It’s fair to say that only a few short years ago, no one gave much consideration to the supply chain. It was a background mechanism that kept the global economy turning, working as a silent partner to every business around the world.
However, over the course of the COVID-19 pandemic, the impact of a highly disrupted supply chain became apparent. COVID-19 shutdowns, border closures, interrupted manufacturing capacity, unpredictable supply and increased shipping costs all inevitability impacted both businesses and consumers around the world.
Working in response to the narrative of consumer demand throughout the pandemic years to date (outlined below), in conjunction with managing the aforementioned challenging factors that the pandemic presented had a detrimental impact on the global supply chain. An impact that has been significant across the business and consumer landscape through rising prices, unpredictable supply and product shortages.
- Stage 1: Onset of COVID.
Consumer demand and spending rapidly shifted towards essential items such as medical supplies, groceries, and non-perishables.
- Stage 2: COVID lockdowns.
Consumer spending shifted to physical products such as home goods, electronics, and clothing.
- Stage 3: Easing of COVID restrictions.
This shifted consumer spending to travel and experiences such as dining out.
- Stage 4: Rising inflation and cost of living.
Cost pressures have seen consumer spending pivot to groceries and other nondiscretionary items.
Outlooks suggest supply chain constraints are easing
In response to the volatility of supply chains, companies moved from a ‘just in time (JIT)’ inventory management approach to a ‘just in case’ one. Businesses across the globe, regardless of location, size, sector or industry lost the once known and reliable ocean and air freight services, and ultimately struggled to move cargo as booked, as well as the ability to predict any sort of approximate transit time to destination.
This challenging environment effectively altered the way companies managed their supply chain, as they built up inventory just in case they couldn’t receive their goods when needed. This has now created a situation of excess inventory and markdowns as the shift in consumer demand from stage 3 to 4 arrived much faster than the retail sector anticipated.
This pivot to a climate of reduced consumer demand for discretionary spending, excess inventory and the reduction of COVID-related consequences on the supply chain may be indicative of a light at the end of the tunnel. As the pressure of a challenging global landscape alleviates, it could mean the beginning of the end of the volatile supply chain landscape of the recent years.
Recent management outlooks from varied organisations such as Fastenal (industrial), Whirlpool (appliance), Johnson & Johnson (healthcare), Kimberly-Clark (FMCG) and others all indicate that supply chain constraints are easing and that the overall business environment is more predictable with the supply chain itself becoming more orderly due to numerous factors including improved labour availability and the easing of COVID restrictions.
Given these early indicators it appears that if all goes well, the global supply chain landscape will have the opportunity to recover slowly yet steadily as the worst fallout of the previous pandemic years is behind us. At a minimum a more predictable year will enable businesses to take the time to reflect on how best to optimise their supply chains moving forward.