Everything You Need To Know About Supply Chain Volatility

The COVID-19 pandemic impacted most companies in some way, whether big or small. The upset came in many forms, including a pivot to remote working and increased use of video conferencing software. 

But many enterprises have also been impacted by supply chain volatility. Whether you work in manufacturing or have had a long wait to purchase something, chances are you’ve seen a change in prices or a shortfall in supply.

Few businesses were prepared for the fallout of the pandemic, and it’s certainly shown how crucial it is to protect your business against such obstacles. 

In this article, we’ll look at the challenges companies face today and how you can adapt your supply chain models to safeguard your business from future volatility. 

What is supply chain volatility, and why does it happen?

Supply chain volatility is the fluctuation in the supply and price of goods. This fluctuation causes supply to fall short of demand expectations. As a result, manufacturers and consumers experience longer waits for products or increased costs. 

This volatility can be caused by many factors, not just the recent pandemic, and can have wide-reaching implications in various industries and countries. Here are just a few examples of supply issues around the world. 

Eggs

Recently, New Zealand has recently seen a drop in supply and a rise in the price of eggs. This has been caused by multiple factors, including the change in farming methods by 75% of farmers and the laws taking into effect banning caged farming.

The resulting shortfall and rise in the price of this domestic product have subsequently impacted any business that uses eggs, including food manufacturers and restaurants. 

Chips

Another well-publicised example of supply chain volatility is the global shortage of semiconductor chips, which has greatly affected the car manufacturing industry. 

The pandemic is mostly to blame for this shortfall. Many car manufacturers cancelled orders during this time in response to pessimistic demand forecasts. However, demand picked up sooner than expected, at which time supplies fell well short.

The global shutdowns were plenty due to the ongoing pandemic, which meant the entire supply chain experienced bottlenecks that further slowed the supply of chips. By some forecasts, supply will not fully meet demand until 2024. 

Coffee

In 2021, parts of South America were affected by unusual weather, which caused frost to damage many coffee crops. Among the countries affected were Brazil and Colombia, the world’s two biggest coffee suppliers.

In fact, Brazil is the highest producer of coffee by such a wide margin that its annual output determines the value of coffee itself. The frost caused a considerably smaller harvest for Brazil and other affected countries, and the impact of this is predicted to last for several years to come.

As a result, demand is expected to surpass supply, and coffee prices have increased globally. 

6 ways to deal with supply chain volatility

The brutal truth about supply chain volatility is that it is impossible to avoid because it is out of our control. You can implement delivery management software to help you manage all aspects of the delivery process, but you can’t prevent the scarcity of certain products. However, there are changes and preemptive measures you can implement to soften the blow.

1. Nearshoring, onshoring and offshoring

If you’re unfamiliar with the terms, nearshoring is the transfer of business and production to closer countries. Meanwhile, onshoring involves relocating part or all of your business away from overseas territories to local soil. 

This is in contrast to offshoring, in which business areas are located much further afield. Offshoring can have benefits, such as reduced labour costs. However, there can be complications, too, such as possible reduced oversight, transportation hold-ups and knowing how to correctly declare international goods so they aren’t delayed.

Nearshoring and onshoring are valuable ways to ensure more robust supply chains. The reduction in time-to-market means you are less likely to be impacted by shipping issues and bottlenecks. 

2. Diversification

Diversifying your suppliers is a highly effective way of combating the effects of supply chain volatility and is a step many businesses have taken following the pandemic. 

While working with one supplier may be more straightforward, using multiple suppliers will offer you more flexibility and protection against supply fluctuations. 

If you’re in a situation where one supplier cannot provide the products you need at the price you want or within a specific timeframe, another may be able to deliver the goods.

3. Technology

Whatever your industry, utilising the right technologies is essential. For example, if you’re operating a small business and want a professional communication platform, you may consider investing in a cloud phone service for small business.

Similarly, when you’re reengineering your supply chain model, there are digital technologies that will help you succeed. Initially, it’s worth running digital tests of different scenarios to discover how your new supply chain will hold up. 

This will give you a better idea of where any weaknesses may occur and will guide you in making the right decisions to strengthen your procedures. 

Having a contingency plan will make your business more resilient, regardless of whether it’s a pandemic, transport issues, or climate problems.

4. Real-time data

It is also wise to harness digital technologies to monitor real-time data. This is particularly important in providing supply chain transparency so that you can detect any potential problems early on. 

Think about this in regard to shipping—if you are expecting goods from a supplier at a particular time, you want to know they will arrive promptly, and you want to be able to let your customers know promptly.

Using a real-time data tool allows you to track your shipment location. As a result, you will learn about any delays in a timely manner and be able to seek alternatives or advise consumers of a delay well ahead of time. 

5. Prioritise reliability

It used to be the case that many enterprises considered cost efficiency as the most important aspect of many business processes. However, following the pandemic, many are now focusing on reliability. 

This makes more fiscal sense in the long term. Issues with product supply or delivery to customers may lead to financial loss as customers choose to take their business elsewhere. 

One way of improving reliability is to consistently review your inventory replenishment models. This will help you to effectively maintain your inventory levels to meet customer demand.

Other options may include using local suppliers. Though they may cost more than overseas, they are less likely to be impacted by issues such as shipping delays.

It’s also worth investing in a toll-free number for businesses as part of your overall unified communications strategy. This ensures suppliers and customers can easily reach you during delays.

6. Sustainability

All companies should consider sustainability as a high priority. Redesigned supply chain models should seek to cut carbon footprints and reduce waste. 

This can also go hand-in-hand with making your supply chain more resistant to volatility. There are many advantages to your business embracing sustainability. 

One example is to reuse and recycle parts or materials. This can mean you are less reliant on new goods when fluctuations occur and helps to reduce waste, a beneficial practice for both the planet and future generations. 

Conclusion

Supply chain volatility is unavoidable and hard to predict. You never know when the next pandemic will hit or if adverse weather will affect certain industries. But there are steps you can take to ensure your business is well-placed to weather the storm, literally or metaphorically. 

These measures could start with researching a good ecommerce delivery service or moving parts of your business to a different country. 

While you may still adapt to current issues, it is important to look to the future. Being proactive always pays off and will give you an advantage when things don’t go quite to plan.