Complete visibility into your supply chain is necessary to safeguard operational continuity.
- COVID-19 shutdowns in China, war in Ukraine, and supply chain issues lingering from the start of the pandemic are creating enormous uncertainty and product shortages
- The predicted shortages include basic materials like plastics and aluminum cans along with materials necessary to make computer chips
- Business continuity plans must cut through the opacity of an unpredictable future with a digital supply chain platform
- Decisions must be data-driven, and that takes intelligence from every single link in the supply chain.
Product shortages have plagued the supply chain since the start of the coronavirus pandemic, affecting goods from garage doors to computer chips to lumber, and businesses from car manufacturers to home improvement centers. These shortages have continued into 2022, and recent global developments added another layer of uncertainty to planning for business continuity.
A resurgence of COVID-19 in Shenzhen, China – a logistics, tech, and manufacturing hub – means suspended operations and may further boost both freight rates and container prices. Russia’s war against Ukraine has created trade restrictions both ways as Russia bans the export of more than 200 products and the United States restricts Russian imports. It all has a domino effect, and among changing global dynamics, accurate predictions are hard to come by.
Should you be concerned? Yes. But tough times call for strategic, future-forward solutions that ensure business continuity no matter the crises. In this blog, we’ll explore some of the product shortages most likely to disrupt business and what you can do to maintain operational continuity.
The Products in Tight Supply in 2022
We started 2022 with a list of product shortages that is steadily increasing. Here are the top shortages as of this writing:
Ukraine produces an estimated 45% to 54% of the global supply of neon, a chemical element that is a key ingredient of computer chips, contributing to the semiconductor shortage and rising prices. The companies Ingas and Cryoin have shut down operations as Russia escalates attacks and destroys essential infrastructure.
Current stockpiles could be depleted by April, which can add further supply chain constraints and cripple the manufacturing ability of companies that make mobile phones, laptops, and even automobiles. Of course, this leads to our next shortage.
Also called computer chips, semiconductors are ubiquitous and used in everything from smart appliances to SUVs. While producers have ramped up production, it is likely that there won’t be enough to meet demand this year. With a lack of neon, the manufacturing backup will just increase.
Rising energy prices along with a push by China to reduce carbon emissions have created a perfect storm when it comes to aluminum can production. European producers have cut production, losing in excess of 650,000 tons of annual production capacity since October 2021. China’s cut in production meant they produced 1.2 million tons below what was expected. Monster Beverage company, for example, was unable to meet third-quarter demand because of can shortages and other supply chain issues.
Food manufacturing plants continue to face labor issues, and workers sick with the coronavirus mean lower output and increased costs. Adding to these problems is a shortage of both fertilizer and pesticides, which will mean lower crop yields. High natural gas prices in Europe and export curbs on Russia and China are anticipated to keep demand high for fertilizer this year and beyond.
Plastic prices soared more than 50% in 2021, which led to manufacturer stockpiling that helped alleviate some pricing issues and supply constraints. However, demand continues to increase and a proposed import tax on resins will contribute to market volatility.
Non-residential construction prices rose 23.2% year over year, and residential construction 22.3%. The supply chain in general – as well as the price and availability of building materials, labor constraints, high demand, and long lead times – mean companies must reassess their plans. Many plan to add new distribution centers as well as capital expenditure products to create resiliency and ensure business continuity in the face of product shortages and other constraints.
The future is uncertain. What does it take to safeguard your business operations in the absence of a crystal ball?
The Key to Business Continuity in Uncertain Times: Visibility
There’s no simple way to “fix” the supply chain. There are simply too many moving parts, and there’s no fast or painless way to eliminate dependencies on necessary materials. Business continuity in a time of product shortages takes an understanding of critical processes and dependencies, along with efforts that will optimize your production and distribution capacity based on realistic demand.
A successful business continuity effort requires transparent visibility into the entire supply chain only available with a digital supply chain solution. Only then will you have the technology you need to manage the effects of today’s and tomorrow’s supply chain crises. The insights gained will help you recalibrate your business continuity plan with a focus on supply chain stability.
Decisions must be data-driven with real-time information that lets you quantify costs, integrate demand and supply-side plans, and manage risk. This requires capital investment in both automation and digital capabilities in order to:
- Perform make vs buy analyses
- Find and get rid of high priority gaps in operations
- Address labor constraints proactively
- Optimize your supplier network based on a comprehensive strategy
Managing an unpredictable supply chain is difficult. The increased visibility and transparency provided by a digital supply chain platform offers unparalleled insight into your supply chain and the data you need to ensure business continuity and inform the future.
Ensure Business Continuity in the Face of Product Shortages with Logility
Logility’s digital supply chain platform accelerates the sustainable digital supply chain by leveraging data-driven tools such as advanced analytics and AI that empower your business with greater visibility, which you need to manage your entire supply chain in good times and bad. Reap the benefits of more accurate planning, accelerated cycle times, improved precision, and increased operating performance.
We help organizations sense and respond to changing market dynamics, more profitably manage their global businesses, and become resilient, sustainable enterprises. It’s time for a digital, sustainable supply chain. Reach out to our specialists today to discuss our supply chain solutions.