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Dealing with supply chain disruptions

1/14/2022

Dealing with supply chain disruptions

As the global economy continues its recovery from the pandemic, supply chain disruptions like the recent Suez Canal incident continue to impact product availability and prices. The ongoing health concerns, unprecedented instability and shortage of warehouse and distribution workers have only exacerbated these issues, causing frustration and confusion among customers and warehouse managers alike. According to the White House, "These shortages and supply chain disruptions are significant and widespread – but are likely to be transitory." However, disturbances like these are par for the course for warehouses, even before the pandemic. So how can warehouse managers deal with these unprecedented times while preparing for the future?

Here we will discuss a few ways warehouses can address supply chain disruptions as they happen while developing resiliency against future events.

Transparent communication
During times of disruption, it's imperative that warehouse leaders maintain transparent communication not just with their employees but all stakeholders involved. That includes everyone from suppliers, distributors and customers to investors and regulators. Stakeholders are far more likely to be understanding when company leaders are consistently direct and honest about delays and their causes. For example, if you happen to be low on stock or need to adjust shipping speeds, share these updates with your network as early and as often as possible.

Diversify suppliers
When warehouses exclusively work with a handful of suppliers, they often benefit from volume discounts. However, McKinsey argues that warehouses should strategically fragment their supplier base to deal with potential disruptions. Establishing a diverse network of suppliers enables warehouse managers to quickly adapt to fluctuations in demand by maintaining critical inventory levels.

Prioritize critical components
While supply chain disruptions may limit your company's efficiency and productivity, it's essential to figure out exactly what is needed to continue operating. There will likely be times of crisis when leaders will have to make difficult trade-offs to ensure employee well-being and customer satisfaction while maintaining cash flow. Take a step back and evaluate your processes to determine what is most important and see where optimization can help. After managing disruptions, you should also take away key insights that can be used to develop better decision-making criteria for future incidents.

Assess inventory levels
Inventory visibility is a crucial aspect of warehouse management at any time, but this is especially true during supply chain disruptions. Conducting a thorough audit of available products will allow you to determine the best course of action for distribution and management practices. To mitigate the impact of and develop resilience to disruptions, McKinsey also recommends prioritizing purchase-order flows and specific markets for inventory deployment.

Predictive analytics
One of the compounding factors in supply chain disruptions is demand fluctuations. The pandemic is a prime example of this, as more people started buying things like hand sanitizer and masks seemingly overnight. While warehouse managers can't see the future, they can leverage predictive analytics to forecast product demand and buyer behavior. For instance, many warehouses utilize simulation software powered by statistical algorithms and machine learning. These simulators use historical data to predict demand and behavior trends so that leaders can pivot inventory prioritization to match the products customers are seeking.