Is Your Supply Chain Vaccinated?
By Hannah Kain, ALOM President and CEO
After 15 months of pandemic disruptions, demand fluctuations and supply problems, supply chain pros are like toddlers crying from the back seat: “Are we there yet?” Especially seen from a U.S. perspective, with so many states starting to drop mask mandates and seeing greatly reduced numbers of COVID-cases, the long-awaited end feels so near.
Yet, before we start celebrating prematurely, let’s remember that supply chains are global. A severe outbreak in Taiwan is – as I am writing this – further impacting already ultra-tight chip supplies. Latin America, most of Asia and all of Africa is at great risk. European vaccinations are behind U.S., as are vaccinations among the largest U.S. trading partners, Canada and Mexico. Our sourcing, from raw materials to components to finished goods, is dependent on the health of our entire planet. Procurement professionals simply cannot breathe easy at this time.
At a recent event, I spoke about the global pandemic and its impact on supply chains. I predicted three to five years impact on sourcing – with luck, determination and limited new nasty variants spreading. One of the attendees accused me of destroying his day, and – certainly – that was not my goal. Yet reality is that our supply will be impacted by the pandemic for years to come.
Maybe positioning suppliers in countries with advanced vaccination rates and infrastructure can become a competitive advantage. It is not enough to keep factories going by selectively immunizing factory workers. Supply chains need the infrastructure working as well. Location drives risk and reliability in this temporary situation as we are in a multi-year transition to a post-pandemic world.
The other supply choke holds are also not letting up. U.S. infrastructure constraints will take upwards of a decade to resolve. We need more, bigger ports and possibly a different port management system. Better rail, rail management, roads and bridges.
ALOM’s supply base team continually updates their supplier risk analysis. This is an iterative process that requires a deep understanding of not only tier 1 suppliers, but also their suppliers, locations, and raw materials. When I ask what’s the hardest area to predict; the answer I hear is: predicting where demand fluctuations in other industries may cause a shortage of certain components or finished goods. We saw that exact problem with automotive chip supply that was impacted by increased demands from computer electronics.
We all read daily that U.S. business leaders are struggling with what they can demand and ask of their staff members regarding the vaccine. Can you mandate that staff members get vaccinated? Can you ask whether staff members are vaccinated? But today, supply chain professionals should look outside of their four walls.
Proactive supply chain and procurement professionals should be assessing the geographical exposure and align around vaccine roll-out as one parameter. Most have also started understanding that just-in-time only works with the appropriate buffer stock. Today, what is appropriate buffer stock partially depends on the vaccine roll-out at supplier locations.
This obstacle course is longer than we ever anticipated. Yet that’s reality. We need to adjust our thinking accordingly.