Supply chain management is under siege. First, the global pandemic, now an unsettling war in Ukraine. So when do supply chains get back to ‘normal’?

Well, they don’t, and won’t, for a long time.

For over two years, there has been unprecedented instability in supply chains. Nobody knows what ‘normal’ looks like anymore. Product shortages, high delivery and transportation costs, labor/recruiting challenges, and limited storage space continue unabated.

Supply chains do not work well with inherent risk from a geopolitical conflict. The higher the risk, the higher the challenges for supply chain managers and global policymakers. The situation in Ukraine all but guarantees we’re bound to see continued high inflation, higher commodity prices, and further delays in product manufacturing, shipping and deliveries for the rest of the year and likely longer.

Here in the U.S., our government needs to encourage and focus on addressing the human/workforce element with technology while prompting more companies to implement onshoring or nearshoring initiatives, and industry leaders must step up to help drive industry-wide standards.

Here are some of the factors that have been in play in recent years that’s impacted the global supply chain. Let’s take a deeper dive.

Standards matter

Now more than ever, standards matter. Standards drive the technology, and the technology drives the standards. It’s a complementary dynamic. Having better standards enables the technology and allows technology partners to interact with each other.

Aligning standards for the right collaboration tools would be another step forward. But, unfortunately, today’s collaboration tools for supply chain protocols don’t talk to each other very well, if at all. That has put suppliers in a precarious position where they have to rely upon multiple collaboration tools to talk to various partners.

This produces an inefficient situation that is not productive. And that’s one of those critical areas where creating industry-wide standards can make a difference. There is a tremendous need for the government to address supply chain standards and processes. Currently, behind-the-scenes efforts are going on in this area. GS1 work is ongoing, focusing on three key areas:

• Deliver interoperability in open supply chains via standards for data and information exchange;
• Bolster a competitive marketplace for system components; and
• Encourage innovation in the products and systems.

Beyond this, the recent release of the Association of Supply Chain Management Supply Chain Operations Reference Model (SCOR DS) as an open digital standard is very promising in terms of helping supply chains speak the same language, leverage common best practices and ensure meaningful collaboration and communication moving forward. Additionally, the International Standards Organization has established a group to create a new supply chain standard.

Technology solutions

New tools utilizing continued innovation in artificial intelligence and machine learning can help drive manufacturing, shipping and logistics forward.

This means employing AI solutions to provide visibility, digitization, and predictive supply and inventory levels for materials management in complex global supply chains. By gathering data from various sources across ERP instances/systems, you can move beyond traditional master data management and planning to strategies, allowing you to optimize inventory costs while reducing risk in MRO supplies to secure trust and improve production uptime. In addition, tools that organize inventory processes can help prevent future inventory spikes while optimizing allocation and procurement needs.

Putting technology to work industry-wide, backed with best practices and wide-reaching digital transformation, can be the opening salvos to winning the war on supply chain disruption, inefficiencies and lack of resilience. We need this change now!

Nearshoring necessary

Another area that’s increasingly come into play is onshoring or nearshoring for U.S. manufacturers. Let’s face it, sourcing goods for the U.S. market from a plant in the northern hemisphere makes more sense than shipping from China.

In recent years, manufacturers in many industries were already moving out of China for a multitude of reasons, including the rising standard of living making it much more costly to produce. As a result, manufacturers were already moving into Laos, Cambodia and Vietnam, chasing the “low-cost region.”

Nearshoring can act as a solid response to today’s rapidly changing supply chain disruptors, including geopolitical turmoil and climate impacts. Sourcing goods from halfway around the world is no longer ideal, nor cost-effective when you consider the outrageous costs of ocean transport and the lengthy lead times. The passage of the United States Innovation and Competition Act, which promises incentives of $52B for the construction of microchip fabrication plants and research and development is a great first step in assisting companies in their nearshoring efforts and reducing needless risk in supply chains.

Geopolitical turmoil

Before the pandemic, we already had highly complex supply chains that struggled with high customer demand across the board and limited transportation and warehousing capacity. Together, this caused a myriad of traffic slowdowns and product delays.

Now, we have a more urgent global geopolitical situation that affects decision-making done at the supply chain level. Will goods be available? Is it safe to source the goods in a particular location? How do we move goods across volatile territories?

Companies already dealing with the heavy blows from the pandemic, during which many employees left the workforce, are now faced with making decisions that impact the employees who stayed and those newly hired. Clearly, finding better technology solutions would help existing and new employees thrive in their roles. Companies moving toward digitalization will be better equipped to deal with these challenges all around.

Government policy needed for stronger supply chains

Amid the Russia-Ukraine Crisis, the White House released its new Capstone Report about advances made in its year-long supply chain task force. The reports produced recommendations to strengthen supply chain resilience and mitigate future disruptions across five broad categories:

1. Rebuild domestic production and innovation capabilities;
2. Support the development of markets that invest in workers, sustainability and quality;
3. Leverage the federal government’s role as a purchaser of and investor in critical goods;
4. Strengthen international trade rules and trade enforcement mechanisms; and
5. Work with allies and partners to decrease vulnerabilities in global supply chains.

It’s time for supply chain leaders, industry groups and government policy makers to come together to not only assess the historic disruptions and uncertainty encountered by global supply chains but to work collectively to create resolutions, including global standards and best practices and incentives for improving visibility, collaboration, communication and sustainability across the entire end-to-end value chain.

Christine Barnhart is the vice president of product strategy and go-to-market for Verusen.

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