Current supply chain processes are built for efficiency, and they work perfectly in a normal and predictable economic climate. Unfortunately, this is not the reality of today. Political, climate, and health crises have shaken many companies to their core, and most supply chains have yet to recover.
That’s why we need to rethink our supply chains and the business strategies behind them so we can manage economic disruptions as they come, and be flexible enough to conquer them. In this blog, I’ll show you the importance of a balanced and flexible supply chain triangle in these times of unrest, and how the supply chain has become the centerpiece in strategic business decisions.
The Supply Chain Triangle as a key strategic concept
Balancing this triangle is important because each side has an influence on the others. For instance, improved services can lead to more sales, higher sales lead to lower inventory and a decreased inventory leads to fewer storage costs.
During the last 18 months, however, global supply chains have been a complete mess, as pictured below. And this has, of course, a severe impact on the supply chain triangle. When key suppliers cannot supply your raw materials (Cash), this leads to delivery problems (Service), which in turn leads to firefighting costs (Cost) to close that service gap. Likewise, when demand for your products largely exceeds your production capacity (Fixed Assets), it increases lead times (Service) and last-minute changes to the production schedule (Cost), which then again negatively impacts your capacity.
Will global supply chains ever return to 'normal'?
When you combine the challenges of the past two years with the ongoing rise in raw material prices, the lack of transport, the war for skilled labor, etc., you might ask yourself the question: ‘when will everything return to normal?’. The short answer is: not anytime soon. And that’s precisely why we need to rethink our supply chain strategies if we want to tackle these increasingly difficult challenges. 2022 will be remembered as the year that supply chains, unfortunately, did not go back to normal and continued disruptions remained top-of-mind. While being more aware of these continuous disruptions, my wish for 2023 is that companies finally act. Rethink your supply chain into an agile and flexible business process and not the cost-efficient method it was historically built for.
How to convince C-level to invest more in Supply Chain?
The following articles may also be interesting for you: