How Supply Chain Can Mitigate Macrotrend Risks

How Supply Chain Can Mitigate Macrotrend Risks

There is a belief that proactive company can turn a potentially disastrous situation into a market opportunity – of course, with proper forethought and action. The story of Nokia, for example, they bounced back in late 2000 after a fire damaged water inventory at their supplier’s factory, which then affected their production. Nokia’s quick response to tie up spare capacity at Philips plants and every supplier they could find had helped them rise quickly. 

Another example comes from Toyota. Toyota successfully recovered quickly in the aftermath of the 2011 Japanese tsunami and continue their production with only moderate hiccups. They took an action by retrieving the critical molds from an earthquake-stricken supplier factory and order substitute parts from China.

From these stories, we can learn how great managers managed well in dealing with supply chain risks as they occurred. However, the examples above portrayed only temporary threats. What if bigger and longer threats such as collapsing economy or global politics which affect the business bottom line happen? 

See also: Established Consumer Brand is Seen to Struggle in the Market

According to Chad W. Autry and friends in their book titled “Global Macrotrends and Their Impact on Supply Chain Management”, there will be more macro risks that firms will face. In the future, we believe, Autry said, only firms that have painstakingly prepared for the macrotrends’ long-term impacts will be sustainable. That being said, companies who have been successful in the past must realize that the rules are constantly changing – the new threats will soon shift in supply chain management as we see it.

The question is, what are the new threats and how can companies mitigate them? Taken from Steve Banker’s survey, here are macrotrends in the supply chain you should be aware of.

Politics impacting global trade, tariffs, and free trade agreement

Banker wrote that there is an unpredictable tariff between the US and China. For example, the tariffs on a washing machine, steel, and aluminium that keeps going back and forth without fix agreement. Also, let’s not forget the current impact of the Brexit vote. The direction of that initiative, Banker said, could have widespread trade ramifications, including broader supply chain disruption.

To handle this, executives should highlight problems that are hugely impacting their business, first. Then, do market research and step that seem to benefit your company more. In Brexit case, for example, if you think exiting from the European Union is better for your business, then supporting the Brexit vote should be your concern.

Labour shortage and automation

Banker surveyed that there will be a continuous labour shortage through 2019. In the supply chain, labour shortage will be driven by high demand for delivery drivers as there are a plethora of online shoppers these days. The needs of e-commerce will boom and tight warehouse labour is on the rise. As a result, warehouses will find it difficult to find the right candidate to fill an open position in their company.

Banker suggested that automation will be very helpful in this case.  According to the survey, driverless trucks or same-day bot deliveries could be a good answer for the talent shortage. The automation will add stability to the company’s collaboration in order to fill the staffing shortage. However, albeit automation might be a good answer, managers should understand that warehouse automation is only part of the solution. It can only mitigate, Banker said, not solve the supply-demand imbalance.

The digital supply chain

Another way to help warehouse survive is by adopting a digital supply chain. There is no exact definition of what digital supply chain is. But according to the survey, it is related to supply chain software, communications, and automation efforts that meet certain digital criteria. There are already many initiatives from firms to adopt this term. Pfizer’s journey, for example, was driven by real-time shipment visibility. The journey resulted in the Pfizer Trackit application that tracks a shipment of 15,000 stock while allowing consumers to access timely and accurate data through their online application.

There is also a warehouse control system (WCS) that can help supply chain grow to be more autonomous. WCS also helps warehouses operate with an agility that meets consumers’ expectations of their online shopping. Another form of the digitised supply chain is a digital control tower (DCT). The control tower helps warehouse workers to have an extended supply chain visibility, relevant data from social media, weather, and news feeds, advanced analytics that provide both broad-based and detailed insights, as well as an ability to take action.

Machine learning and AI

Machine learning and AI are not new things in technology advancements. However, Banker hoped that these developments will accelerate through 2019 and beyond. Especially machine learning, you should adopt the technology as it can be useful for large and dynamic data sets. Machine learning is also applicable to a wide range of logistics technologies such as warehouse management systems, robotic vision systems, supply chain planning, supply chain visibility, and so forth. Lastly, Banker emphasised that machine learning could be applied much more extensively across the supply chain in 2019 and beyond.

Read also: Best 5 Machine Learnings Impacting Last Mile Delivery

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