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Bill's Building Blocks - A Sad State-Of-Affairs - September 2022

Bill’s Building Blocks - September 2022

A Sad State-Of-Affairs

My son is an architect. In a recent conversation he expressed his dismay with the sad state-of-affairs in our supply chains. “Dad, it’s been two years already. I can control specifying the supplier for a piece of equipment in a building design, say a rooftop air handler. But I have no control over the contractor who will win the bid, or the equipment distributor chosen by that contractor, or the logistics company delivering the air handler. Same item, two contractors, two distributors, two logistics paths result in one solution being on time and the other months late. A building design represents thousands of such scenarios. Dad, you’ve got to teach your students how to fix this problem!”  If only I knew.

Supply chains over the past quarter century have been dominated by cost reduction strategies driving ever more complex, remote, daisy chained relationships. Today’s supply PLAN-SOURCE-inbound logistics-MAKE-midbound logistics-DELIVER-outbound logistics-customer demand scenario has major deficiencies. Supply PLANNING has become just-in-case. Political tensions with China threaten the stability of chip SOURCING in Taiwan. Factories MAKING product in Sichuan Providence have shut down for weeks because drought conditions have limited electricity production from hydroelectric dams. The logistics ports in Shanghai and Shenzhen are weeks behind schedule because of Covid. Bunker fuel price increases have contributed to container costs skyrocketing. Trucker strikes in California protesting limiting the use of independent contract drivers are delaying the unloading of container ships in Los Angeles and Long Beach. Distributors DELIVERING products are running out of warehouse space for peak season. Extreme weather in Texas and elsewhere is interrupting last mile delivery. There is an imbalance of empty containers at the Port of NY/NJ that are not cost effective to be returned to the west coast. Price inflation is causing retail customers to demand less than PLANNED. Consequently, the end-to-end delivery priority of a specific customer order loaded into a container at an Asian factory has been destroyed by the time it reaches its intended destination on the east coast of the United States.

We can all agree that the world is currently a mess. Problems need to be dissected and understood before fresh solutions will emerge. The first step is to separate what can be controlled from what cannot be controlled. Then drilling down into what can be controlled overlay a timeframe for immediate change, gradual change, and long-term change. A place to start may be redundancy in supply chain relationships, an analysis of inventory lead time risks, and the design of measures to manage delivery reliability and cash flow.

©2022 William T. Walker, CFPIM, CSCP-F, CLTD-F, CIRM has 42 years practitioner experience, authored Supply Chain Construction and Supply Chain Architecture, and teaches Supply Chain Engineering at NYU Tandon plus Demand Planning at Rutgers Business School. He is a 40+year ASCM member and APICS E&R Foundation past president. email: [email protected]