Supply chain issues are some of the most disruptive problems a manufacturer can face. If something goes wrong at the top, it triggers problems all the way down.
As a manufacturer, especially if you’re a smaller business, it may feel that there’s not much you can do about supply chain problems. After all, so much of it comes from factors outside of your control. What can you do?
Let’s take a look at some of the major global supply chain issues of the past four years, then drill into the most common effects on businesses. You’ll be surprised at the number of strategies you can implement to mitigate the risks.
Looking back: Global supply chain issues 2020-2024
2020-2024 was a tumultuous period for global trade, with multiple compounding issues happening one after the other, greatly affecting economic stability.
These are the top five global supply chain issues to occur since 2020:
1. COVID-19
The COVID-19 pandemic massively disrupted supply chains around the world. According to an EY study, the pandemic had a negative impact on 72% of businesses.
That said, one interesting point about COVID-19 disruption was that it did not slow investment in certain areas. While economic uncertainty typically kills investment, COVID-19 encouraged new and rapid digital innovation, with the digital supply chain helping companies navigate the tricky waters. In a way, then, it was a catastrophe that left many businesses in a more resilient shape than previously.
2. 2021 Suez Canal obstruction
In 2021, the Suez Canal was blocked for nearly a week by a ship. This was a very sudden blow to global trade, given that a third of container traffic goes through the canal and – at the time – 450 vessels were scheduled to pass through it.
One group of researchers wrote that up to US$17 billion was held up during the blockage, and the incident cost the Egyptian-owned Suez Canal Authority (SCA) millions in lost fees.
3. Geopolitical conflict
Geopolitical tension and conflict has been an ongoing crisis for the world’s economy, and looks set to continue.
The invasion of Ukraine by Russia had the most economic impact, particularly on food security, hitting right as businesses were trying to find their feet post-pandemic. Ukraine and Russia were the world’s largest exporters of wheat, and the Economic Observatory reports that, by 2022, food insecurity grew to the highest level on record since 2017.
This is in addition to growing energy costs, wavering GDP growth, inflation and economic vulnerability resulting not just from Russia’s aggression, but other conflicts and tensions around the world.
4. Red Sea shipping crisis
Later on, the Suez Canal became a hotbed of problems again. This time not because of a ship stuck in the canal itself, but because container vessels were avoiding the Suez due to Houthi rebel attacks on vessels in the Red Sea. For context, to reroute away from Egypt means going around Africa instead.
JP Morgan reports that rerouting vessels around Africa adds 30% to transit times, shrinking global shipping container capacity effectively by 9%. Shipping costs from Asia to Europe increased as much as 350%.
5. Panama Canal drought
This past year was the second-driest in the Panama Canal’s history (of over 100 years). As a result, authorities instigated water-saving measures which restricted the number of ships that could pass through the canal each day. The average dropped from around 30-40 ships per day to around 20, reducing throughput by about 15 million tonnes.
Around 5% of global trade passes through the Panama Canal, impacting mainly South and Central American nations, with broader impacts on the USA, Europe and Asia.
10 common supply chain issues (and their solutions)
As businesses, there’s little we can do about geopolitical tension and ships getting stuck in the Suez. However, there are a variety of solutions and work-arounds available for the most common supply chain issues that you’re likely to face.
1. Raw materials shortages
Materials scarcity is as it says on the tin – when the raw materials required for production aren’t readily available. This tends to happen when global shipping is disrupted, affecting your ability to import what you need, or something has happened to impact the production of materials – like a disease hitting growers, or conflict affecting factories.
It’s not an easy thing to solve, but four strategies can really help:
- Diversify your suppliers, so you can pick and choose between them in the event that catastrophe hits one region more than another.
- Consider on- or near-shoring where possible, so you’re dealing with locals instead.
- Analyse your production processes and product lines to determine what you might be able to adjust, slow or stop outright in the event of materials scarcity. For example a food manufacturer might swap out similar ingredients in recipes.
- Ensure you’re up to date on your suppliers' circumstances, so you stay on top of any big changes.
