against longer lead times as well as longer times on sea, some organizations consider building inventories, Raman said. But this can be problematic, she said, as suppliers (1) might lack the capacity to build inventories or are still dealing with production shutdown issues and (2) struggle to secure critical parts or components due to shortages or another reason.
While organizations will continue to face disruptions this year, Raman said, there are some positive developments, including fewer supply chain delays than at the peak of the crisis.
She continued: “Even though you’re paying more for some of these services, it’s because demand is strong and you’re able to sell more products. In most cases, companies have been able to pass on some of those additional costs, which leads to the general inflation problem. But profitability for business was excellent in 2021 … and we definitely hope it will continue in 2022.”