Often when supply chains are discussed they are viewed as external to the organisations only, however supply chains are much wider than this. Supply chains are both internal and external, from raw materials through to consumer/customer.
Supply Chain Management is important to organisations particularly to reduce risk and supply chain vulnerabilities- supply chains are only as good as the weakest link. Both micro and macro factors effect supply chains and not always in a negative way, factors such as supply and demand, modern day slavery, skills shortage, climate change, global political unrest and inflation are good examples.
Interestingly, a survey completed by Supply Chain Management Review in Autumn 2022 revealed that business leaders said their current supply chain issues arise from a global political unrest, lack of raw materials and rising fuel and energy costs, with just 31% citing inflation as a major contributor.
Staff shortages in the UK and across the world can have a major impact on supply chains, for example, in 2021-22 shortages of butchers and abattoir workers led to many pigs being culled[1]. Other examples of staff shortages are in the haulage sector[2] causing distribution and delivery delays.
According to the Food and Drink Federation there are shortages of available staff for farms, factories, warehouses, distribution centres, shops, restaurants, and hotels as well as HGV drivers[3]. In addition to, and adding to the staffing crises, is inflation and increasing wages to attract staff. See fig. 1 which identifies the key challenges facing UK just in time supply chains.
Fig. 1 Key Challenges facing UK Just In Time supply chains, Food and Drink Federation, 2022
In December 2022, Barclays reported that UK manufacturers have goods worth £24bn sitting in warehouses awaiting completion due to supply chain issues[4]. Imagine all this money tied up in inventory; a cash flow nightmare for organisations, it’s not surprising that so many businesses have been struggling, or worse, had to close up.
Many businesses are making changes to adapt, improve and strengthen their supply chains. These measures include improving contingency plans, reviewing supply chain strategies, moving away from lean principles including “Just in Time”, and are once again becoming more agile. Holding more inventory is one method which will assist with the keeping logistic costs down, however, holding large quantities of inventory can also increase costs. Organisations and industries are continuously innovating to solve these challenges, 39% are increasing storage capacity, 33% are near shoring (moving supply chains closer), and 32% have chosen to work with those countries that have strong trading relationship with the UK. 37% of manufacturers have increased the number of suppliers they work with which supports the move away from JIT and a move to becoming more agile[5].
Into 2023 our businesses continue to adapt and make changes; recently Dr Martens announced a 6% price increases after seeing their half year results which revealed a 5% fall in pre-tax profits, despite a 13% rise in sales[6], this is the second rise in consecutive years. Dr Martens say the increase is a result in the rising costs of production costs. Other organisations respond to different challenges; Brompton bike maker announced a plan to move to source fewer parts from China and Taiwan due to growing concerns of political tensions and the military threat to the island from Beijing[7] .
Awareness of your organisations supply chain, and the challenges at each link in the supply chain, is imperative to remain resilient and respond accordingly. Many organisations choose different strategies to adapt and change and there is no “one fits all” solution; it’s all dependent on many factors such as organisational strategy, industry, size, history, experience, and supply chain of course. During times of significant challenge, it pays dividends to have strong supply chain partners, but not always! I shall leave you with that thought.
Written by: Susan Rashid FCIPS, MBA, CPSM, PGCE, Founder & Managing Director of SR Supply Chain Consultants and Co-Founder of SR Strategic Sourcing.
[1] www.fwi.co.uk/livestock/thousands-of-pigs-slaughtered-in-welfare-cull-npa-confirms (Accessed: Jan 23)
[2] Why the UK is struggling with driver shortages – FleetPoint (Accessed: Jan 23)
[3] fdf-briefing-supply-chain-disruption-jan-2022.pdf (Accessed: Jan 23)
[4] Supply chain issues see UK manufacturers with goods worth almost £24bn sitting in warehouses awaiting completion | Barclays (home.barclays) (Accessed: Jan 23)
[5] https://home.barclays/news/press-releases/2022/12/supply-chain-issues-see-uk-manufacturers-with-goods-worth-/ (Accessed: Jan 23)
[6] Dr Martens says boot prices will rise to cover increasing costs | Dr Martens | The Guardian (Accessed: Jan 23)
[7] Bike maker Brompton to source fewer parts from China and Taiwan | Manufacturing sector | The Guardian (Accessed: Jan 23)
