6 Supply Chain Issues Your Organization Will Face in 2022
As the COVID-19 pandemic continues to disrupt global supply chains, organizations are facing a number of different challenges at every stage of the supply chain. Some businesses can’t hire people fast enough to keep up with demand, while others don’t have enough product in their inventory to avoid running out of stock.
Understanding and keeping on top of current supply chain issues can help you address the problems right away and give you extra time to find the best solution.
1. Workforce and labor shortages
One of the biggest supply chain issues organizations will face in 2022 is continued workforce and labor shortages. In the last two years, the supply chain industry has dealt with mass layoffs, extended factory shutdowns, and closed borders. Many supply chain functions, including manufacturing, transportation, and warehousing, are still struggling to find and retain workers.
In addition, as more and more technology is introduced to supply chains, manufacturing and supply chain workers need a unique mix of physical and technological skills. Ultimately, as Generation Z becomes an active part of the workforce, supply chain organizations need to think about how to appeal to the younger generation and encourage them to join the industry.
2. Capacity limits
With the ongoing labor shortage and other supply chain issues, consumer demand will exceed production capacity. Customers still have high expectations for good quality products, low shipping costs, and fast delivery times, and many manufacturers are just trying to keep up.
Many organizations are currently not equipped to deal with the demand and inconsistent supply they are facing. Organizations can streamline their operations in order to optimize their production capacity.
3. Increased use of technology
To combat some of the ongoing supply chain issues, many organizations are looking to increase the use of technology across all areas of their supply chain operations including warehouses, manufacturing facilities, and corporate office buildings. New technologies, such as blockchain, AI, and automation, can give organizations more visibility and insight into their operations.
Supply chain leaders need to be prepared to embrace new technology and leverage it to improve their operations. These technologies can help make supply chains more flexible, resilient, and efficient.
4. Increased demand for local products
These days, sustainability is top of mind for many consumers. Over the last few years, there has been increasing demand for local products and more sustainable practices. This affects everything in the supply chain, from where source materials come from, to transportation, to relocating distribution centers.
Over the past two years, many people have turned to purchasing locally-made products to support their communities. These businesses are less susceptible to supply chain disruptions. The idea of a circular economy, where recycling, repairing, and reusing materials is a top priority, is also becoming more popular in a global effort to reduce waste.
This model will require businesses to change their operational processes. In 2022, organizations need to adapt to more sustainable business practices or risk losing their customers or hurting their reputation.
5. Production delays
Another issue that organizations continue to face is production delays. Delays can occur at any point in the supply chain including materials and parts shortages, manufacturing, logistics disruptions, or shipping. This leads to inconsistent levels of supply, empty shelves, and long lead times for customers.
Because many businesses deal with just-in-time delivery, production delays can make it difficult to coordinate the various links in the supply chain. While production delays aren’t ideal, organizations should plan accordingly and communicate frequently with vendors and customers about delays to manage expectations.
6. Higher costs and prices
It’s no secret that inflation is the highest it has been in 30 years. The limited supply of products and increasing demand continues to drive prices higher. Increased costs from the prices of raw materials to the price of fuel have also affected many parts of the supply chain.
These costs add up at each step of the supply chain and often get passed on to the end customer. Throughout the year, organizations will need to operate as efficiently as possible to keep costs down, and effective supply chain management can help.
Dealing with labor shortages, rising prices, changing demand, and production delays isn’t easy. But, with the right tools, technology, and people in place, organizations can plan ahead and get ahead of these problems before they turn into problems.
In 2022, organizations will have to adopt new technologies and processes to continue to stay competitive and drive business growth. Patience, flexibility, and efficiency are key.
Wondering what else you can do as a supply chain leader to tackle these challenges? Check out our blog post What Qualities Will Supply Chain Leaders Need in 2022 and Beyond?.