2. Supply chain disruptions
Supply chain disruption is any event which interrupts the regular flow of trade goods around the world. This could result in materials scarcity, described above, or higher costs, slower shipments, poor quality and the loss of preferred partners.
It’s better to be proactive about supply chain disruption than reactive, so you can get ready. The strategies in point 1 above will help here too, though consider also:
- Performing a risk analysis, to understand your most at-risk supply chain partners as defined by potential impact on your business versus likelihood of disruption. Any disruption which is highly likely and highly impactful needs a contingency plan.
- Consider building a materials stockpile, if you can afford the inventory holding costs, which could help you stay on top of production during a shipping slowdown.
- Improve your visibility over the supply chain so you can spot red flags as they occur.
3. Issues with supply chain management
Supply chain management is the planning and strategy side to procurement. When issues with the supply chain occur, it doesn’t just affect the production line, but also any plans and forecasts.
Common supply chain management issues include:
- Demand unexpectedly changes.
- Increasing costs.
- Supply chain uncertainty.
- Shipping delays.
- Labour shortages.
- Quality issues.
The key to responding well to supply chain issues is to get really good at forecasting.
Forecasting is the act of comparing internal data (i.e. historical sales, peaks and troughs, etc.) with your own industry expertise and close consideration of important news topics. Theoretically, with good forecasting you should be able to spot surges or drops in customer demand, risks with your supply chain partners, the potential for increasing costs, and more.
When you can spot those issues before they occur, you can plan to mitigate them.
4. Digital disruption
Overall, digital disruption in the supply chain is a broadly good thing. Better technology means better data, greater efficiency and the potential for new market opportunities (like direct-to-consumer selling). But, if you aren’t paying attention to the way technology is changing, you might fall behind.
What is digital disruption doing to the supply chain?
- Improving visibility through real-time product tracking.
- Improving efficiency through simplification and automation of menial tasks.
- Improving business decision-making with better data.
The key to staying on top of digital disruption is to ensure your company invests in a similar level of technology (if not greater) than your peers. Supply chain and inventory management software is now standard across most manufacturers, who are also investing in cloud data, AI, smarter marketing and eCommerce functions.
Just remember, if you’re going to make some big tech investments keep these points in mind:
- Watch your costs. It’s easy to blow the budget on a tech upgrade.
- Don’t forget people and processes. Technology is great, but it needs good processes to tell good people how to maximise its effectiveness.
- Don’t skimp on data security. Cyber-attacks are a very real threat.
5. Workforce talent shortages
Worker shortages are the biggest challenge hitting supply chain executives, according to an MHI study, including lack of available talent and retention of existing talent.
To counteract the impacts of talent shortages on your organisation, there are a few questions to ask yourself:
- What can you automate? Automated jobs are jobs which your staff don’t need to worry about, easing work pressures on your team.
- Can you get active in promoting careers in your sector? This could mean lobbying your government, getting involved with schools or universities, or getting involved in with your local industry association.
- Can you offer skills training to existing staff? This could help you fill skills gaps without needing to recruit, while offering people more incentive to stay on with your business.
6. Cyber attacks
Global cyber criminals and state-backed hacker gangs are targeting not just public sector organisations, but the private sector too. Indeed, Statista data shows that manufacturers were hit the hardest out of any industry in 2023, and AAG research shows when data breaches happen they cost businesses an average of US$4.35 million.
The supply chain is where manufacturers are typically at their weakest, because that’s where an attack impacts not just the victim, but the victim’s connections too. From 2022-23, supply chain attacks doubled in the US, according to additional Statista data.
It is absolutely imperative that you consider cyber security in all risk management plans, to ensure your business is doing what it can to protect itself:
- Perform a risk analysis on your IT systems, looking for systems which will have the biggest impact if disrupted, and which are the most likely to be attacked.
- Implement strong network access controls, to ensure that if a staff member should be compromised, the attacker can’t gain infinite access to your business.
- Invest in cyber security training for all staff and update this training regularly.
- Ensure an IT security professional looks at your vendor agreements and third-party software, to ensure that you’re protected from any breaches at a vendor’s end.
