Supply Disruptions: How can you ensure continuity within your business?
Posted on 30th September 2021 at 15:34
The pressure on procurement and supply chain remains unrelenting. A number of companies have been affected by supply disruptions due to several factors including labour shortages, new immigration rules, and the lingering effects of the pandemic. Labour shortage in particular is well documented and one of the biggest concerns as its impact on the wider economy is becoming more evident. Understanding the complexities involved and asking the right questions, as well as building resilience needed in the supply chain, are some of the key elements to keep supply chains moving amid these disruptions.
The UK economy has been disrupted by several factors including labour shortages, new immigration rules, and the lingering effects of the Covid-19 pandemic. It is clear that there are supply problems in many industries with logistics providers struggling to guarantee all collections and deliveries. However, problems with shortages have existed for years but now a combination of several factors is exacerbating the shortages.
According to BBC News (2021), there is now a shortage of more than 100,000 drivers in the UK and it seems like things are getting worse. Everyday there is an increased number of warnings from large companies, especially from those operating in the UK’s food supply chain. However, it is not only the food industry that has been affected - shortages of materials have also been reported in the manufacturing and construction sectors.
Indicatively, the examples listed below have been collated from various sources (BBC News, 2021; Clowes, 2021; Chapman, 2021) to show how companies have been affected:
McDonalds stopped sales of milkshakes due to shortages of HGV drivers.
Nando’s temporarily closed 50 sites due to supply chain issues.
Co-op says it faces the worst food shortages in memory.
Iceland’s boss raised the prospect of empty supermarket shelves at Christmas.
Morrisons warned that the driver shortage would push up prices.
Halfords said that bike sales were down due to supply chain disruptions from imports to the shortage of lorry drivers.
As reported on the news, the ongoing shortage of lorry drivers is a result of many factors. It is not just a result of Covid-19 solely or tax changes (in a post-Brexit environment) or a result of low labour standards (e.g. poor working conditions, insecure contracts, low pay).
And what is more, “the causes of empty shelves are also more complicated than just a shortage of lorry drivers” as Professor Edward Sweeney, Professor of Logistics and Systems at Aston University explains in The Independent (Chapman, 2021).
As the economy has started to recover, the demand for goods has rapidly increased and there are lots of products as well as raw materials in short supply (e.g. electronics, drinks, aluminium). Additionally, the Covid-19 pandemic has changed consumer behaviour, needs and priorities. This means supermarkets and companies operating in different sectors have to deal with a sudden jump in demand which is now combined with more uncertainty, added to an already difficult logistical task. On the other side of the problem, the competition is tough and big retailers put enormous pressure on suppliers for lower prices and shorter lead times.
In view of driver shortages, the UK Government has announced a package of measures to help address the shortage of hauliers by providing for example funding for the LGV driver apprenticeship scheme and increasing the availability of HGV driver testing (GOV.UK, 2021). Individual big companies have also taken steps to minimise the driver shortage problem – for example (BBC News, 2021; Chapman, 2021):
John Lewis has increased salaries by £5,000 per year.
Tesco is offering drivers a signing-on bonus of up to £1,000.
Aldi has increased wages for drivers.
Waitrose has given its drivers a pay rise of around £2 an hour while new qualified drivers will receive a "welcome payment" of £1,000.
The big companies might be louder about the impact of supply disruptions on their business continuity but that does not mean that SMEs are not affected too. In fact, SMEs might have less power and/or understanding to deal with supply shortages than their larger rivals which makes the problem particularly challenging.
To begin with, a good planning process for ensuring continuity within your business is asking the right questions about your supply chain. A strong supply chain continuity capability rests on strong and well-chosen partners who can all work together during a disruptive event and increase the potential for business and supply chain success. So, as a first step try answering some of these questions:
Do you have a good view of how your supply chain is structured?
Can you analyse your supply chain’s complexity (e.g. who, what, when, how)?
Do you understand the influence of your suppliers’ supply chain on your own business?
Do you routinely evaluate your supply chain for warning signs of distress?
Can you identify risk in reaction to an incident at a supplier’s or customer’s site?
Do you have a plan when there is a problem within your supply chain?
Can you identify the critical paths in your supply chain?
For a more complete set of questions, you can undertake our Instant Supply Chain Health Check which can help you gain an initial understanding of how well you might or might not know your supply chain and quickly identify areas of strengths and weaknesses.
At a next level, 6 strategies which can help businesses to address supply disruptions and ensure continuity are:
Gain/Increase transparency and visibility across your extended supply network: try to achieve end-to-end supply chain visibility, you can start by mapping your supply chain.
Continuously assess your suppliers’ capabilities: establish KPIs, evaluate and assess your suppliers’ capabilities and performance and take actions when needed.
Review your sourcing strategies: dual or multiple sourcing strategies might be beneficial for your business to address supply shortages during disruptive events.
Review your supply chain relationships: establish partnerships where appropriate, share risks and information with your partners.
Gather supply chain intelligence: identify supply chain risks, monitor the market, model supply scenarios and contingency plans, monitor financial stability of key suppliers.
Build supply chain resilience: understand how well your suppliers are prepared, identify supply risks, avoid reliance on single sourcing, instead opting for multi-sourcing and the creation of buffer capacity.
At UK-Centric Supply Chains, we understand the challenges of getting the supply chains ready to meet the various requirements and at the same time be resilient enough to quickly respond to disruptive events.
Author: Dr Evanthia Thanou
Evanthia Thanou is a Lecturer in Supply Chain Engineering. Prior to that, she worked as a Research Associate in UK-Centric Supply Chains project where she conducted research and delivered consulting support to Small and Medium Enterprises in the supply chain, strategic and operations management areas. She has also worked as a Teaching Assistant in the Operations and Information Management Department at Aston Business School.
To find out more about how UK-Centric Supply Chains can help your business, why not get in contact with us today?
References:
BBC News. 2021. How serious is the shortage of lorry drivers?. [online] Available at: https://www.bbc.co.uk/news/57810729 [Accessed 14 September 2021].
Chapman, B., 2021. Food shortages will end when workers are paid more, say HGV drivers. [online] The Independent. Available at: https://www-independent-co-uk.cdn.ampproject.org/c/s/www.independent.co.uk/news/business/analysis-and-features/food-shortages-lorry-driver-supermarkets-b1908769.html?amp [Accessed 14 September 2021].
Clowes, E., 2021. Why are UK businesses being hit by shortages at the moment?. [online] Sky News. Available at: https://news.sky.com/story/why-are-uk-businesses-being-hit-by-shortages-at-the-moment-12391233 [Accessed 14 September 2021].
GOV.UK. 2021. HGV driver shortage letter to industry. [online] Available at: https://www.gov.uk/government/publications/hgv-driver-shortage-letter-to-industry [Accessed 14 September 2021].
Tagged as: Resiliency, Supply Disruptions
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