Supply chain disruptions are inevitable; the most effective way shippers can handle them is to confront them head-on. A proactive and direct approach requires understanding the contributing factors and available solutions. In this guide, we explore common causes and explain how to handle supply chain disruptions.
What is causing supply chain disruptions?
The supply chain is a vast and complex system woven throughout countless layers of society, logistics, and business across the globe. Thus, the supply chain has main points of vulnerability and can be impacted by many elements. Here are the top factors in supply chain disruptions:
Weather events like hurricanes, extreme heat, and blizzards can cause widespread and long-lasting damage that disruptions the supply chain in many ways—weather events damage infrastructure like roads, bridges, and railways essential for transporting goods. Production facilities may be forced to close due to hurricanes, leading to shortages and rising prices. Raw material production can also suffer from extreme weather and create shortages that increase prices and force businesses and consumers to change and adjust.
Natural disasters like earthquakes, forest fires, and floods are increasingly common, even in places without a history of these events. Like extreme weather events, natural disasters damage infrastructure and force delays, rerouting, and even complete shutdowns of transportation networks. Producers, distributors, and warehouses may face facility damage and loss of valuable goods.
Geopolitical events like wars, sanctions, pandemics, and random events like a cargo ship getting stuck in the Panama Canal can cause vast supply chain disruptions. Political instability can result in infrastructure damage and transportation issues, making goods difficult to move throughout the supply chain. Tariffs increase the cost of goods, and trade policies can interrupt established supply chains.
Full warehouses do not make headlines but can disrupt the supply chain. When there is a shortage of available warehouse space, cargo gets stuck as it moves through the supply chain. Full warehouses can also lead to overstocking, which ties up capital and increases the risk of spoilage.
A lack of logistics professionals or supply chain workers sets off a cascade of issues, including production delays, reduced output, increased labor costs, and quality control issues. Bottlenecks can easily arise and lead to product shortages.
How to Address Supply Chain Disruptions
There are several tactics companies can adopt to address supply chain disruptions.
1. Diversify Suppliers
When supply chain disruptions occur, there is a good chance that suppliers are suffering too. Your go-tos may become unavailable or unreliable due to supply chain factors outside their control.
Stay agile with your supplier partnerships, familiarize yourself with all available options, and form partnerships with suppliers with different sources and processes.
2. Leverage a Transportation Management Solution (TMS)
A TMS relies on data to enable supply chain and logistics operations visibility. Shippers can use a TMS system (or partner with a freight broker who uses a TMS system on their behalf) to identify potential bottlenecks and opportunities for relief. A TMS system is also beneficial because it facilitates communication, handles payments, and automates many logistics processes, giving you more time and energy to focus on troubleshooting other factors.
3. Stockpile Inventory
Another approach is to stockpile inventory of raw materials or final products, whatever is most likely to be threatened by supply chain disruptions or what would suffer the most harm by supply chain disruptions. Stockpiling does not necessarily have to be a consistent practice. It can just be implemented during select times of the year when supply chain disruptions might be most problematic or most likely to occur.
4. Adapt the Business Plan
Another approach that companies commonly take, or are forced to take, to manage supply chain disruptions is to adapt the business plan. This may include changing the pricing structure to account for the cost increases, choosing only the work that meets the profit margin, or innovating new products or services.
5. Partner with a Freight Broker
Perhaps the simplest and most effective approach to addressing supply chain disruptions is to partner with a freight broker. Not only will an excellent freight broker help you ride the waves of supply and demand, they will also provide immense value to your business. Freight brokers understand the industry, have extensive connections, constantly keep a pulse on the market trends and global events that may impact the supply chain, and are excellent at forecasting and problem-solving. When supply chain disruptions arise, and they will, it’s crucial to have a freight broker on your side who can anticipate and proactively manage any issues that may arise.
To partner with a freight broker, contact First Star Logistics today!