The Minimum Wage Hike

California’s minimum wage went up to $20/hr. for fast food restaurants with at least 60 locations nationwide that do not make bread. This law is causing widespread unintended consequences. For example, Fosters Freeze in Lemoore closed suddenly after the wage hike. Mod 5 Pizza is closing five locations. There are widespread price increases including at In n Out, Burger King and more. Significant layoffs are also occurring at restaurants like Pizza Hut, Round Table Pizza, and Auntie Anne’s as companies determine how to deal with the wage hikes while maintaining profit levels. Some franchise owners are “on the move” to states with less regulation such as Nevada. It will also negatively impact manufacturing and supply chain as companies compete for resources and increase prices. The Skills Gap and misalignment of high-skilled and low-skilled jobs will worsen.

More Shortages & Sky High Prices…..NOT Chocolate!

The price of cocoa has doubled in the last year. After three years of poor cocoa harvests with a weak outlook, the supply of cocoa has been slashed. Thus, prices are escalating and shortages are becoming widespread. Processing plants are saying they cannot afford to purchase the beans. For example, 60% of the world’s coca is produced in Africa’s the Ivory Coast and Ghana, and these plants have stopped or cut processing. Unfortunately, there is a massive misalignment of demand and supply which is creating supply chain shortages and causing inflationary pressures. In addition, substitutes are starting to occur. To read more about persistent shortages, see our article, “Supply Chain Shortages Remain a Concern“.

Egg Inflation

The largest producer of fresh eggs, Cal-Maine Foods, Inc. temporarily shut down one of its facilities due to the bird flu. It also resulted in the depopulation of 1.6 million hens. These issues are bound to lead to further price increases. Egg prices increased over 8% in the last month, have more than doubled since before the pandemic, and are bound to go even higher as potential shortages loom. What is the bottom line? Supply and demand misalignment is creating havoc throughout the supply chain.

It Isn’t All About Food

Oil and gas prices are increasing again, which will have an impact on countless products from medical devices to electronics and industrial machinery. Since the supply chain has been thrust into chaos throughout the world (listen to our recent Supply Chain Chats on what’s going on in the global supply chain), container shipping rates are increasing. And after the recent bridge collapse in Baltimore, the automobile supply chains have been disrupted, and it is likely to lead to inflationary pressures. No matter the product, supply chain risks have been heightened.

How to Navigate

Unfortunately, there is no easy answer and magic wand to resolve the shortages and realign demand with supply. On the other hand, the focus of SIOP (Sales Inventory Operations Planning) is to align demand with supply and provide the visibility and insights to proactively navigate these rough waters. For example, clients are reallocating capacity among production facilities, making make vs buy decisions, offloading to supplement short-term spikes in demand, and maximizing customer and product profitability with a SIOP process. To learn more about these strategies, download our complimentary book, SIOP: Creating Predictable Revenue and EBITDA Growth.

In addition, there is no doubt the proactive clients are finding ways to leverage ERP systems and advanced technologies to automate, digitize and better navigate these trying circumstances. For example, a healthcare products manufacturer is using artificial intelligence and robotics to produce standard product with minimal resources so that they can dedicate their high-skilled talent to their complex product lines supporting aerospace and defense. Another client is pursuing additive manufacturing/ 3D printing to get a leg up on the competition and bring down lead times to support growth plans. There is plenty of opportunities if you look for them!

If you are interested in reading more on this topic:
How Do You Rate in Your Supply Chain?

The post The Minimum Wage Hike, Cocoa Shortages, Egg Inflation & Impacts appeared first on LMA-Consulting Group, a supply chain consulting firm.

When supply chains run smoothly, the economies they support do too.

But when even the smallest disruption occurs, supply chains can quickly turn into the equivalent of a daisy chain — where one event sets off a cascading impact down the entire logistics value chain.

Experts fear that this is what could happen up and down the East Coast as businesses and shippers try to manage the fallout from the March 26 collapse of Baltimore’s Francis Scott Key Bridge as a result of a cargo ship collision.

“The impacts to the local region will be significant for several months or years until the bridge is rebuilt,” Lisa Anderson, founder and president of LMA Consulting Group, told PYMNTS in an interview. “Even once the port is reopened, trucks will continue to be re-routed around Baltimore, adding time and cost to trips from the port and through the Baltimore area.”

The Port of Baltimore itself remains closed to ships moving in or out until further notice, and officials are now faced with the task of removing the thousands of tons of steel and concrete clogging Maryland’s Patapsco River, while at the same time navigating the logistics of rerouting Baltimore-bound ships to other ports up and down the eastern seaboard.

