The Manufacturing Industry and the Supply Chain Crisis
The supply chain crisis continues to have a massive impact on businesses in nearly every industry. As you might guess, the manufacturing industry has experienced this impact the most.
So, what can manufacturing businesses do to help combat the effects of supply chain issues?
What Is Causing Supply Chain Disruptions?
There are a variety of factors that have led to the supply chain crisis that we’ve experienced over the last few months.
Some of these factors include:
The COVID-19 Pandemic
Though it feels like we’ve surpassed the COVID-related closures, we’re still seeing the effects of business closures due to employees being unable to go to the office in person.
Everyone remembers seeing the Long Beach port overrun with ships containing products that were unable to get unloaded. With a shortage of workers to move the ships along, backlogs occurred, and as a result, shipping prices increased.
As companies move to a more digital-focused environment, critical data is being shared in a far-reaching global supply chain. With the increase in digital usage comes an increased risk of cybersecurity breaches.
These breaches can cause damage to your business’s operations, finances, and reputation.
In 2021, the American Trucking Association stated that the truck driver shortage could hit historical lows of 80,0000 unfilled truck driving jobs in the US. This shortage led to even more backlogged ports, as products cannot be moved.
The increased demand for specific products alongside the factory closures in 2020 and 2021 has caused production issues across various industries.
Lastly, the effects of natural disasters always affect the supply chain. Whether it’s a hurricane, flood, blizzard, fire, or any other natural disaster, they may be responsible for postponed deliveries, closed ports, and canceled cargo shipments.
How Can You Reduce the Effects of the Supply Chain Crisis in Your Manufacturing Business?
It’s important to understand how you might be able to mitigate the effects of the supply chain crisis. Below is a shorthand list of what your manufacturing business can do.
Diversify Your Supplier Base
Using one sole supplier for all your business needs can easily cause massive disruption in your manufacturing business’ entire supply chain. Having diversified suppliers allows for the disbursement of risk and reduces the impact of potential disruption.
Ensure You Have Backup Suppliers and Vendors
Similar to a diversified supplier base, you can also combat supply chain issues by ensuring you have backup suppliers and vendors. If, for whatever reason, your supplier is unable to complete an order, you’ll have a backup supplier in place to cover the disruption.
Work Toward End-to-End Visibility
Visibility into the supply chain operational stages allows you to forecast where problems may arise while also tracking progress and ensuring a quick response to issues that might come about.
Have a Risk Management Plan in Place
Risk management is one of the most effective ways to combat any issues within your business. This plan allows you to identify and assess current and potential risks that could disrupt business operations. Procedures and responses can be prepared in this plan, as well as processes to adapt to disruptions within your business.
Invest in Cybersecurity Insurance and Protocols
Investing in cybersecurity protocols helps mitigate the common risks that affect supply chain processes, including breaches, data leaks, and malware attacks.
Alongside the additional protocols and cybersecurity measures, it’s important to invest in a separate cybersecurity policy to ensure your business is protected in the event of an attack.
Review your Insurance Coverage
There are a few insurance policies that can help reduce the impact of supply chain disruptions on your business. Some of these include:
- Contingent business interruption insurance
- Extra expense coverage
- Supply chain Insurance
- Natural disaster insurance, and
- Production process problems
As a manufacturing company, the supply chain crisis is likely one of the most important issues you may face.
On top of that, there are insurance requirements your business needs to follow to remain in business. Take a look at our article “Complying with Insurance Requirements: Construction, Manufacturing, Tech Start-Ups” to guide you through this process.