News analysis: Chaos is the new normal for supply chain

Just as scientists and public health officials are daring to suggest the Covid pandemic might be entering its end-game, so China announces strict new lockdown measures, sparking fresh fears that disruptions to trade will be with us for some time yet.

Is China really on the brink of an Omicron outbreak that could see the world’s economic engine room splutter to a standstill? Or is China merely doing what China does - being authoritarian, and welding its citizens indoors in the run-up to the Beijing Winter Olympics? It’s probably the latter, but only time will tell.

Either way, it’s a stark reminder that we live in uncertain times, and with 100,000 Russian troops gathering on Ukraine’s border, things are not about to get any less uncertain.

In supply chain, uncertainty is the only certainty  

It seems that today, uncertainty is the only certainty - and with supply chains being by their very nature global in scope, C-suiters are shock-proofing supply by reducing its exposure to risk. 

Multinational businesses are responding by shrinking supply chains. Smaller chains, smaller risks. Samsung US is re-shoring its chip manufacture, for example, with Apple set to follow suit, by making its own ARM-based microprocessors. 

And wherever you look, supply chains are being digitised, to increase visibility and agility, as companies seek to roll with the punches. 

Where is the next punch coming from? China? Ukraine? A new flesh-eating virus from outer space? Or maybe a containership captain will attempt a three-point turn in the Suez Canal? 

Whatever ends up causing the next bout of chaos, there is no escaping the fact that ours is a shrinking world, with everything seemingly global. While this makes trade more responsive, it also means that a shock to one part is a shock to the whole. Just ask your nearest chief supply chain officer.

Logistics - once on the periphery - is now a C-suite priority

Edward Sweeney, Professor of Logistics and Supply Chain Management at the UK’s Heriot-Watt University, says globalisation has followed a tumbling of barriers  - to cross-border movement of products, services, capital, people and information. 
Sweeney explores the impact of globalisation on logistics and supply chain management in his book, Global Logistics: New Directions in Supply Chain Management.

In it, he shows how logistics is now at the heart of long-term strategic plans in almost every business, when not so long ago it was on the periphery.

In an article for The Conversation - a source of news and research written by experts and academics - Sweeney says that uncertainty in a shrinking world “is a characteristic of the international business landscape in which supply chains now operate”. 

He adds: “As a result, major companies have become strongly focused on supply chain risk management. This means identifying where risks of any kind exist in the network, assessing the potential impact of these risks, and putting mitigation strategies into place."

He says such strategies are wide-ranging, covering all manner of risk - both to demand and supply. There’s also environmental risk, from socio-economic and socio-political factors, plus common-or-garden business risks, such as suppliers going bust.

With so much uncertainty and risk it’s a wonder any CSCO or COO gets out of bed in the morning, for fear they’ll be struck by a bus, or a meteorite.

So what might 2022 have in store for supply? Few are better placed than Sweeney to take a stab at that one.

Sustainability 'will be the next shock to supply chain'

As well as the unfolding situation in China, the likelihood of new Covid variants, and international shipping costs remaining high, Sweeney feels the biggest shake-up will come from the global bid for sustainability. 

“Freight transportation and supply chain processes will change as more environmentally sustainable strategies are adopted,” he says.

The biggest changes, he feels, will be a move to fleet e-vehicles and the relocating of distribution centres, to minimise distances travelled. He also expects to see more collaboration, as industry embraces sustainable practices. This can already be seen in the UK, in the work of the Centre for Sustainable Road Freight, he points out. 

The sustainability drive, he writes, “will inevitably create short-term challenges as new practices become embedded”.

He concludes: “Business will have to be resilient and capable of adapting to major disruptions.” 

Which is another way of saying it's a mixed up, muddled up, shook-up world - and there’s nothing supply chain teams can do but get on with it.