Lisa Anderson, a supply chain expert and president of California-based LMA Consulting Group, says that the Chips Act “has spurred on certainly quite a bit of investment” in the US electric car sector. And Mexico is also booming through ‘friend shoring’.

###

Read the full article at the BBC website. 

The post BBC: Why firms are bringing their manufacturing back home appeared first on LMA-Consulting Group, a supply chain consulting firm.

Status of the Medical / Healthcare Supply Chain

The supply chain has calmed down since the height of the pandemic; however, smart manufacturers are thinking ahead to changing conditions. Geopolitical risks are at an all-time high. The Russia-Ukraine war rages on and Israel and Hamas are at war which has spilled over to the Iran-backed Houthis rebels attacking container ships in the Suez Canal, disrupting a major shipping lane.

Additionally, China continues to threaten Taiwan which produces 90% of the advanced computer chips for the world and an important component in medical devices. China is also being very aggressive in the region which could impact shipping lanes through the South China Seas, manufacturing in China and manufacturing in countries in the region. Since China dominates the medical device supply chain, this is concerning. Thus, proactive manufacturers are moving towards regional manufacturing. This trend started following the pandemic (refer to our quote in a MPO Medical Products Outsourcing article) and has been picking up steam.

Reshoring & Expanding Manufacturing Capabilities

According to Xometry’s Medical Industry Survey, medical device manufacturers are rapidly reshoring operations to strengthen their domestic supply chains. In fact, 67% of medical device manufacturers are in the process of reshoring operations within the next 12 months. There is a focused effort in rethinking supply chain strategies.

Although many companies are reshoring, executives remain concerned about the cost impact of expanding production in the USA. The good news is that labor costs have decreased as a percentage of total cost dramatically since the offshoring craze while other costs have increased, making reshoring more attractive. For example, transportation costs were heightened during the pandemic and have been impacted by the Panama Canal drought, the diversions of the Suez Canal, and other supply chain disruptions. The cost of capital has increased significantly with the increase in interest rates which has made the cost of carrying inventory much higher. And there are many other costs to consider in the total cost to produce. In fact, the total cost of product can be equivalent or even less in the USA in some non-commodity situations.

Many advancements have been made in manufacturing and technology. Companies are automating and digitizing their manufacturing and supply chain. For example, they are using 3D printing/ additive manufacturing, robotics, artificial intelligence with IoT, and other advanced technologies to improve efficiencies and enhance visibility. As manufacturers expand their manufacturing footprint, source new regional suppliers and reshore production, these advanced technologies maximize operational performance and minimize cost while maintaining and improving customer service levels with lower inventory levels. Thus, margin concerns are mitigated depending on the upgrades and improvements to the manufacturing process.

In the medical device industry, companies are starting to expand regional manufacturing in the USA. For example, Ascential Medical & Life Sciences is reshoring to Minnesota. Their new state-of-the-art facility has highly innovative automation solutions, making reshoring financially viable. Certainly, they are not alone. Companies are expanding operations in the USA.

Manufacturers are also nearshoring to the region. Mexico has expertise in medical devices and the ability to scale. Since customer requirements are significant in North America, the ability to scale in the US and Mexico is a relevant factor. The availability of advanced manufacturing and technical skills is also an important factor. Medical grade material supply can be sourced nearby, and the USA is ramping up computer chip manufacturing capabilities. For high labor component products, Mexico provides an excellent option because their labor rates are lower than China, and they benefit from the USMCA agreement between the two countries.

Although the USA and Mexico are great options with scale, there are additional medical device manufacturing hubs in other nearby countries. For example, Costa Rica has advanced skills, computer chip manufacturing, and therefore a thriving medical device manufacturing concentration. The Dominican Republic has medical device manufacturing, and Puerto Rico is known for pharmaceutical manufacturing.

Manufacturing Resurgence

There is no doubt that the successful companies will mitigate risk and manufacture regionally. Thus, the USA, Mexico and business friendly countries will experience a resurgence in manufacturing in the next decade. It will require investments in manufacturing, tooling, and other resources although there are opportunities to keep costs intact or even reduce total product cost.

