Supply chain shortages and their impact on manufacturing

Many industries have been impacted by supply chain disruptions over the past few years. Labor shortages and difficulty obtaining hard-to-source parts have caused delays or even halts in production in the construction, automotive, technology, and other industries. The pandemic has brought these delays to everyday consumers, shining a spotlight on the impact of supply chains on every aspect of modern life. By assessing the causes of supply chain shortages and the impact on production, manufacturers can find solutions that minimize risk.

See also: Manufacturing recovery boosts transportation and logistics sectors

Causes of supply chain shortages

Supply chain disruptions can occur for a variety of reasons. The increasingly global market for materials and components can cause some headaches, especially during times of political or economic instability in regions that control access. Manufacturers with the least inventory are most likely to experience delays due to these situations.

Global interdependence

Today, manufacturers are more dependent on global supply than ever before. Global markets mean manufacturers may source supplies and parts from all over the world. While globalization of production provides opportunities to reduce costs or source uncommon materials, it can also increase delays when there is a disruption in one part of the supply chain. While supply chain issues can vary by region, many delays are related to disruptions in the transportation process.

Regional changes

Manufacturers that rely on a specific region for the supply of materials or components may experience supply chain disruptions that vary by region. Political instability can disrupt shipping and export activities, including border access, regulations, trade conflicts, etc. During the recent pandemic, many countries have established new guidelines for foreign transactions. These guidelines affect the speed and volume of shipping and other activities that require dealing with foreign entities, disrupting the global supply chain.

Economic instability

Economic changes can be a major driver of supply chain instability. During periods of price volatility or inflation, manufacturers and suppliers may become cautious about both production and consumption. If the price of a material or component increases significantly, manufacturers may also increase prices to offset the increase in indirect costs. The resulting inflation may change demand, especially for consumers who are concerned about the impact of instability on their ability to make ends meet.

Material scarcity

Some high-demand materials are scarce or difficult to source, either due to insufficient supply or artificial scarcity created by regions that control access. Access to certain metals or semiconductors has featured prominently in recent supply chain shortages due to limited production and dwindling access. Mining remains a complex process that requires significant manual intervention and can be disrupted during strikes or government shutdowns. In some cases, countries that control supply may use that control to raise prices or gain other advantages.

Lean Inventory Management

The trend in inventory management is more focused on efficiency, which can lead to delays when supplies cannot be renewed. Many manufacturers emphasize the importance of maintaining just-in-time inventory, so they rarely have more inventory than they need. This approach can help reduce the necessary space in a warehouse, thereby reducing storage costs. However, if manufacturers cannot replace supplies when needed, they may have to cut back or even stop production.

The impact of supply chain on manufacturing

Because there are many possible disruptions to the supply chain, manufacturers must find ways to anticipate changes and respond as smoothly as possible. Supply chain disruptions can have a variety of negative impacts on manufacturers, including:

• Production delays could disrupt other parts of the supply chain
• Materials with high demand and low supply have higher costs
• Increased labor costs associated with production
• Decreased customer satisfaction, which in turn leads to decreased demand

Ultimately, the supply chain can make or break a business. When manufacturers fail to forecast their supply needs in advance, they may find their customers turning to competitors who have a well-developed plan to maintain production.

How to minimize supply chain disruptions

Because supply chain issues can lead to increased costs and reduced revenue opportunities for manufacturers, minimizing the impact becomes the most important goal. By adopting these improvements, manufacturers can identify the most common sources of disruption in their own supply chain and reduce the risk of significant production delays.

Diversified supply chain

Manufacturers that rely on a single supplier for a specific part are most likely to experience supply chain-related issues, and diversification can reduce risk. Supply chain diversification may involve considering multiple suppliers for the same material, finding local producers to minimize shipping delays, or bringing some services in-house. In some cases, manufacturers are using 3D printing to make parts themselves to minimize production time and limit the impact of supply chain disruptions.

Optimize inventory

Optimizing inventory can minimize the damage to manufacturers caused by supply chain delays. Organizations should assess the likelihood of disruptions in their supply chains and change their sourcing strategies accordingly. Maintaining an ideal inventory allows production to proceed on schedule without having to make room to manage excess supply. This process improvement may require the integration of supply, inventory, and production systems.

Improve your skills

Upgrading technology can help manufacturers anticipate supply chain disruptions and eliminate other delays in the process. Many manufacturers have implemented supply chain technology into their processes so that they can maintain real-time inventory management and increase the resiliency of their supply chains. Material handling equipment Waste can be reduced, which can increase production efficiency and reduce the amount of supply that manufacturers need to order.

Supply chain disruptions are a reality, but they can significantly disrupt manufacturers’ production goals and timelines. It is difficult for manufacturers to predict major supply chain issues, which highlights the importance of having a robust management plan in place. By diversifying supply chains, optimizing inventory, and improving technology, manufacturers can find ways to reduce the impact of global shortages.

About the Author

Annette Harris has been with American Equipment for 23 years and has been in the industry for over 40 years. She has worked as a service manager, outside service salesperson, and currently serves as Director of Sales Operations for American Equipment. She is passionate about service in the industry and enjoys discovering customer needs and finding solutions for them.

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