SUPPLY-CHAIN SLEUTHS
Supply-chain Sleuths
Forward thinking… looking back Getting the big picture when it comes to understanding the latest developments and challenges surrounding supply chain operations can be a full time job. SPN takes a broad look at the forward thinking of industry leaders and the realities facing packaging companies as they look back at the lessons they have learned from past challenges ( Excerpts courtesy of the Finacial Times ) A most interesting overview was published in the FT recently that made some very interesting observations concerning the current “panic” and “depleted supply chains.” SPN readers may well find this article very helpful when making decisions that can often mean the difference between sink or swim. There is a mini-panic spreading about shortfalls all along the supply chain for manufactured goods, and how these somehow predict a commodities boom. At the beginning of this week, the ISM Manufacturing survey reported “depleted” supply chains, “increased lead times for deliveries” and “wide-scale shortages”. The survey’s respondents are supposed to be steady handed supply chain professionals. The investing public, with too much time, stale cash deposits and bandwidth on its hands has responded through its online trading accounts. Thanks in part to people who heard the term supply chain for the first time last year, net noncommercial long positions in Comex copper were up to 75,000 contracts in recent days, close to December’s all-time high of 80,000 contracts. Not surprisingly, the Twitterverse is agog with “commodities supercycle” talk. But we still have continued high unemployment, low wages, vaccine delays and declining bank credit. Yes, since its postCovid economic reopening China increased its imports of basic materials by 40 per cent.
6 SUSTAINABLE PACKAGING NEWS
But that surge is not going to be repeated given a planned growth rate of 6 per cent. So what can account for the desperation along the goods supply chain?
Whiplash effect We believe it is the whiplash effect of the depletion of retail inventories during the lockdowns at the beginning of the pandemic. In the world of operations management, ie the systematic analysis of production and distribution chains, this is also called the Beer Game Effect. The Beer Distribution Game is a classroom exercise invented by Jay Forrester of MIT’s Sloan School in the late 1950s to simulate the dynamics of a production-distribution system using (conceptual) cases of beer as the product. The Covid-19 shutdowns and restarts of production changes disorientated supply chain managers, who responded to initial post-reopening shortages by double-ordering and overstocking supplies. These actions are now echoing down from retail stores to basic materials and producers of sub-assemblies such as semiconductor chips. Ominously, White House deputies and European commissioners have involved themselves in solving the bullwhip effect on critical supply chains.
“ There is a mini-panic spreading about shortfalls all along the supply chain ”