7. Transport costs
When the cost to ship changes, it affects every stage of the supply chain, snowballing downstream and creating a bigger and bigger bill for the customer. If any organisation along the supply chain wants to hold its prices while transport fees increase, often it has to eat into its profit margins to do so.
So, if your supply chain managers are under pressure to keep costs down while everyone in the logistics industry is increasing their prices, what can you do? These are some solutions to investigate:
- Consolidate shipments where possible, to cut the number of shipments you’re paying for.
- Try to be flexible with shipping modes. You might be used to shipping by air, but sea and train could also be open to you.
- Talk to your suppliers. Strong relationships with suppliers may allow you to negotiate better pricing, in return for doing things in a more optimised way (such as using smaller packaging). You may also find you can work with other buyers, to consolidate your shipments with someone else's.
- Look at on- or near-shore options. Local partners may not provide the products you’re used to, but could help you save on freight charges.
8. Regulatory pressures
Even if you’re doing your best work, hitting all the right beats to manage and mitigate supply chain disruption, if the rules change or a regulatory body ramps up the pressure, the situation is likely going to change.
Regulatory pressure can come from a few different directions, for example environmental policies affecting shipping, human rights watchdogs checking supply chains for unexpected violations, or customer demand putting pressure on governments to affect applicable legislation, in turn affecting you.
Your business needs to remain on top of compliance at all times, even as the requirements change. That means:
- Auditing your supply chain to check for potential human rights issues.
- Auditing the environmental cost of your supply chain – making green changes now may future-proof you against future policy change.
- Investing in traceability (i.e. compliance records, batch tracking and shared data) so that, if there’s an issue in future, you’ll know where it came from.
9. Demand forecasting challenges
Unless you’ve hired a psychic then demand forecasting will always be a challenge. After all, you’re trying to see into the future – it will never be 100% accurate.
Common challenges of forecasting include:
- Market volatility
- Lack of data
- Limited visibility
But while demand forecasting is impacted by a lot of variables, many of which will be outside of your control, you can still create useful forecasts if you stay adaptable.
These are some things to think about:
- Ensure your business collects real-time data on all of its processes, to ensure maximum visibility.
- Coordinate as closely as possible with suppliers, even sharing data where available, to increase supply chain visibility.
- Use multiple forecasting models to better predict problems.
- Stay agile as a business – getting too embedded into one way of thinking could cause major headaches if the supply chain changes too drastically.
10. Lack of visibility
Visibility into your customers’ expectations, visibility into your business processes, visibility over your inventory, visibility into the supply chain … any missing piece in this puzzle could leave you open to surprises.
Two big things to think about when it comes to increasing visibility include:
- Treat your supply chain partners as teammates. The more closely you can collaborate with third parties, the better your information.
- Invest in technology. Smarter systems will give you more options for increasing visibility, like accessing real-time data, better tracking and tracing, easier communication, and process automation.
How technology can help you manage supply chain issues
Modern supply chain management software is designed to help solve many of the problems described in this article. For example, it could enable you to:
- Collect and analyse better real-time data.
- Collaborate more closely with suppliers, improving relationships.
- Optimise stock levels with smarter inventory control.
- Automate repetitive, menial tasks so staff can focus on value-adding activities.
- Set automatic alerts to catch issues as they occur, not afterwards (such as materials reorder points).
- Improve demand forecasting by accessing higher-quality insights.
- Improve traceability with better batch tracking and customer order management.
Of course, modern cloud-based software also has a few other benefits:
- When software is hosted in the cloud, you can access it from anywhere. Check in on your business at home, at a conference overseas or while in transit.
- Modern systems are designed to combat modern cyber threats, and typically have robust access controls like 2-factor authentication.
- Software hosted in the cloud is easier to keep up to date – the vendor just has to issue a patch and it updates the system without IT needing to come in and do any new installs at your end.
- Modern manufacturing software systems are designed with usability in mind, making them simple to learn.
Learn more: How better manufacturing software has changed these companies