The most successful companies will upgrade their processes, ERP systems, utilize advanced technologies, maximize customer and product profitability and proactively manage these opportunities with a SIOP (Sales Inventory Operations Planning) process. Assess your supply chain to learn how you stack up. Take our complimentary supply chain assessment. Upgrade, innovative, get ahead of the competition, and thrive.

If you are interested in reading more on this topic:
Why Manufacturing Matters and Will Thrive in the Next Decade

The post Regional Manufacturing in the Medical Supply Chain appeared first on LMA-Consulting Group, a supply chain consulting firm.

Manufacturing Matters – Safety & Security

Manufacturing promotes safety and security and mitigates risk. Controlling your supply chain and mitigating geopolitical risk can become paramount overnight as geopolitical events occur, natural disasters emerge, and supply chain challenges arise (strikes, disruptions, shortages). These types of issues have been increasingly concerning with recent events.

For example, the war in the Middle East has caused disruptions in the Suez Canal. Container ships are being diverted and traveling around the southern tip of Africa, adding 10,000 miles and 7-10 days. This situation delays critical supplies and causes further inflation with increased costs. Additionally, the reason China has been threatening Taiwan is partially to gain control over 90% of the world’s advanced computer chips that go into everything from medical devices to critical infrastructure.

During the pandemic, the U.S. discovered it was dependent on China for critical supplies and everyday necessities. Not only can a worldwide pandemic cause disruptions of these supplies, but country specific policies can dictate whether your supply will be cut off. For example, China rolled out zero COVID policies, directly impacting production and shipping to the U.S. China could prioritize who received limited supplies.

China also wants to control the Red Sea and could decide to cut off supplies produced in other Asian countries in the region. Clearly China thinks manufacturing is essential to national security. For example, their shipbuilding capabilities are over 200 times greater than the U.S. According to the Maritime Executive, China produces more than half of all new tonnage in the world. These types of statistics are gravely concerning and the proactive will build capabilities.

Manufacturing Will Thrive in the Next Decade

As companies realize they must gain control over their supply chain to better support customers, reshoring and regional expansion of manufacturing capabilities will soar. Additionally, the cost has come into alignment for non-commodity products if you evaluate the total cost to produce, ship, store, protect, etc., China won’t have the advantage. Piles of inventory tying up cash unnecessarily are no longer acceptable, especially as customer needs change rapidly, increasing the risk of obsolescence. As interest rates soar, this situation is untenable.

Customers are not willing to accept prolonged periods of delays and stock outs. Thus, they are taking control of their supply chain and focusing on manufacturing capabilities. In addition, companies must prioritize customers and address proactively with strategic pricing and capacity decisions. Thus, smart companies are utilizing a SIOP (Sales Inventory Operations Planning) process to proactively navigate these changing circumstances to maintain high levels of customer service, profitability, and working capital results. SIOP will bring visibility to customer and product profitability, sourcing decisions, make vs buy alternatives, capacity bottlenecks and more.

The proactive will thrive and have more opportunities than ever expected. In fact, they will be in the catbird seat. The rest will continually struggle and weaken. With the significant skills gap (refer to our recent article on where the talent has gone), the proactive executives are hoarding the “best of the best” (employees, trusted advisors, suppliers, etc.). Are you prepared to thrive?

If you are interested in reading more on this topic:
SIOP/ S&OP: Proactive Approach to Maximizing Production Output and Capacity

The post Why Manufacturing Matters & Will Thrive in the Next Decade appeared first on LMA-Consulting Group, a supply chain consulting firm.

Supply chain optimization must remain a priority as disruptions continue. For example, although the Panama Canal started experiencing issues in the summer (refer to our article for details), it has been worsening lately. 40% of the goods movement from Northeast Asia to the U.S. East Coast go through the Panama Canal, and so the Panama Canal issues are driving shortages, late deliveries, and re-routing of goods.

Panama Canal Issues Worsen

Drought conditions are creating a new round of disruptions:

• Reduced container ships: by > 50% (from 40 to 32 earlier in 2023 to 25 Nov, 20 Jan & 18 Feb). 
• Restrictions on ship draft: to a maximum ship draft to 44 feet (vs. 50 feet) – requiring larger ships to sail light or unload, rail across & reload 
• Capacity restrictions: Neopanamax locks (handling larger ships) restricting to capacity by 50% (from 10 to 5 per day)
• Gas container ship impacts: LNG and VLGCs (very large gas carrier) will experience the greatest impact since deprioritized 

Inflation impacts: Creating inflationary pressures, shortages and delays. Some ships paying up to $4M to go to the head of the line

The China Risk

In addition to the disruptions to the Panama Canal, there are other risks associated with the Panama Canal. Hutchison controls the terminals at both ends of the Panama Canal. Thus, if China wants to “control” the flow through the Panama Canal, they can do so via Hutchison. It is an important risk to consider.