The U.S. Coast Guard opened a temporary alternate channel Monday (April 1) for vessels that are helping with the cleanup effort.

“The most critical timeframe is clearing the bay to reopen the port, which could take weeks,” Anderson said. “This will impact the ninth biggest port in the U.S. and 3,200 sites involved in logistics, distribution and warehousing nearby the port and bridge as well as local businesses.”

Read more at PYMNTS site.

The post PYMNTS: Supply Chain Chaos Threatens East Coast After Baltimore Bridge Collapse appeared first on LMA-Consulting Group, a supply chain consulting firm.

The collapse of the Francis Scott Key Bridge and the closure of the Port of Baltimore this week could have far-reaching implications all the way across the country for the ports of Los Angeles and Long Beach, according to several experts.

The bridge collapsed Tuesday about 1:30 a.m. when the Dali, a 985-foot-long cargo ship en route to Sri Lanka, crashed into one of the bridge’s support pillars shortly after losing power. It sent a majority of the bridge plummeting into the 50-foot-deep Patapsco River below, claiming the lives of at least two construction crew workers on the bridge; four others are missing and presumed dead.

In the short term, the closure of the Baltimore port will increase costs for businesses and consumers on the East Coast, said Lisa Anderson, founder of LMA Consulting Group, which specializes in supply chains and manufacturing. That’s because the container ships on their way to Baltimore will be diverted to nearby New Jersey, Pennsylvania and Virginia ports, and the products they’re carrying will have to change the arrangements previously made to be transported to wherever they need to go, Anderson said.

The closure will also affect warehouses and other logistics services, which will have to decide whether they want to switch to other facilities while officials work on reconstructing the bridge and reopening the port, Anderson said. Trucks will also have to be diverted from the Key bridge, meaning they’ll either have to go around the city or pass through tunnels, which have height, width and hazardous materials restrictions.

Longer term, ports in Los Angeles and Long Beach could see more activity, especially with drought conditions reducing the capacity of the Panama Canal, Anderson said. The shipping route from northeast Asia through the Suez Canal and to the East Coast of the U.S. has also become perilous because of the war in Gaza. The Iran-backed Houthis in Yemen have been attacking commercial ships going through the Suez Canal, resulting in shipping lines having to divert their vessels around the southern tip of Africa.

What that means is that the ports of Los Angeles and Long Beach will see an increase of volume, translating to more activity for trucking companies as well as for warehousing and rail systems, Anderson said.

“That’s a positive, but we also need to make sure it’s not gonna become a new bottleneck,” she said. “These folks are adding time to their orders so they have to find new routes and we wanna make sure we’re prepared to service this additional volume.”

The closure of the Baltimore port could also lead to a “nominal” uptick in costs for the products that typically arrive there, such as cars and light trucks, Anderson said. The costs of diverted transportation will eventually be passed on to customers, but it’s not expected to be significant across the U.S., she said.

Read more at the LA Times

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CLAREMONT, CALIFORNIA – March 28, 2024 –  In the aftermath of the catastrophic collapse of the Francis Scott Key Bridge, Lisa Anderson, MBA, CSCP, CLTD, President of LMA Consulting Group Inc., emphasizes the profound and wide-ranging impacts on global supply chains.  The bridge’s destruction not only disrupts local traffic and logistics but also sends shockwaves through international trade routes, highlighting the critical need for robust supply chain resilience strategies.

The incident, which tragically claimed lives and caused significant infrastructural damage, poses immediate challenges to the Baltimore port – the 5th largest container port on the U.S. East Coast. With the port effectively cut off, the repercussions extend far beyond the immediate delays and diversions. “This disaster underscores the interconnected nature of global supply chains and the cascading effects a single disruption can have,” Ms. Anderson notes. “It’s a stark reminder of why companies must prioritize flexibility, diversification and contingency planning.”

In response to the bridge collapse, Anderson advocates for the adoption of nearshoring, reshoring, friendly shoring and regional manufacturing strategies. These approaches not only mitigate risks but also enhance supply chain responsiveness and sustainability. “The current crisis highlights the vulnerabilities in our supply chains and the pressing need for strategic adjustments,” she states.

Drawing from her extensive experience in supply chain optimization, Anderson calls for a proactive stance with processes like Sales Inventory Operations Planning (SIOP) and the development of multiple backup plans. Her insights are informed by the broader context of recent disruptions, including drought conditions in the Panama Canal and geopolitical tensions affecting the Suez Canal. “In today’s volatile environment, a single backup is insufficient. Businesses must think several steps ahead to navigate and thrive amidst uncertainties,” Anderson asserts.

