Learn how to handle unpredictable post-pandemic supply chain risks
Supply Chain Risk and the Ever-elusive ‘New Normal’
Three Logistics Management magazine articles related to global supply chains in a post-pandemic world recently caught my eye:
Overall, I am pleased about the conclusions these articles reached.
We are probably “not” back in a pre-pandemic supply chain and logistics world. Unlike last year, we no longer face contract volatility and unprecedented levels of port congestion. However, just because the pandemic is in check does not mean disruption is in check.
International trade is vital to better living standards. But global supply chains face major issues of new capacity, inadequate, uncertain demand and inflation. These new disruptions prevent us from having confidence in our ability to predict where we are heading.
And at least some are catching on to what I’ve been saying for the last five years. The rate of VUCA – volatility, uncertainty, complexity, ambiguity – will continue, and we should not expect a return to normal.
The pandemic exposed supply chain risks that were always there and still remain. The perpetual disruption of the last few years should give us clues to change the way we do business.
Outmoded Thinking About Supply Chain Risk
So first, the good news. No one is claiming we are getting back to normal. So maybe some understand that disruption is the new normal.
Now, the bad news. So many in our supply chain world think it’s relevant to get “back to normal.” That is not relevant, and that bothers me.
In particular, I am concerned about the implications presented in the first two articles:
- There are signs “that the supply chain and logistics sectors are returning to the CADENCE OF PRE-PANDEMIC TIMES.”
- “There is not nearly as much mention of how supply chain issues are the main reason for economic issues and the stalling out of business throughput.”
- Industry observers believe “that when demand eventually does pick up, we could be in a more NORMAL, pre-pandemic market environment.”
- “We can expect to see a more robust 6.8% growth for inventories in 2024, when the effects of the hangover from the pandemic dissipate and more NORMAL spending and restocking patterns reassert themselves.”
Global Supply Chains Are Not Going Back to Normal – New or Otherwise
Global supply chains in a post-pandemic world will not reach a “new normal.” We need to dismiss any thinking of going back in time.
In reality, time moves on. And so must we.
The third article is much more on point, encouraging supply chain managers to address obvious risks:
- Single/source suppliers
- Single manufacturing locations
- Strikes at ports, and other labor unions and freight carriers
- Natural disasters
Six Hidden Risks in Post-Pandemic Supply Chains
Of even greater concern are six hidden, unpredictable risks that can cause chaos in your post-pandemic supply chains. As pointed out in Logistics Management:
- Supplier financial risks
- Tier 2, 3 and 4 supplier risks
- Political risks
- Climate change risks
- Counterfeiting risks
- Risks of not addressing risks
The Greatest Risk to Post-Pandemic Global Supply Chains
The last risk – “not addressing risks” – is our greatest post-pandemic supply chain risk. To me, the greatest risk is the risk that we think “everything will get back to normal.” Then, instead of changing supply chain strategy and addressing risk, supply chains will continue to do what we have always done – pre-pandemic and post-pandemic.
This will not work. What you know now will not be true six months from now. We are not going back to normal. Disruptions will continue to disrupt, and risks will present risks.
We must be realistic, we must be agile, we must embrace optionality and we need to obtain and respond to the INSIGHTS about the future that will impact supply chain operations.
Jim Tompkins, Chairman of Tompkins Ventures, is an international authority on designing and implementing end-to-end supply chains. Over five decades, he has designed countless industrial facilities and supply chain solutions, enhancing the growth of numerous companies. He previously built Tompkins International from a backyard startup into an international consulting and implementation firm. Jim earned his B.S., M.S. and Ph.D. in Industrial Engineering from Purdue University.