Responses to the Panama Canal Issues

Proactive executives are not waiting to see how this turns out. They are pivoting. Several of the actions include the following:

• Alternate routes: Depending on the start and end point, companies are pursuing different routes. These include the Suez Canal and sailing around the southern tip of Africa or South America.  
• Alternate modes of transportation: Depending on urgency, and start/ end points, companies are using air freight, rail etc.
• Alternate routes & modes of transportation: Companies are also going to an alternate U.S. port and sending product via rail or truck to its destination.
• Moving and/or reallocating manufacturing: Companies are certainly pursuing reshoring, nearshoring, and expanding manufacturing to minimize risks and shorten lead times. In addition, if they have multiple facilities and/or contract manufacturers, they are proactively moving manufacturing to support customer needs and mitigate risks.
• Forward position inventory: Depending on the manufacturing and distribution network, clients are also positioning inventory close to customers so that they can absorb additional disruptions without impacting customers.
• Change distribution network: Clients are also moving and expanding their distribution networks to better support customers. They are doing this in creative ways, sometimes partnering with customers, suppliers, and competitors.

The key is to proactively address these issues to mitigate the impacts to the customer and cost, and longer term, to revise your manufacturing and supply chain footprint and network to best support profitable growth and mitigate risk.

If you are interested in reading more on this topic:
Supply Chains are on the Move

The post Supply Chain Optimization Remains a Priority as the Panama Canal Worsens appeared first on LMA-Consulting Group, a supply chain consulting firm.

CLAREMONT, CALIFORNIA – December 20, 2023 –  Manufacturing and Supply Chain Consultant Lisa Anderson, MBA, CSCP, CLTD and President of LMA Consulting Group Inc., emphasizes the critical necessity of prioritizing supply chain optimization as global disruptions continue. Key issues, such as the worsening conditions at the Panama Canal, have been highlighted as significant contributors to the ongoing supply chain crisis. LMA Consulting Group specializes in supporting manufacturers and distributors in strategic planning and comprehensive supply chain transformation, focusing on enhancing the customer experience and robust business growth.

The Panama Canal, a critical passage for 40% of the goods moving from Northeast Asia to the U.S. East Coast, is experiencing severe disruptions that are intensifying supply chain challenges globally:

• Drastic Reduction in Container Ship Capacity: A decrease in container ships by more than 50%.
• Draft Restrictions: Limitation of the maximum ship draft to 44 feet, necessitating larger vessels to sail light or undergo complex reloading processes.
• Capacity Cuts at Neopanamax Locks: A halving of the daily capacity, now limited to 45 ships per day.
• Impact on Gas Container Ships: LNG and VNLCs face significant operational challenges and delays.
• Inflationary Pressures: These disruptions are contributing to inflation and causing delays, with some ships incurring costs of up to $4MM for expedited transit.

In addition, the control of the Panama Canal terminals by Hutchison, a company with connections to China, presents a potential geopolitical risk. This, coupled with the most recent challenges for ships going through the Suez Canal, will impact the flow of goods, posing additional layers of risk for global supply chains.

“There are proactive measures that companies can take,” noted Ms. Anderson. “Alternate routes, diverse transportation modes, manufacturing and distribution adjustments and inventory strategies can proactively address challenges and minimize impacts on customers and costs.  In the long term, revising the manufacturing and supply chain footprint is essential for sustainable growth and risk mitigation,” she said.

For deeper insights into navigating the complex landscape of global supply chains, download Ms. Anderson’s special report The Road Ahead: Business, Supply Chain & The World Order and her eBook SIOP (Sales Inventory Operations Planning): Creating Predictable Revenue and EBITDA Growth.