LMA Consulting remains at the forefront of guiding businesses through supply chain challenges, offering strategic insights and tools such as the Supply Chain Profitability Assessment. This tool encourages organizations to critically evaluate their supply chain operations, fostering agility and strategic foresight.

LMA Consulting specializes in guiding businesses through turbulent times with strategic formulation, comprehensive supply chain transformation and resilience-building solutions. For more insights, download Ms. Anderson’s 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.  A recognized supply chain thought leader, Ms. Anderson has been named a Top 40 B2B Tech Influencer by arketi group, a Top 16 ERP Expert to Follow by Washington-Frank, among 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.” offers strategies for creating bold customer promises and profits. An expert on the SIOP process, advancing innovation and enhancing supply chain resilience, Ms. Anderson is regularly interviewed and quoted by leading publications. For information, sign up for her Profit Through People® Newsletter or for a copy of her book, visit LMA-ConsultingGroup.com.                 

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

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The Francis Scott Key Bridge Collapse

Horribly, a container ship collided with the Francis Scott Key Bridge, and much of the bridge collapsed. Cars went into the water, and it has become a deadly disaster. Our thoughts go out to the families impacted.

As we commented in Inc., from a supply chain point of view, it has caused significant near-term impacts and extended disruptions in the region. Transportation bottlenecks immediately emerged. Container ships, trucks, and rail were all impacted.

Port Impacts

It just so happens that the collapse of the bridge cut off the Baltimore port by in essence setting up a wall between the port and the Chesapeake Bay. The bridge’s collapse means that for the foreseeable future, it won’t be feasible to get to the container terminals. The port is likely to remain closed for several months and traffic diverted. This port is the 5th largest container port on the U.S. East Coast and the busiest port in the region for handling roll-on/ roll-off cargo such as cars, light trucks, construction and farm equipment, and more. The port also handled sugar, furniture, home appliances, coal, and other items.

Near-term, container ships will be diverted to nearby ports such as New Jersey, Pennsylvania, and Virginia ports. There will be delays, congestion, and diversions. Most likely, these delays will be relatively short-term as they are absorbed to nearby ports; however, it is another disruption in the global supply chain with short-term and long-term implications. As we communicated in a recent article on the impacts of the drought conditions in the Panama Canal and container ship attacks in the Suez Canal (both impacting shipments from Northeast Asia to the East Coast), this is an additional disruption at the East Coast ports. Thus, some shippers are likely to divert to the West Coast ports and rail or truck product to the East Coast.

Regional Logistics Impacts

There are 3,200 sites involved in logistics, distribution and warehousing nearby the port and bridge. Thus, there will be severe near-term disruption in the region. The timing will be heavily dependent on how quickly the debris can be cleared to restore safe passage in the area. Some experts believe this task could be accomplished in the next 1-2 weeks whereas others say it could take months. With that said, with the ports closed and diversions underway, it will take time for the supply chain to level out.

Trucking Impacts

According to the American Trucking Associations (AMA), almost 4,900 trucks travel the bridge each day, with $28 billion in goods crossing each year. There are alternate routes; however, there are issues associated with several of the options. For example, the two tunnel options to cross Baltimore harbor cannot carry hazardous materials, and there are height and width restrictions on the tunnels. Thus, trucks will be diverted on I-695 on the western side of the city. These diversions will cause additional delays, diversions, and cost.

Industry Impacts

The auto industry will experience the most significant impacts because the Baltimore port is the top American port for the import and export of cars. BMW, Volkswagen and Mercedes-Benz have facilities close to the port to handle vehicle shipments, and Mazda is had the highest dollar value of imports. The auto industry supply chain will be resilient but it will be another disruption after finally returning inventory to pre-pandemic levels.

The energy industry might experience disruption as well. There could be a disruption in coal supplies, gasoline and ethanol. The oil industry will have to find alternate routes for barge deliveries and/or pursue alternate modes of transportation (trucking). CSX transports imported coal and is communicating expected delays.

SIOP & Backups

It is quite clear that a single backup is no longer sufficient. You must proactively plan for likely risks and think 3 steps ahead of your competition to succeed in today’s global supply chain. SIOP (Sales Inventory Operations Planning) is a process to align demand with supply. It provides visibility across the supply chain so that companies can take proactive actions to mitigate risks, source backup sources of supply, and pivot with changing circumstances. For example, there is significant regional manufacturing, reshoring, and nearshoring occurring. To learn more about these strategies, download our complimentary book, SIOP: Creating Predictable Revenue and EBITDA Growth.

