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LOGISTICS
Supply Chain Mix and Match Global trade imbalances have been created by systems designed pre-pandemic to handle JIT manufacturing that were not adaptable to sourcing and moving goods. By Derek Cutler, Chief Economist; and Chris Steele, President & CEO; EBP-US
I
magine, if you will, that you are a logistics manager for a major manufacturer in December of 2019. The economy has been growing at unprecedented speed, and you are doing everything in your power to ensure that raw materials are getting to where they need to go. You’ve been speaking with each of your suppliers to better understand what’s happening in their production cycles so that you can get your parts to your assembly lines as quickly as possible. Cost is king, and time is money. You’ve done everything you can to remove all waste from the system, and everything is humming along the way that it should. But you’re starting to see some interesting news stories about this unusual flu that you had never heard of before, which is being seen in a part of China. Clearly, it won’t have any implication for you, right?
Roots of the Problem So, let’s back up slightly, and remind ourselves of just how flat the world has become in the past four decades or so. Manufacturers worked hard over that time to both produce goods in the lowest-cost locations and reduce waste and minimize the need for large warehouses full of inventory in favor
of more nimble supply chains that deliver just what is necessary. This shift from centralized, scaledriven production minimized the need for warehouse inventory, meaning firms only maintained enough safety stock to overcome minor delays. Over time, manufacturers came to rely on a continuous flow of goods and money, with constant communication between sections in a supply chain. This worked well under typical circumstances. However, problems began when the systems designed to handle this “just-in-time” (JIT) manufacturing lacked the necessary adaptability in sourcing and moving goods to address the cascading
Container Imbalance Index CAx | Year on Year
1
Values
0.75
0.5
0.25
0
1 2 3 4
5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30 31 32 33 34 35 36 37 38 39 40 41 42 43 44 45 46 47 48 49 50 51 52
Source: container-xchange
2020
2021
2022
AREA DEVELOPMENT | Q3 2022
SupplyChain.indd 21
21
8/25/22 1:26 PM