The pandemic wreaked havoc on supply chains worldwide due to mass disruptions in manufacturing caused by shutdowns and COVID-19 restrictions at factories and warehouses.
The strain on the supply chain resulted in shipping delays, as well as product backlogs that subsequently drove up pricing on both products and delivery.
While supply chains are still playing catch up, local businesses should assess their supply chain vulnerabilities post-pandemic and seek ways to strengthen it in case of another mass disruption, say experts.
“I’ve used the term a perfect storm to describe what happened to supply chains during COVID,” says Tony Nuzio, founder of ICC Logistics Services Inc., a Hicksville-based transportation and logistics consultancy.
The outbreak of COVID-19 in China shut down factories and cut off initial supply, he says.
Additionally, there were capacity issues on the transportation side of the supply chain, he says, explaining “everyone had back-orders precipitated by people being home and shopping online.”
Nuzio said demand is still outpacing supply and “the whole supply chain is dealing with the uncertainty of what the next disruption will be.”
That is why businesses should use this time to assess their vulnerabilities and strengthen future supply chains, says Nuzio, who is working with clients to identify pain points and vulnerabilities post-pandemic.
But generally speaking, there are two main ways to mitigate supply chain risk, says Edith Simchi-Levi, a Manhattan-based supply chain and operations analytics expert and co-author of “Designing & Managing the Supply Chain.”
One is to make sure you have enough inventory, especially of your most critical products and components, and the second is to diversify your suppliers, she says.
Too often businesses become reliant on one or two suppliers, which was a problem during the pandemic, she says.
It pays to have multiple supplier relationships, but if for some reason “you only have one supplier, make sure their plants are in multiple disparate locations,” Simchi-Levi says.
Having diversity of product is another way to mitigate some risk, she says.
Howard Kipnes, president of Cedar Knolls, a Ronkonkoma-based homebuilder, learned this first hand during the pandemic when he had to consider alternate products when normal mainstay products were hard to get.
With people working on their homes, demand was huge for building and lumber supplies, he says, adding that demand led to skyrocketing prices on building products.
“As important as pricing, was can I get the product,” says Kipnes, noting for example he had difficulty getting deck railings.
As a result, he had clients make alternate product selections if a certain product was unavailable. Some of those new products ultimately turned out to be quality products at competitive pricing Kipnes will use going forward.
Being open to alternative options helps, but it also pays to assess where your inventory is housed and perhaps rethink your inventory holding practices, says John Costanzo, founder and chief executive of East Norwich-based LDK Global Logistics, which specializes in freight and package transportation services.
Businesses should know where their primary suppliers are procuring materials because they may be more vulnerable than they realize, Costanzo says.
For instance, you might be buying from a Michigan-based supplier, but perhaps that supplier is getting everything from China so it pays to know the Michigan supplier’s crisis contingency plans if its offshore suppliers’ shut down, he says.
Also as a small business it could help working with a third-party logistics company that has relationships with multiple freight and transportation companies to help find greater capacity and better pricing, Costanzo says.
Looking forward, businesses should also look to have better supplier relationships with their existing carriers when “times are quiet,” says Sudhir Sachdev, an assistant professor in the School of Business at Farmingdale State College and president of the Association for Supply Chain Management NYC/Long Island Forum.
Have at least two or three suppliers that you buy from on a random rotating basis, he says. That way if you need help from them during a crisis there is some history.
That also helps build your credit rating with them so in times of crisis perhaps they would more willing to extend you credit, Sachdev says.
Also, manage your demand and inventory very carefully, he says.
You don’t want to panic and overbuy and then be stuck with inventory you can’t get rid of, he says.
Use what you learned from the pandemic to strengthen your supply chain process, Sachdev says, noting “if you can manage your supply chain, you can survive anything.”
Demand and backlog continues since COVID-19. A National Retail Federation survey this past April showed 98% of retail respondents were impacted by delays at the ports or other shipping delays, with problems throughout the supply chain starting in supplier countries.
Source: National Retail Federation