If you are interested in reading more on this topic:
How Do You Rate in Your Supply Chain?

The post The Francis Scott Key Bridge Collapse & Impacts in the Supply Chain appeared first on LMA-Consulting Group, a supply chain consulting firm.

Disruptions have not stopped. China has been flying balloons over Taiwan. North Korea is threatening South Korea. Russia continues its war with Ukraine. Israel is at war with Hamas which has spread throughout the region, diverting container ships from the Suez Canal in addition to causing a bunch of other negative consequences. The Panama Canal is experiencing a drought and has reduced the number of container ships that can pass. It got so bad that tankers are now avoiding it altogether which has improved pricing to jump to the head of the line for container ships.

And this is before we bring up one of the hottest topics for companies – the skills gap. In essence, although the high level numbers have improved a bit, if you talk with executives, they are challenged to find resources with the appropriate skill sets. Only the companies advancing technology will thrive; however, it requires additional resources with technical skills to pursue these avenues. It is a complete jumble. If a client thinks they have the resources, it turns out they don’t know what the executives expect them to know. Or, as conditions change (new ERP system, new company ownership, changing economic conditions), they fall short. To read more about where the talent has gone and strategies for success, read our blog article.

Why The Issues All Fall to Planning

At multiple clients, the issues are stockpiling in Planning. We consider Planning to include the following areas:

• Demand planning
• Production planning & scheduling
• Replenishment planning (transfers, distribution)
• Materials planning
• Logistics planning (warehouse, transportation, international)

Here are the common causes that are flowing into the Planning Teams. Executives are frustrated and often think the people are the issue when it is the process, the system, the way the organization is set up etc.

• Customer Service: If Customer Service doesn’t proactively manage customer requests, push back when appropriate, handle customer concerns proactively, enter sales orders with the appropriate fields filled in correctly, every issue will fall in Planning’s lap. As Planning plans and schedules, these issues will arise, and they will have to reschedule, expedite, etc. Additionally, as customers change their mind or orders are pushed out or in, if Customer Service isn’t on top of these issues and proactively communicating cross-functionally, the issues flow to Planning’s desk.
• Engineering: In CTO (configure-to-order) and ETO (engineer-to-order) companies, the product is not finalized until it goes through Engineering. If delays or mistakes occur during this process, the issues flow into Planning’s lap. Also, typically if customer approvals are required, the follow up falls to Engineering. If the customer is delayed in providing approval, they typically still want it on the original request date, even if the company has a policy against this occurring. It happens anyway and falls to Planning to resolve.
• Transactions: If the warehouse doesn’t ship, receive, and transfer on a timely and accurate basis, if production doesn’t enter production and issue materials on a timely and accurate basis, if whoever is responsible for scrap and usage adjustments don’t handle them on a timely and accurate basis, if the inventory team doesn’t cycle count, research and resolve root causes on a timely and accurate basis, the issues pile up in Planning. To determine what to plan, inventory must be accurate and performed on a timely basis. Another issue that arises related to transactions are design decisions made on the basis of minimizing transactions in one department that pushes the workload to Planning. Unfortunately, the fact that the workload will end up in Planning isn’t typically known, but it is what happens as someone needs to figure out what to do. If you don’t track at a detailed level yet you need to plan at a detailed level, Planning will have to figure it out manually.
• Suppliers: If suppliers struggle or transportation is delayed (such as the Suez and Panama Canal or via strikes), production must be rescheduled. Again, the issues wind up in Planning to resolve before moving on.
• ERP setup and use challenges: There are millions of setups and processes tied to how an ERP system is rolled out or upgraded. Thus, there are many ways the system can drive incorrect actions. For example, if an item is set up to flow through MRP when it should flow through a min-max planning process or vice-versa, the planner will not receive the appropriate signals. If your branches are not set up properly and in conjunction with your sales forecast, you can send the wrong product to the wrong place at the wrong time. If lead times and safety stocks are not monitored, you can run the plant out of materials or create an overage quite easily. If there are ECNs (engineering change notices) but the ERP system cannot handle them, the Planners might be left updating countless work orders to know what to produce and order.

In the last six months, we’ve seen Planning get bombarded with these types of issues across multiple clients in multiple industries and multiple geographies. It is a common situation.