About LMA Consulting Group – Lisa Anderson, MBA, CSCP, CLTD

Lisa Anderson is the founder and president of LMA Consulting Group, Inc., specializing in manufacturing strategy and end-to-end supply chain transformation.  Ms. Anderson is a recognized Supply Chain thought leader by SelectHub, named a Top 40 B2B Tech Influencer by arketi group, a Top 16 ERP Expert to Follow by Washington-Frank, in the Top 10 Women in Supply Chain by Warner PR, in the top 55 Supply Chain & Logistics Experts by flexport, and a woman leader in Supply Chain by RateLinx.  Her primer, I’ve Been Thinking, provides strategies for creating bold customer promises and profits. An expert on the SIOP process (Sales, Inventory Operations Planning), advancing innovation, and making the supply chain resilient, Ms. Anderson is regularly interviewed and quoted by publications such as Industry Week, Bloomberg, Fox News and The Wall Street Journal. For information, sign up for her Profit Through People® Newsletter or for a copy of her book, visit LMA-ConsultingGroup.com.

###
Media Contact Kathleen McEntee | Kathleen McEntee & Associates, Ltd. | p. (760) 262 – 4080 | KMcEntee@KMcEnteeAssoc.com

The post Lisa Anderson, Manufacturing & Supply Chain Expert Emphasizes Urgent Need for Supply Chain Optimization Amidst Ongoing Global Disruptions appeared first on LMA-Consulting Group, a supply chain consulting firm.

Lisa Anderson was quoted in Food Logistics’ Top 10 Trends to Shape Cold Food Chain in 2024 recently. With the help of some supply chain visibility, sustainable measures, more focus on people and the ability to pivot at a moment’s notice, 2024 is anyone’s and everyone’s game to succeed.

Top trends to watch in 2024

Nearshoring, risk mitigation and building resiliency. The top supply chain trends to watch in 2024 include a keen focus on mitigating supply chain risk, reshoring and nearshoring to source reliable production closer to customers, finding backup sources of supply, creating resiliency in the end-to-end supply chain, digitizing the supply chain, and keeping an eye on cybersecurity threats, according to Lisa Anderson, president, LMA Consulting Group, Inc.

“Since there is heightened risk in the global supply chain due to geopolitics, conflicts over natural resources, ongoing concerns related to the Russia-Ukraine war, South China Seas, new threats in the Suez Canal related to the Israel-Hamas conflict, Panama Canal issues related to drought, and concerns about natural disasters, labor negotiations/labor shortages, and cyber threats, smart executives are taking control,” she adds.

Sustainability. Despite all of the challenges and disruptions the supply chain industry faces, sustainability still remains a key trend for 2024, especially as companies race to deliver on their net-zero commitments by 2030.

“In many sectors, Scope 3 emissions can account for up to 80% of a company’s total emissions. Lowering Scope 3 presents one of the most significant opportunities for decarbonization, and the industry will look for opportunities to gain operational efficiencies,” Gerdeman says. “For example, our clients are using our analytics to optimize the mode, route, and equipment selection for temperature-sensitive goods, saving money by protecting products from freezing or spoilage, reducing refrigeration costs when cold blankets do the trick, reducing fuel costs, and lowering their carbon emissions.”

In fact, global food and beverage production accounts for roughly 34% of global greenhouse gas emissions (GHG), and according to the Food and Agricultural Organization, the food and beverage supply chain is on track to become the industry’s largest polluter. OXFAM found that the emissions of 10 of the largest food and beverage fleets equaled the total emissions of all Scandinavian countries combined.

State of transportation

The driver shortage still exists, diesel fuel costs are still on the rise and U.S. container imports continue to experience an uptick month-over-month.

The Yellow Freight bankruptcy also created a ripple effect on the industry, one that is still somewhat being felt.

“Customers had to scramble, opportunities arose for competitors, and the supply chain evolved,” Anderson says. “Similarly, the threat of a potential rail strike and West Coast port strike caused customers to transition to alternate modes of transportation and pursue alternate routes. The same is occurring with the UPS strike and the UAW strike as supply chains are moving to account for these types of issues.”

State of e-commerce

E-commerce in grocery didn’t really become a thing until COVID-19 forced several supermarkets and grocery retailers to create a B2C arm of their business almost overnight.

Fast forward to what will be 4 years later, and the rise of e-commerce in grocery is here to stay.

Similarly, B2B channels are also growing.

