Supply chains can often be thought of as a well-oiled machine that runs in the background of businesses. But as the COVID-19 pandemic has illustrated, the machine can quickly stall out.
In a recent survey from Ernst & Young, only 2% of companies reported being fully prepared for the pandemic. 57% of companies reported serious disruptions to their supply chains, with 72% reporting a negative impact on their operations.
At the root of such disruptions are not only challenges brought on by the COVID-19 pandemic, but also the exaggeration of existing supply chain challenges. Together, these challenges have created roadblocks for companies of all industries to acknowledge and find ways to overcome.
Navigating 5 of Today’s Biggest Supply Chain Disruptions
As consumers began to buy in bulk during the pandemic, many companies began to stockpile raw materials like plastic and wood as a means to keep up with current demands. Combined with labor and trucking shortages, this has led to a shortage of key production materials — one that has not only raised the costs of materials, but also led to production delays.
When sourcing constrained materials, companies can end up competing with other businesses that have a bigger budget to throw at the materials. By partnering with a third party that already has supply chain connections domestically and overseas, you can leverage this relationship to more readily access the materials you need for production in a way that remains cost-effective.
Increased Production Costs
While an increase in material costs has led to a rise in production costs, this spike can also be attributed to a rise in labor costs. With aging workers moving onto retirement and young skilled workers demanding better pay, many companies have raised workers’ pay to attract them — not to mention, the overtime hours to keep up with production demand.
Generally speaking, offshore production costs are often less than domestic production. This is in part because of the ability to mass-produce products, and in part because you’re closer to the source of raw materials. Once again, leveraging a third-party provider’s established network of offshore manufacturers ensures you get quality results without further inflating your supply chain costs.
When pivoting to offshore production, it’s important to remember that this shift comes with tariffs, tariff penalties and a shortage of containers that increase costs and extend lead times. Ideally, your partner will have connections to work around tariffs in specific countries to lessen some of these expenses.
Consider this statistic: Compared to 2020's record-breaking levels, incoming cargo at the Port of Los Angeles is up by 30% in 2021. This puts the shortage of trucks and containers in perspective. With a backlog of inventory to mobilize, trucks and space are already accounted for, making it difficult for other businesses to locate shipping units to move their products.
This is another scenario where a third-party provider can step in to offer assistance. Using the same domestic and overseas connections they lean on to mobilize their products, the provider can help secure the truck and container space you need to get your products to the right places.
Rising Packaging Costs
Another area where price inflation has reared its head is packaging. Alongside rises in material, labor, production and transportation costs, packaging has become more costly and shortages have become more common. While this has a direct impact on products and cases, the scarcity and high cost of other packaging components like boxes, pallets, gaylords and polybags further exacerbates the supply chain woes. Collectively, as the protective layer for products in transit, companies don’t want to skimp on packaging quality for cost.
Alongside efforts to work around expensive labor costs and costly tariffs, a third-party provider can help you reevaluate and optimize your packaging at a foundational level. Does the size of the packaging match the size of your product? Reducing unnecessary space can help you save packaging costs. Are the most cost-effective manufacturing techniques being used? When you can minimize unnecessary steps in the manufacturing process, you can speed up turnaround times and lower costs.
Labor shortages have no doubt complicated global supply chains. As the U.S. Bureau of Labor Statistics reports, 930,000 employees left their job in July of 2021 alone. This impact is felt more across some industries than others, with manufacturing employment dipping by almost 400,000 in comparison to pre-pandemic levels. In light of this, some factories have closed while others struggle to keep up with demand.
Partnering with a third-party provider can help you navigate labor shortages as they occur. In the event the existing factory you work with on your parts closes or simply can’t meet your projected timelines, they can help you identify a new factory that has already been vetted for quality.
Think of Cases By Source as Your Supply Chain Partner
While Cases By Source is in the business of designing and manufacturing custom cases, we put our diverse capabilities and industry connections to work to help customers navigate supply chain problems. Whether you’re experiencing factory shutdowns, delayed production times, cost and tariff increases, or inventory shortage, we’ll work with you to overcome supply chain issues and keep your business efficient, confident and profitable.
Take a closer look at how we can step in to help with your supply chain management.
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