Path Forward: Reactive to Proactive

Unfortunately, there are no easy solutions. In fact, that is how “we” have got into this situation. Someone has to figure out the path forward. If no one else does it and the ERP system hasn’t been designed to handle it yet, Planning will be your last resort. Thus, ensure you have the appropriate skills on your Planning teams. If they are supposed to catch whatever goes wrong throughout the lifecycle of an order, make sure your planners are ready to do that for an interim period of time. Have you provided ongoing training and education? Have you hired consultants to help your team upgrade the process? Have you invested in additional technology to support your team?

Look around you. Have you had several retirements of long-term employees? Are you sure someone has absorbed ALL of the relevant tasks? How sure are you that the tasks will be automated? How sure are you that they are no longer required if you’ve implemented a process change? How sure are you that your new resources understand the big picture? In several situations, smart executives wondered why these tasks couldn’t be automated. Of course, the answer is that they can be automated, but ONLY with a high-skilled resource(s) with practical experience that can ensure items don’t fall through the cracks. Don’t wait for retirements to occur to go backwards and think about the process. Plan ahead, develop career paths, and transition plans.

Have you implemented a new ERP system or new ERP functionality? Most likely, the ERP team said we will start with base information and add your requests to future phases. How sure are you that those requests will be covered in the interim period? Have you planned to bring on board the appropriate resources for the workload in the interim? Do your employees know what should be done? They might just know what doesn’t seem right, but not know what to do to make it better. Are there a few of those items that should be fought for instead of postponing to a future phase? If you don’t want your business waiting on the Planning Team, re-review if you hear any of these watch-outs. Supplement your team, provide support, and tie rewards with the outcomes you want to achieve for not just the ERP team, but also for those required to ensure success.

Pivot from reactive to proactive is the message. Think forward, invest wisely, provide training and education to your people, communicate clearly, hire leaders with the experience to “jump in” and take on tasks to “see” what their team members are experiencing and help their team climb out of holes. We are in a business environment that is not for the faint of heart. Strong leaders that are willing to take on smart risks, work hard, and pivot with changing conditions will deliver strong results.

SIOP: Reactive to Proactive

Smart leaders are rolling out a SIOP (Sales Inventory Operations Planning) process to proactively plan demand and supply. SIOP will alert you to bottlenecks, issues, the need to pivot etc. Forward-thinking companies are gaining an advantage as they have planned ahead to be agile, pivot quickly, and most importantly, are ahead of the curve in securing capacity, materials, and key resources.

Think ahead and pay close attention to what’s going on in your Planning Team. If the ball is rolling downhill, put stopgaps in place to catch it while proactively addressing the topic.

If you are interested in reading more on this topic:
Master Planning & Production Scheduling Case Study: Gaining Visibility for Results

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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

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Lisa Anderson was quoted in Overt Operator: “China is Israel’s number two trading partner, and so there will be a significant impact to that trading relationship during the war. There will be disruptions due to labor shortages as business workers are called up as army reservists, and as disruptions occur due to the war (business interruption, material shortages, import/export disruption etc.). Since Israel has advanced computer chip capabilities, it is important as an alternative to Taiwan,” Lisa Anderson with LMA Consulting Group explained to Overt Operator.

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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

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Lisa Anderson was interviewed on the Lou Desmond radio show to talk supply chain. John Tulac, international business attorney, hosted the show to talk the status of the supply chain and what opportunities will emerge. We discussed the status of the supply chain post pandemic including the impacts on inventory levels, cash flow and the Bullwhip Effect. The bullwhip effect is a supply chain concept that describes how small fluctuations in demand at the retail level can cause progressively larger fluctuations in demand at the wholesale, distributor, manufacturer, and supplier levels.

We also talked about supply chain risk as the conversation was on the heels of the Chinese spy balloon traversing the United States. John Tulac is an expert in China and the global economy and geopolitical risk, and so we talked about the implications of this risk and how manufacturers and distributors should respond. From spy balloons to the Russia-Ukraine war and changing relationships related to oil to the elevated risk of China, we talked about getting in front of supply chain risk, knowing what’s going on in the world and how to encourage executives to keep up with changing global conditions as it is vital to surviving, let alone thriving in the volatile business environment. Certainly, the supply chain risk topic was followed by what to do about it including backup sources of supply, reshoring, nearshoring, and taking control of your supply chain. This led to a discussion on examples and case studies related to computer chips, Tesla, and other types of companies moving supply chains to mitigate risk.

John wrapped up the show by commenting about the importance of energy and complex systems.

Click here to download.

Originally published on the Lou Desmond Show on 2/13/2023

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