“For example, cold chain needs will explode as computer chip capacity comes online with the expansion of manufacturing with the CHIPS Act,” says Anderson. “Thus, cold chains are expanding at a rapid rate and will continue to thrive in 2024. Cold storage is limited, and even though there are inflationary pressures escalating the cost to build cold storage facilities, growth will be robust. Innovation will be essential to meeting these needs in a way that will provide customer value in a sustainable and profitable manner in 2024.”

What’s to come in 2024?

While 2023 may have been the Year of Bottlenecks, 2024 opens the door to longevity, peace and prosperity.

Yet to achieve those elements, companies must be more proactive, more agile and more forward-thinking.

“Instead of being reactive, forward-thinking executives are making the shift to being proactive. Thus, they are setting up a resilient supply chain with the ability to scale up/ down quickly, utilize backup sources of supply, alternate logistics and transportation providers and routes, and educating a cross-functional workforce. They are also rolling out proactive and predictive demand and supply planning programs such as SIOP (Sales Inventory Operations Planning), forward positioning of inventory and capacity, and predictive analytics. As no client has enough high-skilled talent, the best organizations are automating, digitizing, and using robotics, autonomous vehicles, artificial intelligence, IoT and the metaverse (AR/VR) to best utilize limited resources while supplying customer needs,” says Anderson.

Read the full article here

The post Top 10 Trends to Shape Cold Food Chain in 2024 appeared first on LMA-Consulting Group, a supply chain consulting firm.

The White House has launched a cabinet-level supply chain council as the criticality of the topic rises to the top. Although they emphasized the minimization of supply chain disruptions as it relates to inflation, our perspective is that the supply chain is much bigger than that. From national security to securing supply chains of the future, there is tremendous work that industry must take on at a dramatically accelerated pace for companies that want to thrive 5 to 10 years from now.

Why Supply chain Resilience Matters

China is the largest manufacturer of the world and there are many risks rising to the top. For example, China is quietly working on several fronts:

• Supporting Russia and Iran behind-the-scenes (buying up oil etc.)
• Threatening Taiwan (which produces 90% of the advanced computer chips in the world)
• Threatening goods movement in the South China Seas (risking shipments to/from Asia)
• Buying up and/or taking control of farmland, critical minerals, ports/ terminals (including control of the Panama Canal), and other infrastructure around the world
• While the US has decreased carbon emissions by 20% since the peak, China is expected to be at an all-time high in 2023. They permitted 2 coal plants per week in 2022.

There are other risks throughout the world. Look no further than the Russia-Ukraine war, the Israel-Hamas war, etc. Each of these events impact the supply chain. In addition, there are the many disruptions carrying on since the pandemic caused by a variety of factors including lack of resources (labor, materials), weather, strikes, etc. The baby boomers are retiring at a quick pace, creating a shortage of resources we haven’t seen in our memories.

Thus, supply chain resilience has become of paramount importance.

Supply Chain Resilience Path Forward

Unfortunately, there is no 5-step plan to check off to create a resilient supply chain. The bottom line is that it requires confronting reality, uncommon common sense, execution of process disciplines, innovation, and a willingness to take smart risks and invest wisely.

Our proactive clients are jumping on creating a resilient supply chain. In no special order, they are following several of the following strategies:

• Rapid assessment: It helps to know where you are starting (strengths, weaknesses, risks, priorities) so that you can focus efforts rapidly. Learn more about LMA’s complimentary supply chain assessment. 
• Reshoring: Getting manufacturing under better control
• Nearshoring/ Friend shoring: Bringing manufacturing closer to consumers/ customers to minimize disruptions and lengthy transit times.
• Backup sources of supply: Pursuing multiple backup sources of supply to cover for unexpected issues.
• Securing funding to support resiliency and growth: Investments are required (technology, people, infrastructure) to create supply chain resiliency.
• Implementing technology to support resiliency: Smart executives are upgrading ERP and related technologies (IoT, AI, CRM, customer/supplier portals, business intelligence, etc.) to increase visibility, automate mundane tasks, and upgrade the customer experience.
• Cross-training internal & external: In addition to cross-training resources to backfill key roles, smart executives are supplementing resources with consultants, collaborating with supply chain partners, and finding creative solutions to ensure customer service and profitable growth during volatile times.
• Moving from vendors to partners: Vendors will not be there when you need them. Vendors implies price. Upgrading to suppliers is a step in the right direction; however, during the risk laden times, partners are needed.
• SIOP (Sales Inventory Operations Planning): Upgrade your demand and supply planning to get in front of what’s needed to create a resilient supply chain with a SIOP process. Learn about SIOP, also known as S&OP, and read our recent article on moving manufacturing forward instead of backwards with SIOP.

