Highlighted in our Friday quote last week, we wanted to demonstrate how impacts from the pandemic continue to lead to supply chain challenges. Notably this week, ocean carriers are canceling sea voyages as a result of port congestion. The port congestion is mostly a result of companies ramping back up from COVID-19 shutdowns. This has led to an overall increase in the number of shipments. Further exacerbating the issue, port employees have been contracted the virus and precautions due to the pandemic are slowing the movement of goods and shipments. The result—ships are having to wait a couple additional weeks before docking and unloading.
The situation results in two major questions. First, will we see a major shift in the transportation industry and how companies begin to transport material? The second question is how will companies approach their strategic sourcing activities? We know a lot of companies are sourcing materials abroad due to the cost difference from locally sourced products, but companies now need to determine if the cost savings are worth the risk of materials being across the globe. One alternative solution is building certain requirements into the bid processes and future contracts. These requirements could require certain criteria be met to ensure stable production. An option could be requiring particular levels of safety stock be maintained domestically to account for large supply disruptions. Another key will be the focus on secondary sources for material. Are companies approaching sourcing in a strategic way by having all possible supply lines in one geographic location with long lead times? Supply chains are going to need to evolve even further to accommodate these supply disruptions that are looking to be far from over. It seems what we will see is not only an increased focus on how to get materials from a transportation perspective, but also how companies approach their overall sourcing initiatives to shield themselves from further potential risk.
What types of evolution do you see happening in your supply chain. Are sourcing changes happening within your organizations? What other related supply chain challenges is your organization experiencing?