Emerging Supply Chain Trends Entrepreneurs Need to Know About Crashing supply chains have caused delays and financial loss for entrepreneurs throughout the pandemic, but industries are evolving as we continue to adjust to this change.
By Marco Ludwig Edited by Ryan Droste
Opinions expressed by Entrepreneur contributors are their own.
In any type of goods-based business, a healthy supply chain is critical to getting your products in the hands of customers. Ultimately, a company's success depends on keeping a close eye on the trends within that chain so that you can prevent interruptions and control your overall costs.
The chaos from the pandemic
During Covid-19, supply chains were tested like never before. As the demand for items skyrocketed, governments in the United States and around the world issued health and safety rules that restricted when, where, and how people could work. Companies became short-staffed, and critical materials became scarce. Costs of shipment containers increased substantially — sometimes by as much as 300% — and often weren't available at many locations. Even when containers were docked, it wasn't always clear when they would be unloaded. Subsequently, items within those shipping containers sat idle for weeks and, in some cases, months.
At the same time, transportation companies — which had traditionally done more business-to-business work — saw their pricing and demand rise. They suddenly had to deal with significantly higher instances of less-than-truckload (LTL) shipping as a result of consumers changing their buying habits to increase e-commerce utilization.
On the other hand, companies that controlled their own production were able to scale successfully to effectively meet demand during the crisis. This was the exception. With the sheer number of issues building, most businesses saw supply chain interruptions and struggled to get their products out to their customers.
Although transportation and logistical challenges are expected to continue, businesses will not likely see this level of supply chain interruptions after the pandemic. Both the B2B and the everyday consumer will see the demand normalize, capacities become more readily available and efficiencies improve. That said, it's not wise to expect businesses and individuals to revert completely to pre-pandemic operations.
Related: Consumer Trends Demand New Supply Chain Ideas
Four supply chain predictions to keep your eye on
Going forward, change is inevitable. As the pandemic subsides, entrepreneurs need to be cognizant of the following supply chain related topics:
1. Trucking and transportation as a buffer
Truthfully, most companies don't have the ability to build up their own trucking or transportation capacities. However, those that do have done well compared to their competitors. They will likely continue to use these capacities as a differentiator. The companies that have the ability to boost trucking and transportation might begin to put a higher priority on these areas to mitigate or prevent issues in the event of another disaster.
2. Risk management
Risk management assessments and plans need major improvements going forward. In the past, executives looked at worst-case scenarios more theoretically and didn't give them a lot of attention. Additionally, they didn't approach supply chain, production planning and risk management as interrelated subjects. Rather, they often had separate managers and teams to address them.
However, Covid-19 proved that worst-case scenarios can become reality. It's likely that executives will need to change and evolve in order to mitigate potential problems. For example, they might be more willing to accept the added expense for backup or insurance capabilities — which could enable them to keep their doors open in a disaster.
They may put a bigger emphasis on transparency — particularly when it comes to vendor qualification — and knowing who is supplying key materials to the vendor. Knowing where these key items come from and understanding what influences their prices are both important factors to assess the reliability of the supply chain during a crisis scenario. Executives should also familiarize themselves with how to tap into unused capacities, as this will allow them to deal with demand spikes, remain efficient and differentiate themselves. These efforts will be more unified and holistic.
3. Automation
Companies were investing in and using automation heavily before the pandemic, but the pandemic revealed new ways to use it and additional areas where it could be protective or economically beneficial. It's likely that companies will emphasize automation to a much greater degree going forward. We won't just see robots on the production side but also on the delivery and transportation side. Down the road — as technology advances and reliability improves — driverless trucks will become standard and legislation is expected to become more accommodating soon. This will allow businesses to address the current driver shortage and avoid staff-related delivery concerns in the future. Automated driverless test programs already are operating in certain areas, such as Dallas/Fort Worth, so it may become the norm to see driverless trucks on U.S. highways in the coming years.
4. Increased use of local communities and supply chains
Companies that depended on local supply chains generally fared better during the pandemic than those that did not. They were forced to deal with issues like poor transparency or shipping problems to a much smaller extent (e.g., the aforementioned shipping containers). Throughout the pandemic, suppliers have been known to favor local companies because they often have a more trusted and reliable business relationship — which can often bring speed and reliability advantages.
Consumers also put an increased value on local businesses. People in the United States, for example, might pay more for items they know were made in America. Because of this stability and community ideation, people will continue to emphasize partnering locally even after they have more global options available again.
Related: Chick-fil-A is Facing a Sauce Shortage, and People Are Losing Their Minds
With risk management top of mind, the future can be bright
Even if new mitigation options come with a price tag, the pandemic has proven that executives cannot afford to ignore risk management. Decisions in this area influence the entire company. Additional trends, such as trucking and transportation, also sit within this larger focus. The points mentioned in this article can assist entrepreneurs in preparing their businesses for the future, offering confidence during unsure times.
