Problems in the supply chain

When Nando’s runs out of chicken and McDonalds milkshake-makers stand idle, you know that the UK is firmly amidst a supply chain crisis unheard of since the 1970s.

What has been particularly alarming is that the crisis is affecting companies of all types, sectors and sizes. Ikea, the home furnishings behemoth, has complained of supply problems at all its UK stores affecting 10% of its stock (around 1000 product lines) while builders across the country are baulking at a 20% inflationary rise on the cost of materials.

"Lorry drivers are commanding the fees of airline pilots..."

The problems have also permeated every recess of the supply chain – lorry drivers are commanding the fees of airline pilots, a decent barista is impossible to find, and fruit pickers are flying in from across the globe to save fields of rotting fruit and vegetables.

The Covid-19 pandemic itself had already posed significant challenges for food and drink supply chains globally. Multiple national lockdowns slowed, or even stopped, the flow of raw materials and finished goods, disrupting manufacturing as a result. As the post-pandemic world quickly reverts to its consumerist ways, global demand is soaring, ensuring that the current supply-chain issues are set to continue and, what’s more, deepen.

Vulnerabilities in the supply chain?

In many instances the pandemic has not necessarily created new challenges for supply chains but has simply brought to light previously unseen vulnerabilities; magnifying and accelerating problems which already existed. One example is ocean freight where trade volumes have bounced back after ports were locked down, not to mention the impact of the long-term blockage of the Suez Canal. However, what this has meant is that, not only is it more important than ever, there is now an even greater strain on capacity which was already at a premium pre-pandemic.

Ongoing disruptions to supply have, however, had a positive impact in terms of once again highlighting the risks of using global supply chains, creating a push to develop more sustainable domestic capabilities and a degree of independence, particularly in the supply of essential medicines, energy, and technology goods. For the Food & Drink sector, where over half the UK’s food and feed is already imported from abroad, there is a huge opportunity to develop local supply chains and take further advantage of growing consumer demands around food provenance and carbon footprints.

The future of supply chains will be digital and autonomous

Regardless of whether a supply chain is global or local, technology is having an extraordinary impact on the process itself. It’s worth noting that in uncertain economic times companies often slow their technology investments but during the pandemic companies have been so reliant on digital channels that many have taken the opportunity to overhaul their technological capabilities, enabling them to respond faster to volatile supply and demand.

And this is what will play an integral role in influencing future developments. Not only will technology continue to help optimise costs – the key focus for any supply chain – it will provide even great supply chain visibility and efficiency.

This is particularly pivotal as we continue to see a shift from linear supply chains (a straight path from raw materials to production) to more integrated networks which connect many players. Technologies such as the IoT (Internet of Things) connect devices with sensors to provide valuable data on where goods are in the supply chain and their condition such as frozen foods or even vaccines.

Retraining and reskilling workforces

There has already been a significant shift to retrain and reskill workforces to help workers with the digital change, while further investments are taking place in AI (Artificial Intelligence) and machine learning that will further enhance the supply chain process.

As for the future, the race has already begun for digital enablement and automation. The autonomous supply chain – including robotic warehouses, driverless forklift trucks, delivery drones – is either here or will be by 2025. Autonomous supply chain operations will become ‘lights out’, ‘hands free’ and ‘self-driving’, with organizations using AI across the end-to-end supply chain to help make decisions. This will enable immediate adjustments to supply plans and production schedules without the intervention of a human hand.

Nevertheless, as we have seen in recent weeks, a technologically advanced supply chain process is irrelevant if the chickens and the milkshake syrup are still languishing overseas. The future of the supply chain remains at the behest of global politics as the world moves from globalisation and free-trade capitalism to talk of a second Cold War, onshoring and protectionism. Consequently, supply chain interruption are set to continue…

We work with growing businesses that have funding needs in excess of £2m and regularly approaching £100m. Our clients’ needs will typically be for sophisticated finance products such as cash flow based lending or private equity investments. Our value lies in helping clients access funding that relies on confidence in future trading and cash flows. For a confidential, independent, no obligation discussion on the funding options available click the 'Let's chat' button.