The Bottom Line

There are many more strategies you should pursue to ensure supply chain resiliency. Start with a rapid assessment while jumping on at least one strategy that supports your company objectives. Don’t just add a program and assign your already limited resources to another priority. Instead, do the hard work to determine what will make a difference and focus your resources.

If you are interested in reading more on this topic:
A Resilient Supply Chain Built for Competitive Advantage

The post Supply Chain Resilience Has Risen to the Top with the White House Council appeared first on LMA-Consulting Group, a supply chain consulting firm.

Lisa Anderson was quoted in an article on the American Express website discussing why local sourcing can help benefit your business in a big way!

###

As risks multiply on the world stage and with increasing economic and logistical disruptions, a local supply chain will prove critical for most businesses, according to Lisa Anderson, an expert in manufacturing and supply chain management and president of LMA Consulting Group, Inc. 

Local supply chain sourcing, she says, improves efficiency and quality control by enabling quicker responses to customer needs, optimizing production processes, reducing waste, and increasing operational efficiencies between manufacturers and distributors. Below are more advantages, with insights from owners of two growing businesses, and ways that sourcing local can help benefit your business in a big way. 

1. It Gives You Greater Control Over Your Materials

Through simple local sourcing and networking, Kim Talebi sought out local farms and foragers for ingredients. The Minneapolis-based CEO and owner of Kaskaid Hospitality – which owns and operates The Butcher’s Tale and other restaurants and catering businesses across the U.S. – loves having access to farm-fresh tomatoes and other produce all year long through working with a local greenhouse. “This makes a huge difference versus using mass-produced, under-ripe tomatoes shipped from South America in the wintertime,” she says. 

2. It Reduces Minimum Buys

When you have a local supplier, you can reduce minimum buys because you eliminate the need to fill a container ship, train, or truck. Shipping can be less expensive when your product is being delivered from a local source, so you can offer better prices to customers due to minimized transportation costs and optimized production runs.

3. It Allows for More Flexibility 

“For my handbags and jewelry, I work with suppliers and manufacturers based in New York City, which is only a two-hour drive from my studio in upstate New York. I can travel to the city as needed to meet with my factory contacts in person, as well as source materials,” says Emily Li Mandri, founder-designer of MLE. The company’s statement accessories have been sold by high-end U.S. retailers and are carried in more than 200 stores worldwide. “I can make the decision to go the same day if I need to; it’s really nice to have that kind of flexibility.”  

4. It Reduces the Pressure to Offer Discounts 

Since local suppliers can respond to changing conditions more quickly, less inventory may be needed in the end-to-end supply chain. The inventory required to cover for volatility will likely be less if the supplier and manufacturer can work together on win-win solutions to increase agility and flexibility, according to Anderson. 

5. It Means a Win-Win for Supplier and Customer 

“Local suppliers provide a distinct advantage in getting products to market faster. Product development designs and trials can be done collaboratively for rapid prototyping, testing, and trialing. Additionally, the feedback loop can be direct, speeding up the entire process,” says Anderson. “As problems arise, the appropriate resources can be brought together rapidly to collaborate and overcome bottlenecks. Thus, the new product lifecycle can be dramatically shortened, incorporating additional customer feedback and generating greater growth and a smoother product launch.”

…

To read more, click here.

Originally published on the American Express website, September 12, 2023

The post Local Sourcing Has Big Benefits for Business appeared first on LMA-Consulting Group, a supply chain consulting firm.

The post The Global Supply Chain Life After Globalization appeared first on LMA-Consulting Group, a supply chain consulting firm.

Israel was attacked by Hamas, and the world has another war in another region of the world. Since the global supply chain is interconnected, in addition to the devastation in the region, supply chain impacts will emerge. As I discussed with the Los Angeles Business Journal earlier this week, supply chain disruptions will impact every partner connected to the region in the end-to-end supply chain and/or those that must travel through the region.

