Companies Try To Navigate Woes In Supply Chains

 

"Supply chains that underpin the economy are facing continuing stress from geopolitical tension, labor disruption and natural disasters. Some companies say they are gaining an edge in their markets with tools aimed at managing the risks, but it doesn't come cheap or easy.

A new generation of strategies and technologies to manage risk is growing as the strains in supply chains persist following the upheaval during the Covid-19 pandemic that left many companies scrambling to plug gaps simply to remain in business.

"It was sort of a niche area, supply-chain risk management, and then came Covid, and then really it became a backroom-to-boardroom [issue]," said Mirko Woitzik, global director of intelligence for Everstream Analytics, a risk management firm. "All of a sudden, supply-chain management or risk management was a competitive advantage."

The pandemic punished companies that had prioritized lean inventories above all else, but the years since have seen a series of events that pushed companies to take a longer-term approach to managing risk.

A recent strike by dockworkers at a swath of U.S. ports raised the stakes for many American importers and exporters.

Hurricane Helene, which pummeled the Southeast U.S. in September, disrupted businesses well outside the storm zone, including in auto plants in Texas and Michigan, according to an analysis from Everstream. The conflict in the Middle East over Gaza also has upended oceangoing transport.

New regulations also are adding to the urgency for companies to better understand their supply chains. U.S. businesses in particular face government pressure to reduce reliance on China, including the use of some Chinese suppliers.

Legislation passed by the U.S. House, for example, would deny some tax credits for electric vehicles that incorporate battery components made by certain Chinese companies.

"There's a lot of opportunities there," said Priya Anand, director of global logistics services at St. Petersburg, Fla.-based contract manufacturer Jabil. "If you're able to survive and if you're able to put together a flexible plan . . . then it is a competitive advantage."

With a range of products, including electronics, healthcare products and consumer goods it produces for more than 400 global brands, including Apple, Jabil faces risks all over the world in a sprawling global supply chain.

Anand said Jabil has shared its own tools with suppliers to assess risks, including new platforms that let its suppliers upload data that can help forecast potential disruptions.

The company also has sought to source more components locally, including getting supplies from Mexico rather than China in some instances, Anand said.

But any response to shore up a supply chain, whether technology or sourcing products from multiple, dispersed suppliers, can be costly and challenging to implement, presenting hurdles to some companies.

Businesses that have invested in supply-chain resilience saw revenue grow an average of 23% from 2018 to 2023, compared with 15% growth experienced by their peers, according to a survey by consulting firm Oliver Wyman.

The same research shows only one-third of companies are ahead of their own targets for supply-chain resilience.

Companies that are lagging behind tend to have less buy-in from the board, the Oliver Wyman survey showed.

Separate research from FTI Consulting shows nearly 40% of companies have no contingency plan for a supply chain breakdown.

Managing risk for many companies has meant not only developing a better understanding of not just their own suppliers but also the companies that supply raw materials and parts to their suppliers.

That deeper dive into supply chains is fostering a new set of niche software companies that aim to help unravel the twists in business relationships." [1]

1.  Companies Try To Navigate Woes In Supply Chains. Vanderford, Richard.  Wall Street Journal, Eastern edition; New York, N.Y.. 31 Oct 2024: B.6.