In recent years, there has been much discussion about the negative impacts of our broken supply chain structures. The high degree of interconnectivity between organizations, along with the globalization of production and trade, has led to a situation where a disruption in one part of the world can have a ripple effect that is felt throughout the entire supply chain and logistics ecosystem.
This increased vulnerability has been highlighted by a number of notable events in recent years, such as the 2021 Strict China lockdowns, which disrupted global chip production for automobiles, and the 2022 Ukraine-Russia conflict, which impacted a broad array of industries due to the non-availability of metals like Nickel, and Palladium as well as Neon gas used in semiconductor manufacturing. As supply chain companies have made the supply chain environment more complex and interconnected, it has become increasingly difficult for companies to protect themselves from these types of disruptions.
There are a number of reasons why our supply chains are broken. First, there is a lack of transparency. Organizations are often reluctant to share information about their suppliers and sourcing companies for competitive reasons. This lack of transparency makes it difficult to identify potential risks and supply chain disruptions. Second, there is a lack of trust. Firms are often reluctant to enter into long-term relationships with suppliers due to the fear that they will be taken advantage of or that their business could be at risk if the supplier goes out of business. Third, there is a lack of collaboration. Companies often view their suppliers as competitors rather than partners, which makes it difficult to work together to improve efficiencies or resolve problems. Finally, there is a lack of innovation. Venture capital firms are often hesitant to invest in new companies with new innovative technology solutions because margins are so lean and under constant pressure to adapt to new dynamics almost constantly. As a result, our supply chains and logistics are often slow to adapt to change and are not well-equipped to deal with disruptions.
The good news is that there are ways to fix our broken supply chains on the micro-level of the individual company level. First, it’s up to the individual manufacturing companies to increase transparency by sharing information about risks and disruptions with their suppliers. Second, build trust with your suppliers by entering into long-term relationships and collaborating with them to improve efficiencies. Third, we need to encourage innovative business solutions by investing in new technologies and processes. By taking these steps, we can begin to rebuild our broken supply chains and create a more resilient system that is better equipped to deal with future disruptions.