Labor Shortages

Israel is already affected as companies are saying that employees are part of a mass call up of army reservists. Labor shortages were already causing challenges throughout the world; as key high-skilled labor must participate in the war, businesses will be impacted. In addition to labor shortages, Israel is a hub for advanced computer chips. In fact, it is one of the key regions aside from Taiwan for advanced chips. Intel produces chips for AI and self-driving cars. Nvidia produces chips for AI, and Apple designs some of its silicon in Israel.

Hub for Advanced Computer Chips

In addition to labor shortages, Israel is a hub for advanced computer chips. In fact, it is one of the key regions aside from Taiwan for advanced chips. Intel produces chips for artificial intelligence /AI and self-driving cars. Nvidia produces chips for AI, and Apple designs some of its silicon in Israel.

Import/ Export Impacts

Israel’s imports and exports are impacted. For example, Israel has significant trade with India, increasing from $200 million in 1992 to $101 billion in 2003. Israel exports fertilizer, electronic components, petroleum, and agro-chemicals. Other import/ export items include chemicals, plastics, metals, medical and industrial equipment and more.

Regional Impacts

Israel is in a critical region of the world known for producing oil. Since energy is vital to fuel manufacturing and supply chain, it is important in fueling the world. If the war in Israel expands beyond the country’s borders, it can pose a risk to two key shipping choke points: the Suez Canal, a key waterway for all types of commercial container ships, and the Strait of Hormuz, which is pivotal to oil and gas shipping. 

Impacts on the Supply Chain

In thinking about Israel’s impact on the region and the world, it is clear that many supply chain disruptions are likely to emerge. If your supply chain is dependent on a trading partner of Israel such as India, you could be affected. If you are dependent on advanced computer chips, your supply chain will be impacted, even if you get your chips from Taiwan.

Anytime there is a disruption in one node of the supply chain, it can expand to all nodes connected to that node. Almost every manufacturer and logistics organization is dependent on oil and natural gas and will be indirectly impacted with higher prices at a minimum. Equally concerning would be an expansion of the war that impacts the Suez Canal. We have evolved into a globally-connected supply chain, and successful executives will rapidly determine their risks and mitigate them.

Strategies for Success

Every forward-thinking organization is getting on top of their end-to-end supply chain. You need something like a supply chain control tower to keep track of potential risks and impacts with changing conditions so that you can successfully navigate changing circumstances. It is no longer for the large global organizations. If you want to succeed, you will dedicate resources to monitoring your supply chain.

Uncommon common sense will prove essential in the years to come. Sourcing backup materials and logistics suppliers is simply required. Knowing your partners will be essential. Since your viability might be dependent on your suppliers, you should determine if they are trustworthy, financially viable, and innovative. Thus, although having access to multiple suppliers in various regions is important, you will also have to consolidate efforts to just those that meet your requirements as a partner, not just a transactional vendor.

Smart executives are also pursuing reshoring, nearshoring and friendly shoring programs. To learn more about what the most successful companies are doing, read our special report, “The Road Ahead: Business, Supply Chain & the World Order“. Unless you can afford to risk your customers, you must take control of your supply chain. Don’t forget to evaluate geopolitical risks, energy, natural resources, and supplier networks as you pursue these strategies.

Following a SIOP (Sales Inventory Operations Planning) process that is forward-thinking and predictive to develop demand plans and sales forecasts is becoming even more vital. With heightened supply chain and geopolitical risk, the lack of resources and labor shortages, and escalating costs, only those that look forward and plan for how they will fulfill their orders profitably and with high service levels will succeed. They will be evaluating customer and product profitability, manufacturing capacities and capabilities, supply chain networks, pre-positioning of inventory and capacity, and the required resiliency to best support customer needs.

The Bottom Line

The supply chain is interconnected globally. A ripple in China can impact Europe. A weather event in Japan can influence the U.S., and a war in the Middle East will impact every region of the world. Assess your supply chain, its interdependencies, and your alternative and backup options. Put it together into a strategy and path forward to ensure you can meet your customer needs and deliver bottom line results.

If you are interested in reading more on this topic:
Supply Chains are on the Move

The post Israel-Hamas War & Impacts on the Supply Chain appeared first on LMA-Consulting Group, a supply chain consulting firm.