It might take a few more months before businesses can experience ease in logistics
From purchasing high-end furniture to a simple pair of jeans, online orders have been arriving later than expected in the last couple of months. This has been a common ordeal for Australians ever since the COVID-19 pandemic began, but supply chain disruptions are not only felt in Australia. The interruptions to shipping and logistics are now on a global scale with no permanent resolution in sight.
What are the numbers telling us?
According to the Australian Bureau of Statistics:
- Almost half (47%) of all businesses in Australia experienced supply chain disruptions in the year 2021.
- More than a third (36%) of small businesses were greatly impacted by supply chain disruptions.
- As of January 2022, the sectors most affected by supply chain disruptions were wholesale trade (75%), retail trade (71%), and manufacturing (65%).
The Australian Industry Group estimates that 30% of Australian businesses experienced supply chain disruptions during the second year of the pandemic. This resulted in container freight rates skyrocketing from $1500 to a whopping $5000 per container.
How did we get here?
Supply, demand, and logistics – all three elements in a supply chain – experienced disruption in the last two years.
Factories have been forced to operate at minimum capacity due to lockdowns and closures, but there is a huge demand for consumer goods online as more people are now working from home. As online shopping has become the new normal, it has added extra strain on manufacturers to meet this demand.
The logistics side is the hardest hit element of the supply chain, with thousands of packages affected by shipping delays. Worldwide COVID restrictions meant fewer port workers, slower customs clearance, and longer waiting times for shipping vessels. This has caused a significant bottleneck of shipments and containers at distribution hubs and created congestion at destination ports. The Omicron wave has worsened the situation, with massive staff shortages in the logistics sector.
There were news reports of bare supermarket shelves across the country resulting from half of the truck drivers being unable to report to work. They were either sick, turned in a positive test result, or were forced to quarantine after exposure to a COVID-positive member of the household.
According to industry experts, Australia’s rigid testing rules and the lack of test kits for transport workers were the leading causes of supply chain disruptions in the country. Transport Workers Union national secretary Michael Kaine lamented that drivers who are delivering rapid tests to supermarkets and pharmacies could not access these themselves.
In early January 2022, the Australian government finally scrapped its seven-day rolling test for truck drivers in response to the capacity shortage.
How are Australian businesses responding?
By the end of 2021, two out of three businesses have been hit by supply chain disruptions, and industry experts do not expect the situation to improve until 2023. Many businesses are building stock inventory to be able to fulfil orders on time, shifting from just-in-time production to just-in-case storage.
However, this strategy could lead to increased warehousing costs and less investment in new markets and innovation. Businesses that are unable to find alternative suppliers either absorb the extra costs or pass them on to the consumer.
The shipping industry has taken steps to increase capacity and mitigate the lack of containers, and as Australia reopens its borders, there’s a good chance that shipping processes could go back to normal by the end of 2022.
3 ways to navigate supply chain disruptions
If your operations have come to a halt because of COVID-19, here are five tips on how to overcome supply chain disruptions and get your business back up and running.
1. Find alternative products
In addition to diversifying suppliers and switching to a different manufacturing method, you can also try launching a new product to overcome supply chain disruptions. Look into your customers’ buying history and find similar goods to complement their choices. For example, a business selling health supplements could start diversifying into healthy meals to augment the supply of protein powders.
2. Find alternative suppliers
With many products originating from China, it can be difficult to find an alternative manufacturer or distributor at this time. Goods from other countries likely cost about 150% more. Still, sourcing from a diversified line-up of suppliers could mean shorter shipping times and cheaper return and replacement costs.
3. Find alternative manufacturing methods
Some factories are still in lockdown. Those who are starting to recover from the massive disruption are probably overwhelmed by demand – it might be a good idea to explore newer technologies in these cases.
For old-school manufacturers, perhaps this is the best time to start digitising your supply chain, so there is greater visibility in real-time.
Switching to a different manufacturing model may be challenging during a crisis, but that’s the only way to keep your business afloat sometimes.
Companies that have shifted resources and realigned personnel could adapt to the times and ease the burden of supply chain disruptions.
If you are in the business of making critical equipment or consumables in the medical field, you must ensure that your supply chains are robust. Whatever happens, your supply chain can adapt at lightning speed to ensure that disruptions do not lead to failure to deliver.
What to expect in 2022
Supply chain disruptions and shipping delays are expected to continue into early 2022. However, as countries begin to ease COVID-19 restrictions, overcoming the supply, demand, the end of the logistics chaos could happen toward the end of 2022 and early 2023.
According to the 2022 Australian CEO survey, 79% of chief executive officers anticipate further supply chain disruptions and challenges this year. In addition, almost half of Australia’s business leaders believe that skills shortage will be the major inhibitor to their companies’ growth in 2022.
Australian companies are now focusing on modifying their inventory practices and supply arrangements to address the continuing supply chain problem. Businesses are also looking to invest in staff training and development.
In the meantime, if you’re still waiting for that pair of jeans that you ordered online two months ago, know that there are millions of others who are also in the same boat.